Welcome to Chopping It Up. I'm your host, Mike Hanlon, the senior restaurant and food service analysts at Bloomberg Intelligence. Our research and that of bi's five hundred analysts around the globe can be found exclusively on the Bloomberg terminal. Today, we're joined by Jeff Chandler, a CEO of High Bar Hospitality Group, the parent company of Hop Dotty Burger Bar. How you doing, Jeff, I'm doing great.
Thanks Michael for having me.
Sure thing all right? So on LinkedIn, I saw you're a University of Washington grad. I recently watched Boys in the Boat, a movie about the Washington crew team. Have you seen it?
I have? Yeah, I have, and it was really good to see people where the purple in the gold and to sing a bow down to Washington and brought back a lot of good memories of the filming in and around Seattle. I thought was interesting around the university and certain clips were very cool. Yeah.
I really enjoyed it. It's on Amazon Prime if anybody hasn't seen it. It was great. So uh so, did you play a sport at Washington kid?
I believe it or not, I played. I played football. I was an offensive center about two hundred and eighty five pounds ago. I've lost I've lost a lot of weight. But I played back in the Don James era. And you know, for those who don't follow college football, Don James really was the We called him the dog father, uh and he was the coach's coach. He was the
players coach. He was big time into organizational control and discipline and and uh and and bringing men to be better men and not necessarily fielding a great football team,
although he did that. But I learned so much from him on organizational discipline, structure process that you know, if I'm honest, I probably learned more down on the football field under you know, Don James and his coaching staff than I did up in the business school about things that I use every day, building teams, driving performance, setting high benchmarks, how you push through adversity, how you handle challenges like all of that I learned from him. So I give him a lot of credit, dude.
That's awesome. Football is the ultimate team sport. And I had a similar experience. I played at Georgetown, and I learned so much from my coaches, Coach Benson and Scarlata, stuff that I use every day man, whether it's about being on time, accountability, you name it.
He had a phenomenal knack. I think he had the walk from his office to our team room timed first day of practice every year. What do we get. We got a time X Okay, old school, this is back in the eighties. We got a time X digital walk. And he would walk us through the very first meeting of the year. He'd walk us through how to reset our times and he would count down three, two, one, set it, and he said, gentlemen, you have no excuse to be late to any meeting that we have. And
he would start his meetings really interesting. He would start his meetings at seven fifty eight am, not eight am, not eight thirty, but seven fifty eight. And I look back on that, That's how I schedule my meetings today, because it's mindful, it's purposeful, it's you know, it's seven fifty eight, it's not eight o'clock. And he would walk in and start speaking at the podium and literally it would be seven fifty eight.
The guy was amazing, very cool man. All right, so now you've you're the leader on the field. You've been leading hop Dottie for quite a while now they must be treating you pretty well over there they are.
It's, you know, we have I think, in my opinion, we've got a world class private equity partner with L Catterton. The way they approached their businesses, their ceo CEOs, their teams, I think his first class. And they've been a great support throughout this whole entire journey. And you know, look, it's been a choppy ride. Uh. You know, we've been I've been here for eight years. We had the pandemic
right in the middle of it. We've had you know people, you know, the Great Resignation era, we had the COVID, we had the inflation era. So there's there's been a lot of interesting ups and downs, for sure.
No doubt about that. Hop Dotty is an interesting name. How did how was it? How did it get that name?
Yeah? I can't take credit for it, nor would I would I want to necessarily. It's it was the brain child kind of of the merger of burgers and beer, and the founders thought, you know, hop obviously is the flower that gives beer as aromatic flavor and bitterness. And Dottie actually is a nickname for cattle in Scotland. So the black ag is candle. They call them little dotties. And and so this whole merger and blend between this union between burger and beer. And you know, it's interesting.
People call us hot daddy, you know, we get we get a lot of people that confuse us with bad daddies. And but it's unique and when it sticks, it sticks. And it's something that I think is memorable and unique and once you know it, you know it, and it's it's ended up working out real well for us.
Yeah, it's cool. And I know my dad would one hundred percent agree that burgers and beer go together, you know, like peanut butter and jelly they do, all right, So how many units? Where are you primarily located? And how fast do you open in new ones?
Yeah, so we're we're forty eight restaurants today. We're in eight states. We're in California, Colorado, Arizona, big concentration in Texas, Tennessee, Louisiana, Georgia, and Florida. And you know, Texas is our home. That's that's where we started. And you know, there's so much white space in tech is to grow the economy in Texas is strong you know, the demographics, psychographics, the consumer behaviors and traits in Texas are strong. It's a heavy
dying out as you know, and drinking out state. And so you know, our growth is going to continue Texas Strong and we call it Texas Strong plus plus. We're going to be entrepreneurial and opportunists in Arizona, in Tennessee, in Florida, in Georgia, you know, anywhere in our existing markets. And I think for the next five years we've mapped out, we can stay in these eight states and continue to grow real rapidly. I don't see any addition of a
new market. I mean, never say never, but there's enough white space right now for infill that that's going to keep us busy. So, you know, we started out at five restaurants eight years ago and you know, again we've we've we've had quite a bit of organic growth. We had a we had a merger of grub Burger Bar coming out of the pandemic, which helped, you know, further accelerate that that growth. And now we're looking to build a robust pipeline. Cool.
So when so, do you have a strong social media presence? You know, and how was that expansion into you know, into other states outside of Texas.
Yeah. Look, it may not have been a textbook, you know, example of how you grow and develop the brand. You know, like most privately held brands, Uh, you sometimes make decisions on other factors. And so quite frankly hop Dot he grew you know, Austin, Austin, Dallas, and then it went
to Scottsdale and then Newport Beach, California. And the reason for Newport Beach and Scottsdale, Arizona is, you know, we had two founders that you know, one founder had a home in Scottsdale, one founder had a home in Newport Beach, and you know, they seem to know the markets well. And so it wasn't necessarily a pragmatic approach, but it
worked and it kind of scattered us around. We're working today just in building and concentric circles out and strengthening the awareness of the brand and the recognition of the brand. And so I think that will continue. And again, we're in enough states and enough markets where we've got plenty of green space, you know, just to infill the current growth. And you know, with our current structure, gosh, we're you know we're shooting for eighty five restaurants total in five years.
And we've got the capital to do that, we've got the people to do that. Now, it's just a matter of finding the right real estate good stuff.
So how big are are the restaurants and how much do they cost you to build?
Yeah, you know, that's a that's an evolving question. Right we started out and we were at thirty six hundred, thirty seven hundred square foot concept. All day long, we roll in the the you know, kind of the popularization off premise, and you know, what we look like is just maximizing our throughput capacity. And now with off premis, we can shrink the size of our units. We our
smallest unit today is twenty seven hundred square feet. We think we can get down into you know, twenty four fifty kind of as a smallest footprint and take advantage and maximize that. And again, as we scale down these restaurants, the cost goes down. But I'll tell you, like on a tip, prototypical thirty five hundred square foot building, you know, we're spending about a million six so a pretty sizable investment. We think if we can get down into the you know,
twenty six twenty seven hundred square foot range. We can knock that down to a million four perhaps, And you know, and we we've changed, really changed and evolved our footprint to again take advantage of off premiss take advantage of mobile order pickup. When we have a drive through window. You know, we're never going to be a fast food play, so we're never going to be in order at the
window and receive your food. We might be more of a park through type operation because of the handcrafted nature of our products. But you know, I think if we can get them down sub one five, we'd be doing really well.
Cool. Is there any other unit economic data?
Yeah, you know, our au vs are roughly three million bucks.
You know, I am proud to say that over the years, A big initiative of ours was to become more scalable and more efficient as we scaled, and all under the master umbrella of you know, don't f it up, keep the soul and the brand funky and organic, and our brand parameters have always been around quality, uniqueness, and variety, and last time I check, you're not going to get there by you know, shrinking portion sizes and dumbing the menu down and doing all of I think the harmful
things that a lot of operators get lulled into doing is look to maximize their efficiencies. We've been really fortunate, Michael and enable to do both to maximize the guest experience and to do that in a way that's most efficient. And I give you a couple of examples. Number one is it's just our beef program. We used to grind all whole muscle proteins in house. We had eight different proteins from ahi tuna to bison to different types of
chuck and brisket and turkey and you name it. And we had butcher shops in our restaurants and the brand was really built around this made from scratch, made by hand mantra. And as we started to dive into the brand, we realized, yeah, that's kind of cool, but what people really want is just a craveable, badass, great burger. That's really all they want. And so we started to test and COVID really helped gave us some covered but we
ended up spending more per pound in our proteins. But by doing that, we were getting a higher quality, more consistent protein, and yes, we were bringing it in fresh in a cryoback package loosely packed, and we found it at the end of the day. A there was a ton of waste in what we were doing. Our total cost on beef went down three hundred bases points overall, even though we were paying fifty seven cents more pound
for the product. And it was a better burger, it was cravable, it was made consistently instead of paying a twenty dollars an hour butcher, you know, to throw a bunch of meat and the hopper and a little bit of fat, and we had an eighty twenty blend and this much chuck and this much brisket. We just we had a great consistent product. So that's an example of improving the quality while we improve the efficiency of what
we did. And I'm proud to say that today as a company, you know, we're approaching a twenty two percent store level margin type business. So you know, we've and that really helped us because during this time of inflation, guess what, we didn't have to take much price. In fact, we hardly took any price, and I think we we had margins to play with, and you know, it was real important for us that we kept strong price value.
We kept that quality in front of people, and we didn't want to rise raise prices to a point where I think most people did today and they're saying, oh crap, what do we do. We've raised these prices, we got to start discounting to get more sales. And it's a it's a death spiral. So I think we've been fortunate. We we you know, we've missed that bullet by taking that approach.
Yeah, you have a you have an absolute, absolutely phenomenal product. I'm a fan, and I'm a fan of the chain's use of regenerative beef. When did you know? I feel like that really plays into the Texas consumer right versus maybe some of the other sustainability initiatives you could have taken on. When When did hop Dot make that switch? And how is it? How has it been received by our customers?
Yeah, you know, gosh, we made that decision about a year ago. Michael, I watched the Ground. I watched the movie Kiss the Ground, Okay, and one of our beef suppliers, a regenerative beef supplier, sent me it and I was actually watched it on YouTube. And for those who haven't
seen Kissed the Ground or the sequel common Ground. I highly recommend it because it's an eye opener and and part of our mantra, part of our company culture is always doing right, doing right by our guests, doing right by our business, doing right by our team members, doing right by the planet. And we're going to take a common sense approach. And when I watched Kiss the Ground and I learned about regenerative farming and ranching, It's like, well, absolutely,
you know, why wouldn't we build a healthier ecosystem. Why wouldn't we you know, promote and build a program around more nutrient dense beef for instance, or chicken in a way that is helping the earth, and it's fighting climate change, and it's you know, lowering our dependency on water usage and pesticides and herbicides and you know, creating dust and soil erosion, And why wouldn't we do all that? And and so you know, there was an investment to be made for sure. I mean, we're you know, if we
just flipped the switch tomorrow. Currently, you know, we don't think we can find enough supply. We go through roughly fifty five hundred head of cattle a year and it would be hard to find a soul supplier that could handle that in the regenerative space. But it's it's it's transitioning. More and more ranchers are transitioning and a rapid clip, and you know, I'm hoping within the next couple of years we could go one hundred percent regenerative. So you know,
we are mostly regenerative. We buy up all the stuff we can find that's high quality, and we're we're out there telling the story to anyone who will listen about all of the great benefits from turning to regeneritive farming and ranching.
Yeah, it's great. The page on your website dedicated to conservation for the rest of us and the Force of Nature brand video are both great. I suggest, thank you listeners check those out too. And I'm a customer of Force of Nature. Their products are great.
They are they are good, great company, great people, and they truly believe in what they're doing, which which is inspiring.
Yeah, it's good stuff. And so I haven't been to Hop Dottie in a minute. Unfortunately. When did you put chicken on the menu and what percentage of the mix does it make up?
Yeah, so from day one we have had a ground chicken burger. From day one, we've had a ground turkey burger. From down one or day one, we've had a ground a heat shashimi great tuna burger. Uh, and from day one we've had a bison burger. So those have all been in the mix. We switched to a whole muscle fried chicken breast option gosh, probably pre COVID, maybe twenty nineteen.
It was with the proliferation of all the hot chicken and we came up with our own version of a really kick ass Nashville hot chicken sandwich, and that led into tenders and being able to do toss tenders and tenders in a different way. So it's a big part of our sale. I would say out of whole kind of entree mix, it's about ten percent, So I think that's a pretty healthy mix. And that's not including the ground chicken burger that we currently serve, that's just whole muscle chicken.
Yeah, and it's been such a hot category. It continues that we continue to see innovation around chicken and the quick service and fast casual names that we cover. Are you seeing it grow as a percentage of mix or is it about ten percent? You seem like where it's going to settle in.
No, it's slowly growing, and I think our tender mix is growing, you know, A we feel really comfortable. We work with Redbird Chicken out of Colorado. Give those guys a shameless plug. They are world class, fantastic, regenitive chickens. You can tell and taste the difference for sure. So I think as we sell more and more of it, nothing beats a quality fresh made chicken tender, made from scratch right. We bred it in house. And we do
a variety of tossed tenders. So we have a bunch of signature toppings and sauces that we've created for our famous fries, our permbers on truffle fries, well we do those with our toss tenders as well, and that is growing as a big category in itself, just the tenders.
So no, I see that continuing to grow. But we just you know, at Hop Dotty, we have a lot of great beef and turkey and other options, and so people kind of are predisposed to come in knowing they want a beef burger or they're going to eat you know, healthier with a bison burger or a tuner burger. But it allows us to access a different niche of our potential guest space that I really believe driving our frequency frequency of business cool.
And so I have a question. So I noticed if I see like pastured chickens and whole foods, they tend to be smaller, right, I don't know if it's like lack of hormones and stuff like that. So is it is it difficult finding tenders the size that you would like?
That are you know, yes and no? And it comes and goes in waves. You know, if we said, hey, this is our spect and we're only going to take this spec then I think it's a challenge. We sell it by the weight, so it might be you know, four big tenders, or it could be six smaller tenders, and it constantly evolves. And one of the reasons why we feel that's important because we want to put the best quality on the plate rather than a perfect shape
and size. To your point, you know, with some of those products, to your point, time to harvest could be longer, and that drives the cost up, right for because they want time to maturity. And but you know, they're not pumping them full of steroids and growth hormones and everything else that's bulking up this chicken. They're not you know,
injecting it with saline and different types of solutions. And so I think if we're flexible on size and inflexible on quality, that's a good path for us to take.
Yeah, smart, how big is your bar business?
You know, our bar business is healthy. It's roughly fifteen percent of our business. We've seen it EBB and flow and it's rebounding right now. With the addition, if you know, we're we're really at the end of the day at Margarite and craft beer bar. But we do you know, open up to what people want to drink, and and that means maybe sometimes domestic beers, you know, not alcoholic
beers are on a rise right now. They're on a tear out and another shameless plug for Athletic Brewing Company, if you haven't had their beer, it's it's fantastic, it's na And so we're seeing a rise in nabev, which we think is good for us. It's a premium offering and product that you know, enhances our experience. The fact that it doesn't have liquor in it. Who cares? People are ordering it? And I see that that niche continuing to grow, for sure.
I've heard great things about Athletic my brother in law. I haven't had them yet, but my brother in law recommended them to me. He absolutely loves those.
Try the Hazy I p A. I'm a big I p A fan. Hazy I p A competes with some of my favorite I p.
As, great Hazy IPO That Hazy I p as are right in my wheelhouse, so I'll definitely check that out. All right. So I found it interesting that your loyalty program has three levels. They're called the Headline, A Regular, and Ultimate dotty Fan. Can you talk a little bit about that, because it's not something that I see too often.
Yeah, you know, we wanted to create a loyalty program to build loyals, to build frequency, and it's just like everybody else, but we wanted to do it not necessarily with pragmatic. Hey you hit this level and you get this for free. You know, we wanted to come up with a different way. Really, and I don't like this term, but it's it's descriptive. It's the surprise and delight, right. We want to be able to give people recognition at
different points in time throughout their journey with us. It's the whole notion of show me you know me, show me you care, and show me you're committed to doing something cool that's going to drive me back into hop dot you again. And so we kind of take that parameter and we try to think, well, what can we do periodically to become front of mind to increase their
frequency of their use ocasion. And so, you know, we're fortunate in that we do a pretty creative Burger of the Month program, and you know, we give our more frequent loyals the opportunity to have those burgers before the public we invite them in. Usually there it depends on your level. You can have complementary Burger of the month every month till you're coming in to trying our new Burger of the month. And we've really seen that program
help propel our frequency rate. I mean, our average frequency rate for a loyal used to be something like, you know, ten point four times per year, and we've almost doubled that with the advent of this program. So we do see it working. You know, it's not going to be the type of program that you know everybody's going to be on, but if you're a hop Dotty fan, you find a way to attach yourself to it, and you know, and I'm surprised. Look, I'm I probably eat in our
restaurants four times a week. That's what I do. I have a classic with cheese, I have a palm truffle fried, and I usually get one of our specials. And anyway, I was shocked to learn that there are over one hundred people that eat at Hop Dotty more frequently than I do. And I thought that was just fascinating. Like I would have thought I would have been the clear leader.
So I love that. And I think it's the fact that you know, with our menu and the way that we kind of work our menu in with our loyalty, it's, you know, we're listening to our loyalty club folks and we're understanding what it is that they want that would
make them come in faster tenders. I think actually came out of that whole conversation with our loyals, and so it gives us menu insight in things that we can put on the menu that can increase their frequency and their usication and tenders is a good example of that. Brussels Sprouts is another opportunity. People said gosh, I would love something other than French fries, and then they would say, oh, we want something more healthy, and we're like, well, Brussels
sprouts might be perceived more healthy. They're still fried and their leaves, but it's amazing how fast our Brussels sprouts have taken off. And again it was insights learned through our program.
So great the five to one to two program for gms. Can you talk a little bit about it and talk about out if it's helped GM turnover and if you're willing, if you could share some GM and hourly turnover data, that'd be great.
Absolutely. Look, we went to solve a problem, and that is a GM and manager turnover and burn out in our industry. It's been it's been horrible ever since I started in the business in nineteen ninety. I mean, it's
it's it's endemic. And so we went to say, well, what's at the heart of that, and we really felt and the conclusion we came up with is, you know, people working long hours, covering shifts in a dynamic, fluctuating business, working with the public, working in a highly fickle industry where you're producing a product and serving it out the back door as fast as you can, and people need
a break. And so we came up with this notion of gosh, how could we, you know, figure out like this mid life sabbatical or a mid career sabbatical, and you know, could that give people recharge their energy, their emotional health, their physical health. And then we thought about,
well what about their financial health? People? Most people can't take a month, you know, And and so we came up with this notion of the five one two, which is essentially for a general manager, if you're in that role for five years, we're going to give you one year a pay and twenty eight days off or or a month off in a sabbatical and five one two because it's there at CODE and Austin to make it catchy, but it really was the opportunity for our gms again
this you know, show me, you know me, show me you care, and show you you're committed to me in some way, shape or form. And and it did that. And I will tell you that we have I think we pay it. We had our ninth payout in that recently and we celebrate these. So myself and our VP of OPS we go to the market, we bring all the gms in there with the market partner and we
have a big celebratory dinner. We give them the big check so to speak, you know, and and we have people break down and like get emotional, you know, because the restaurant managers, when's the last time they had more than a week vacation And here they get a month and we make them take a month. Okay, we make them take a month all at once. And they still have their three weeks of vacation or their one, two or three depending on their tenure. They still have that.
But they get to go to places and we've had managers go to Alaska, We've had them go to Jerusalem, to Africa, to cross the country RV trips, to like just inspiring things. And they all come back with this newfound energy and passion that they get from their own personal lives. And then there's this endearing part. They're like, man, you do care about me, Like this was amazing. You know my family, I've never been able to take my kids to Disneyland and you were able to do that
and it's so cool. And look the reality of it is, it's it's expensive. It's not a cheap program. And I would challenge people listening. If you're in a similar sized company and you're penciling out, well, I just can't afford it. I would, I would. I would challenge you to go back and look at your financial statements and look at the productivity that you receive from your more tenured managers. My contention is is your business is more profitable, it's
more healthy, more stable. You have less call outs and turnover in the hourly field because you have stability of leadership. And so that's ultimately what we came to the conclusion of is let's try it, and I will say that it's worked. Like we launched this thing six years ago, we've had no GM turnover other than one person that we initiated a turnover thing for. And then it tells our assistant managers, Hey, I want to be a general manager.
You know what do I need to do? And so that's then where the growth comes into play, because we've got to show people that, yeah, we can get you at your own restaurant. Right, it's going to take you eighteen to twenty four months. Here's the training development program, but you can go get it. And then they get to that level. So you know, I would say, at the management level, our trailing twelve turnover is twenty one percent.
Great, and i'd imagine you can excuse me.
Yeah, no, it's it's pretty good. And I will say that again, take a look at your high performing restaurants. Usually your high performing restaurants have a thing in common, and not only are they more profitable, but guess what, they usually have better retention at the hourly level. And that's what we've seen as well. So you know, our hourly we we have restaurants that run in the sixty
percent range for hourly turnover. I think our company average is ninety two percent hourly turnover across all restaurants, so we're better than one hundred percent. And like, we're not satisfied with that. We're going to push forward and try to get better and do right. But I think it's working.
Yeah, you're blowing away the industry. So you know, kudos to you and the team.
Man.
That's great. So i'd imagine it'll let you, you know, promote from within for all your new restaurants.
Right, we're very proud of that fact. We have. Out of our forty eight restaurants, we have twenty two. We call them TM to gms that started with us in an hourly capacity and now are running their own restaurants and we're proud of that. And we really want to build a moat around our own internals as we grow. And I think if we do it right, you know, people that understand the culture, they buy off on the culture, they thrive in the culture. We can teach someone to
be a manager, you know. And we've really worked hard in the last nine years to design more pragmatic operational procedures, better training programs, really simplifying the admin and the more complicated book keeping parts. And it's about people. It's it's you know, having conversations with people and telling them the why and being out on the floor to assist. And you know, we kind of take a blue collar, roll the sleeves management approach, like we're just out there working
as a management team. And so if we do it right, we can have more teams to gms.
It's cool, man, Well listen, you you're you're doing right for your employees, You're doing right for the environment. It's a great product and a great experience. So you know, I expect big things out of you guys. Can I look forward to continuing to follow this story.
Man, well, thank you very much. I appreciate you having me on. I'm excited for our growth and I'm excited to see what's around the next corner. You know, we live in a dynamic environment, right uh, And I think people, you know, their their resiliency, their ability to solve problems, Like I just think we're spending more time around that than we ever have, and I'm excited to see what the next group all is. Let's go.
Yeah, it keeps us all on our toes, that's for sure. So thanks again for doing this, and thanks to thanks to the audience for tuning in. If you liked the episode, think about subscribing and leaving us a review.