Welcome to Chopping It Up. I'm your host Michael Hanlon, the senior restaurant and food service analyst at Bloomberg Intelligence. Today we're joined by Ralph Bauer, CEO of The Melt. Thanks for doing this, Ralph.
Thank you, Michael.
I really appreciate getting a chance to talk to you.
Yeah, I've been looking forward to this one for our listeners. The two of us first cross pass about a decade ago when Ralph was the CEO and president at Popeyes. That was some run that you, Cheryl and the team had. What really sticks out to you about that experience and what were maybe some of the most important takeaways about building a successful brand.
Yeah, so I grew up in New Orleans. I'm not sure if you knew that, but so for for a guy who grew up in New Orleans, Popeyes is like the pinnacle of fast food and so, uh, that was really a truly exciting time. And to be able to turn around an iconic brand like Popeyes was was really
pretty exciting. But the other thing that made that time really meaningful to me is that we rebuilt that business on the premise of focusing on franchisees first, and the first half of my career in the restaurant industry was spent working with franchisees and so working with a brand that truly believed that, you know, our customer was the franchise e, and that if you served the franchise ese, that would be what builds the business. And I think
that we I think that we proved that. And you know, we went into a brand that didn't have a great history of franchise or franchise relationship, and by building that relationship, we were really able to build a business. And you know, it's a it's just a totally different business today than it was back in and you know, two thousand and eight when when we started there.
Yeah, that, uh, that was awesome. Man. I actually had a client yesterday asking me about restaurant brands. And I don't know if you're following the story, but Patrick Doyle is now the chairman of the board and he took
a stake in the company. And I actually told this investor he should read Cheryl's book there to serve if he wants a good you know, inside scoop of how Patrick's looking at things, because all they've been talking about since since he joined on was on all the investor calls and on all the earnings calls, is UH store level profitability and serving the franchisees. And you know, to your point, I think I think you and the team really prove that out at Popeye's.
Yeah, if you're going to be a great franchise brand, the way you do that is by serving the franchisees. And if your franchisees are happy and making great money, they're going to build more restaurants. And that's what builds your brand. When we started there, you know, if you look back to two thousand and eight, two thousand and nine, we were building about you know, twenty or thirty new restaurants.
A year, and and.
Most of those weren't very successful. And today, you know, they're they're Before I left in uh, you know, twenty and fourteen range, we were up to about you know, one hundred plus and.
Now they're even higher than that.
And and because of the franch if the franchise believe in you and believe in the leadership and they trust you, they're going to build more restaurants.
And that's how you build that's how you build.
A great brand.
And when franchises make more money, they build more restaurants and and that that's what makes everybody successful for sure.
All right, So where have you worked since Popeyes? And what attracted you to the Melt?
Yeah, So after I left Popeyes, I went to UH Payway And I'm not sure if you're familiar with pay Away, but Payway is a fast casual brand about two hundred units that was started by Rick Federico at PF.
Chang's and I went in there.
With the attention of splitting that off into a into a standalone brand. Worked with that brand for for a couple of years, built there was there was actually no dedicated UH employees to the brand when when I got there, and so we built a whole standalone unit and UH.
And then.
I had family in the in the in the Bay Area. My son was year and I got a I got a call one day from a bunch of folks at the Melt and I was, you know, the Melt was a pretty pretty small brand.
And it was funny.
I had had a I had a conversation with my wife prior and I said, you know, I'm not sure about grilled cheese brands. I'm not sure if grilled cheese is enough to sustain a restaurant brand. And then sure enough, I get a call a couple of weeks later from the investors at the Melt.
And at the time, they had they had.
Eighteen restaurants spread across three states, Texas, Colorado, and California, and they were struggling, and they they asked me to come in and take a look and see what I thought.
And I was really impressed with the.
Board and the group of investors was a bunch of really smart people. Ron Johnson who kind of created the Apple.
Store and was you know at J. C. Penny and Target, and.
Michael Marx who was who's a venture a tech venture capital.
Guy, and I, you know, I talked.
To these guys and they were just, you know, a pretty exciting group. And I decided decided to come out to California and sell Girl cheese sandwiches.
So, so, how many restaurants at the Melt as a company owns as a franchise?
Yeah?
So, and can you talk about the service model a little bit.
Yeah, So we're we're a fast casual brand. It's it's been an adventure really. So when I got here, we had eighteen restaurants, as I mentioned in three States. But one of the first things I did was closed everything outside of California. And when we started, I think that we got a little ahead of ourselves. We were founded in twenty eleven and with a lot of fanfare.
And.
From day one, when we opened our first restaurant, we said we were going to have five hundred restaurants in five years, and before we really had a brand yet, we were already planning the five hundred restaurants, and we kind of put the cart before the horse. So when I came in in twenty sixteen, what my idea was ist, let's focus on California. Let's get California right, Let's build a great brand, and then we'll start expanding again. And that's what we're doing today. So we got down to
as low as seven restaurants. Today we have twelve, with four more under construction and five more in the pipeline for next year. And during the pandemic, we bought a second brand, home Room, which is a macaroni and cheese brand out of Oakland, and they had two restaurants a block apart. One is a.
Full service.
Small, full service sit down restaurant and the other one is a block away. It does sit down or rather does carry out and delivery only. And carry out and delivery only we did over four million dollars last year and in macaroni and cheese, So it's a good good business travels well, it travels well, and we have the best mac and cheese you'll ever have in your life. So it's a it's a good it's a good brand.
We just built our third we opened up our third home room in Berkeley a couple of months ago, and so we're just starting to take a look at that brand and its possibilities for expansion.
Awesome. And so all the new stores this year and next are going to be in California as well.
Next year we will open our first restaurants outside of California, which will be in uh which will be in Phoenix. So we'll get we'll get one or two open in Phoenix next year.
Nice. And are are most of the new restaurants going to be staffed by existing general managers or you're going to have to go outside of the system maybe to to hire some.
Yeah, that's a great question. I think that.
Whenever a brand.
Goes outside of its its you know, traditional area, you got to be very very careful, and I think the best thing you can do is to convince folks who are in your core group of restaurants to relocate. And uh so that's that's our plan and is to get folks to relocate. But I think we're also going to be hiring people in the you know, in the Phoenix area.
We actually have one person in our system now who's from the Phoenix Scottsdale area that we relocated to San Diego and he's he's there now training and our intent is once we open Phoenix that he'll, uh he'll move back there. But I think, I think that's super important, and I think that, uh a lot of brands make that mistake, is that when you start to expand outside of your your core area, if you try to do it with no new folks, a lot of times that
culture doesn't move with you. And a big part of growing any any brand is being able to move that culture.
One example I like to give is, I remember when Chick fil A was was just this little chicken brand in the in the southeast, and being the very knowledgeable person that I am, I told anybody who would listen, I'm not sure Chick fil A is ever going to be more than a regional player, because it's gonna be it's going to be so hard for them to uh they're so culture heavy, it's going to be so hard for them to uh create that culture all across the country. And kudos to them. Cheryl is on their board now
as a matter of fact. But kudos to them because they showed, they showed it could be done.
And you know that they have that same.
It's my pleasure culture in California, as they have in Georgia, and that's what's allowed them to be successful every place they've gone.
Yeah, in New Jersey as well. I Uh, once my son gets a little older, I'd love I'd love for him to work for Chick fil A.
Yeah, it's a it's a great brand with a great culture.
I agree with you, you can't you can't go wrong there.
Yeah, all right, So the melt is had an incredible run since twenty twenty. You know, one of the best pandemic success stories that I've heard of, maybe you know the best out there. Can you talk about your experience during the pandemic, you know, I'm sure it wasn't easy at first, and maybe talk about the changes that enabled the chain to survive and then kind of grow AUVs the way it has.
Yeah, so that's a great question.
So I remember March fifteenth or so of twenty twenty, we celebrated one hundred consecutive weeks of positive comp sales and things were looking really good for our brand. On March eighteenth, three days later, they announced a shelter in place in San Francisco and then later in California. So we went from one hundred consecutive weeks of positive comps to negative eighty percent pretty much overnight, which goes to prove one of my favorite sayings that when when things are good, they're never.
As good as they seem.
And uh. But again, being very knowledgeable in these kind of things, I said to myself, this can't last longer than two or three weeks, and so I made some really good decisions based on really bad knowledge. So because I thought it would only last two or three weeks, I wanted to make sure that we didn't lose any employees while we were shut for this short period of time.
And so I uh, I remember I went to work and a team member who'd been with us for a number of years, who I was very close to was really on the verge of tears and was worried about losing her job and how she was going to be able to feed her family. And I said, I said to her, look, you don't have to worry. You know, your your paycheck is safe while as long as this thing lasts.
And uh, then you know, I.
Was very fortunate that I had some investors who backed me on this.
But I told all of my.
Folks, look, we're gonna pay you whether you come to work or not. If you're not comfortable coming to work, don't come to work. But uh, you know we're gonna we're gonna pay you if you come in or don't come in. Now, I will say that most of the folks didn't believe me at first, and so they came to work anyway. But but we didn't We didn't really lose anybody. But the problem was, as I mentioned, our sales were there was basically nobody, especially in downtown San Francisco.
And our office is above one of the restaurants on Market Street in the heart of the financial district in San Francisco. And and uh, about three or four days in to the shelter in place, I remember I looked over the balcony and there was almost nobody in the restaurant, and the only people in there were first responders, and there was some police officers who were at the counter ordering, and I just yelled over the railing I said, you know, don't charge them for their food, you just give it
to them for free. Then I started thinking about it, and one of the things that I knew is I had people in every restaurant and they didn't really have anything to do, and they they didn't really feel like, you know, they were needed. And I thought, well, why don't we give all first responders their meals for free? And so within about twenty four hours, I told everybody, hey, look, if you have any first responders come in, just give.
Them their meals for free.
And the next thing, you know, that went viral. So within about a week, I have a couple of restaurants, one at Stanford in Palo Alto and one in La Jolla, where we had hospitals within walking distance of our restaurants, and so within about a week we started having people lining up in the morning and we would have lines out the door all day, open to close. I remember at Stanford we were doing about thirteen thousand or so a day, and twelve thousand of it it was free.
And still I kept on thinking, well, this is only going to last a couple of weeks, and we're getting all this exposure.
But as things started to.
Move on, first of all, I couldn't handle all that business, especially at Stanford. It was I worked ended up working a Thursday and Friday myself open to close on the grill at Stanford because I had heard the crew was ready to mute. And at the end of the Friday, we actually ran out of food at about ten o'clock on Friday, and people were just worn out, and I said, man, I just don't know if I can do this anymore.
And I was really.
I was really worried because I knew I was going to have to cut it off because it was so hard on the team. But I couldn't figure out, you know, where I was going to go from there and how I would explain it to folks, And so I had to make a decision. Do I go to a fifty percent discount?
What do I do?
And so finally I just decided, you know, I'm just going to go cold Turkey and end it all together. And to my surprise, no backlash whatsoever, and all of a sudden we started to get a steady stream of people. And another interesting story was La Joya. So Stanford had always been our high volume restaurant, and at the time, you know, they were, you know, you know, maybe a two million dollar restaurant. I was just looking before the call.
This same week in twenty eighteen, the week that we just finished, Stanford did was our highest volume restaurant, and they did a little bit under forty thousand, thirty eight thousand. Last week they did ninety five. And La Joya was the other restaurant. La Joya I had had opened for a couple of years and it wasn't a great performer, but they also had hospitals close by, and we were having people lining up, and you know, our our awareness in southern California wasn't as good as it was in
Northern California where we were founded. So La Joya is a fascinating story. For two years, we had done about twenty thousand a week, plus or minus one thousand dollars every single week for two years, you know, nineteen to twenty one. It was pretty mediocre, and then overnight we went down to four or five thousand. But by April,
so you know, Shelter Place was in March. By April things were starting to come back, and we went from four or five thousand to ten or fifteen thousand, and by the end of April we were back to the twenty thousand that we were doing pre COVID. In May we started doing record weeks and in June we did forty thousand, and in July we did fifty thousand and fifty thousand. We average fifty thousand a week, and I remember my manager saying, well, we want to beat Stanford.
We want to do we want to do sixty thousand, and in August we did sixty thousand a week. In September we did seventy thousand a week. And last year that restaurant did four point three million, and so there was a couple of things at play. I think the first thing is is that we did get some We did build awareness with this free meals for first responders. We won a Jefferson Award for public service in San Francisco. You know, it kind of went viral that we were
doing this, So that was a piece of it. But a bigger piece of it is when people came, we had really really good food and really really good service. And because we didn't lose any team members because we paid them whether they came to work or not. We actually had two months after the Shelter and Place started, So in June of twenty we had more employees than we had in March of twenty And so when folks came, we have never we have never really struggled to handle
the business that came in. So when the business came, we were ready. The other thing is is that, you know, we were founded by tech entrepreneurs. Our founder, John Kaplan, who interestingly enough is the Ambassador to Singapore today, was the founder of the flip video phone that he sold to Cisco and so, and all of our investors were tech folks. And so we had a very good technology
platform that we were able to build on. And when third party delivery became so prevalent during during COVID, no we went from you know, pre COVID we were eighteen to twenty percent delivery and during COVID we got up as high as eighty percent eighty percent delivery. But it didn't it wasn't it wasn't difficult to ramp up because we had the systems and I used to handle it.
So so two things that were very important. We had the tech platforms in place to handle the business when it came, and we also had you know, the food and the service models where we deliver what we call and I love it here experience. And so when people came and had that I love it here experience, they told their friends and things, and things just snowballed. So actually twenty twenty, even with you know, horrible marches and
March and April that were down. You know, I think March was down fifty percent and April was down sixty or seventy percent, twenty twenty ended up being a record year because of the amount of sales we did in the back half of the year. But the interesting thing is that our average unit volumes actually doubled during COVID. So I mentioned that Stanford was our highest volume restaurant.
You know, pre.
COVID, they were doing you know, thirty or forty a.
Week, and you know, now they.
Last year they did four point five and this year they're on pace to do over five million. Every restaurant we have has doubled their volume since the beginning of COVID, and you know, it's one thing you have to have. One of the not very complicated beliefs that I have is if you're going to be a great restaurant company, you need to run great restaurants. And you know that is the operator in me. But if people come to your restaurant and you don't run a great restaurant, it
doesn't do you any good. Some of my team gets frustrated with me sometimes because I don't get excited about great sales. What I get excited about is great guest feedback. Because great sales are about what you did yesterday. Great guest feedback is the best indicator you have of what you're going to do tomorrow. And so I'm fanatical about guest feedback and tracking guest feedback and following guest feedback.
And you know, if we have a great sales day and I don't feel like we delivered that, I love it here experience.
I'm not happy.
I really don't care if it was a record day, if we didn't deliver, I love it here, and but our number one goal is to deliver, and I love it here experienced every guest. And that's all about great restaurant operations. And I think, I really think in the restaurant people, in the restaurant business, people underestimate how important that is.
I love that love it.
Yeah, so I love it here.
Right after I came on board in twenty sixteen, you know, the volumes of our average our volumes have grown from seven hundred thousand dollars annual, you know, average unit volumes to over three million dollar genid volume since twenty seventeen. And I don't know another restaurant story. I'm not sure that's ever happened before in the restaurant business.
I don't know of a story.
I haven't I haven't heard of it.
And so, you know, we really did a couple of things. The first one is I was I was sitting in my office and about the end of my first year, and I got a review in from our Stanford restaurant where the guests started off and they said, I love it here, and they went on to explain why they loved it at the Stanford restaurant. And I asked myself, God, what would happen if every guest when they walked out
the door could say I love it here. And so then I asked my restaurant support center team the same question. I said, read this review, what would happen if every guest said I love it here when they walked out the door. And I have a weekly call with my GMS, and I asked them the same thing as I said, Hey, look at this. What do you think would happen if every guest said I love it here when they walked
out the door. And within a week, we had torn up every mission and vision statement we had in the company, and we had changed our mission to delivering and I love it here experienced every guest. And the thing I love about that is that our team members understand what it means to have an experience so good that you
can say I love it here. And twice a day we do rallies, you know, before our lunch shift and our dinner shift, twice a day in every single restaurant, and the only purpose of the rally is everybody says, what's our number one goal?
To deliver?
And I love it here experience and them and they say what does that mean? And that's how we start the shift. And I don't actually tell people how to liver.
And I love it to hear experience.
I say Michael, what does it mean to you to have an I love it here experience? Deliver that to the guest.
And that's been that's.
Been tremendously successful, which is kind of nuts and bolts of running great restaurants. But the other thing is one of the things I learned at Popeyes was that you don't always have all the answers. And in the case of Popeyes, where we are a franchise organization, there isn't a problem that we have the franchisees don't already know the answer to. And in our case at MELT, there wasn't a problem that we had that our team members
and our guests didn't know the answer to. And so when I came to MELT, I sent out a letter to everyone in our database that asked two questions. I said, I'm the new guy. I have two questions for you. What do you hope I change? And what do you hope I don't change? And I got eleven hundred responses back.
And then I met with all of my.
Internal team and my GMS, and I asked them the same two questions. We put all those answers into a spreadsheet grouped.
Together by category.
Then I did what they said to do, and our sales have quadrupled. So it hasn't been it hasn't been all that complicated. Do what your guests and your team tells you is smart and you can have great results.
It's awesome, man, and the mission statement, the simplicity of it is great. I'd imagine the employees really appreciate the freedom that you're giving them to provide a great experience. No, all really smart stuff. I'd imagine your turnover levels are pretty low compared to the industry, right.
They're pretty low.
So if you look at management in the past four years, I've lost one GM and they went on to be a multi unit manager at another brand, and my team member turnover is under one hundred percent. So I think I think that's I think that's important. You know, we we try to listen to, we try to have, we try to be and I love it here place to work. So part of delivering and I love it here experience is being and I love it here place to work. I like to say that the guest experience is never
going to exceed the team members experience. So if you want to deliver I love it here, you better have an I love it here place to work, and so we do our best.
We do our best to do that.
Cool. Is there any other unit economic data that you'd like to share?
Yeah, so, as you can expect, when average unit volumes go from you know, seven or eight hundred thousand to three million, that unit economics.
Improve improve greatly.
You know.
One of the things I was worried about when I came here is that our you know, our rents were so our rents were so high being California. But once you quadruple your average UNDT volumes, all of a sudden, your rents tend to get in line on a percentage basis. So now now our rents are you know, our rents are doing doing a lot better. So yeah, you know, we're in the We're in the high teens.
I think that.
With the supply chain issues the past couple of years, our food costs have gone up a bit. I've been fairly reluctant to take too many price increases.
I tend to be pretty.
Conservative when it comes to pricing. I have taken some probably not a probably I could take more, but that's a lever you can't push back. So I've been I've been pretty slow in that Yeah, are are We're in the high teens, which in California with the uh, you know, with the high costs, I'm I'm pretty pleased with cool.
Are there any opportunities there for you to expand that margin?
Yeah, I think that there is. I Like I said, I think that we do have some some pricing flexibility that that, you know, I think you could be aware of.
I mean, one of the things, one of the things.
That I think brands have to be careful with is their unit economics of delivery. Delivery is an interesting story for us. So this is another case where my team kind of proved that I don't know anything and they know everything. Is that my IT folks came to me in twenty seventeen and said, hey, you know, I think we should try a third party delivery And I said, no way. I have no interest in delivering.
Bad food and.
Charging and not making any money for it.
Right is that? Why do I want?
Why do I want people to have bad food and us not make any money.
It makes no sense to me.
And my IT folks said, you know, I really think that we had to put our toe in the water.
On this, and.
And so we did it in a couple.
I said, all right, fine, you know, we'll do one delivery platform. I think we started off with with Uber Eats and and in two restaurants, and pretty quickly we got we were in high single digits and mix and I said, well, you know, high single digits and mixes. That's pretty good. Let's do it some more places. And then pretty quickly that went to well, I guess we ought to think about having more than one delivery service,
you know, let's bring another one on. And by the time COVID hit, we had gradually grown from you know, zero percent delivery to you know, the first year we did delivery, we were probably eight or nine percent. Going into COVID, we were eighteen to twenty percent, and then, as I mentioned during COVID, we get up as high as eighty. But if I had had my way, we would have never done delivery and we wouldn't be the company that we are today.
But luckily I have.
Smarter people working for me than I am, and they told me that they thought this delivery.
Would be a thing, and they were right.
But one of the things I said from the very begetting is that if we're going to do delivery, we got to make money. I'm not going to have my people working their butts off, and so I charged a premium for delivery in order to make up for that margin loss that you have to pay to the third party providers. And I have found I get zer literally, I get virtually zero complaints from guests on pricing on delivery.
I can remember going to some conventions and things and the biggest, the biggest groups of folks were meeting talking about how do you make money at delivery? And I was always standing in the back of the room, going, well, you gotta charge more, you know, if you want to make money. And that's worked for us. We we charge about a twenty percent our menu prices for delivery about twenty percent higher. There's way more price flexibility on delivery than there is dine in, and people are looking for
the convenience. They're willing to pay for that convenience, and that's worked for us. So I would not do delivery if I couldn't charge a premium for it. There's one there's one third party service and I won't I won't say who it is, But for for a couple of years, they said we couldn't have different pricing on their platform than we had on our menus, and so I didn't use that. I didn't use that platform. And because it just doesn't make sense to do delivery unless.
You're making money at it.
And folks will make theoretical arguments about incremental profit and those incremental sales and how that's labored. In my experience, that's all blowning. You you got to make as much money on that third party delivery as you make on your instore transactions, or it just doesn't make sense to me.
Yeah, that's only good way it's going to work for both parts. Yeah, I completely agree. You know, obviously if top line has grown a ton over the last few years, but do you still see some some opportunities for growth there.
Yeah.
So we've done very little menu expansion. One of the things that I really want to do is develop a great fried chicken sandwich. As you know, I have a pretty big fried chicken background and have a lot of passion for fried chicken and uh, and so we're working on a fried chicken sandwich, and I think that's the
next logical extension. I've been very reluctant to our to expand our menu because I think that being great at a few things is better than being mediocre at many, and so I've, you know, I've tried to really focus on, you know, having I love it here food. You know, I love it here burgers, and I love it here grilled cheese sandwiches. And one of the things I didn't mention is that the other thing that has happened since twenty sixteen is that burgers have become the biggest part
of our menu. And today we're about a sixty forty sixty forty mix of burgers, and we have a really super unique burger that's different from a burger that you get anywhere else. First, we use a blend of Angus and Wygo, and everybody who sells burgers is in love with their blend, but we're the only ones I know that uses Wygu in their blend, and so it makes that burger really juicy. But the other, the other cool thing that we do, there's a couple of things. One is we chop our burgers.
So after we.
Smash the burger.
We chop it, and we do that so that cheese can get into every nook and cranny of the burger and make it kind of a unique burger.
And with a brand like the.
Melt, you want cheese to be a big part of the product. So I was actually touring restaurants in New York, and the bodegas in New York have a product called a chopped cheese, and a chopped cheese is kind of like a Philly cheese steak, but they make it with ground beef instead of cheese steak. And I thought, maybe this is what the Melt Melt burger should be. Maybe it should be a chopped cheese. This feels like something
that we would serve at the Melt. And you know, I worked on it, and at the last minute I kind of chickened out, and I said, you know what, it's kind of hard to eat a chopped cheese every day of the week, but people eat burgers multiple times a week. Let me make it sort of like a chopped cheese, but more like a burger. And so instead of two standard deviations away from a burger, I went one standard.
Deviation away from a burger.
And so what we do is we take that burger, we chop it, and then we have a pickle jalapeno mix. It's kind of like chopped pickles and jalapenos.
And we put that on.
Then we use two slices of cheddar on top, and when you melt that cheddar, it gets into the nooks and crannies of the burger. That picklehallapino mix gets into the nooks and crannies of the burger.
We have a super unique burger.
I think that the key to any successful restaurant is your food has to be differentiated. And there's nobody who has a burger that's anything like our meltburger. And so today we sell more meltburgers than we sell grilled cheeses. Our grilled cheeses are fantastic and the best grilled cheeses you can get anywhere. But I'm pretty proud of our meltburger. It's something that we developed from scratch and is a is a pretty cool product.
And today on all.
Of our new restaurants, you know, seinage says the melt and then underneath our tagline is World's Meltiest Burger, and it's a it's a dang good burger. I have one for lunch just about every day.
It sounds fantastic. You're making me hungry. So when I was in college in DC, there was a deli right near school called Wise Miller's and they did kind of a chopped burger thing called the Burger Madness. It was absolutely fantastic. So I'm going to have to get out to California and try a melt burger. Speaking of California, outside of you know, the high real estate costs, what are some of the other largest obstacles that you have to do in business there.
Yeah, Look, it's no secret to anybody that California is a challenging place to run a restaurant company. And you have the legislative challenges, you have the team members challenges, you have our minimum wage challenges, you know, are my minimum wage at my minimum hourly wage at West Hollywood, which is one of my newest restaurants, is now nineteen oh six and so and every place that I operate today as a minimum wage is fifteen dollars or fifteen
seventy five, I think are higher. So that's a challenge. But the other thing that California brings is, you know, it is a it is a huge economy, and there is the opportunity to still make money, and every everybody you compete against has the same challenges as you do. I don't. I don't find myself worrying too much about minimum wage, for example, because if everybody has to pay that same minimum wage, you're kind of on an on an even field.
I think that it does.
It does mean that the prices you have to charge in California have to be a little bit higher. That's one of the things that we'll have to figure out as we go to Arizona is does our pricing models stay the same or or are is that pricing in Arizona going to be different than it is in California. But there are challenges, but you just you just have to understand the understand the rules of the game, and
and everybody's playing by the same set of rules. So that's you just got to make sure that again, if you can deliver I love it here food and I Love it here service, you're going to do well. It doesn't matter what state.
You're in.
For sure. So you know, speaking to California, it's some of the companies that I cover that have a lot of exposure to California. Jack in the Box and Chipotle are two of them. They're they're testing automation technology, uh in their kitchens, right, so they're they're further along that technology curve than a lot of chains that are maybe based in the South, where labor and real estate come
a little cheaper. So are there any tech upgrades or automation or anything that you're implementing or testing or thinking about installing in your restaurants.
Yeah.
So we've always had really good technology. We've had Kios in our restaurant since we were founded in twenty eleven. Today, about twenty five percent of our orders are taken at the kiosk, and I I'm not I have to I have to tell you, I'm not sure that that necessarily leads to a labor savings though. The way I look at kios is everybody comes to your restaurant with a different expectation level of service. Some people like kios, some people.
Want more one on one.
In person service. Some people would rather use an app.
And so.
What I do is I have a really good app. And again we've had an app since twenty eleven.
Also, we when I when I first when I.
First got to Melt, we had you know, eighteen restaurants and sixteen I people and we were doing you know, so we had our own.
App and our own kios and and uh.
But so we have a great great apps, great kios great online and so I think that that does take some of the pressure off front, off the front. So I'm always looking at how technology. I look at how technology can make the experience better, both for team members and for guests. I haven't really looked at technology so much as decreasing the costs and uh, you know, we're a small brand and other people may be working working
on that. But I think a big part of I love it here as team members who can deliver I love it here, and so I think that's always going to be a big, a big piece of our model. But I do think you need to have the technology that the guests want. I see some brands who are Kiosk only or some brands that are app only. What I believe is you need to have the option of Kiosk, app or front Counter and whatever the guest is most comfortable with, that's.
Going to be I love it here.
There's one one national burger chain that I know I won't mention any names, but started in New York where you know, you go into their restaurants today and they try to push people to the Kiosk and I just don't think that that's the right way to do it. I think if you want to use the kiosk, to use the kiosk, if you want to if you want.
To talk to a person, talk to a person.
I agree, all right, So what are your biggest concerns? What worries you most?
Yeah, I think right now we're really ramping up our unit growth, so attracting enough folks to especially management level folks who can deliver.
I love it here.
That's really important. I think with the supply chain chain challenges right now, it's taken a lot longer to build new restaurants. Equipment's harder to get and it's more expensive. I seem to be two steps behind the rabbit all the time on how much costs are you know, costs are increasing, and how it's how it's delaying the the are builds. You know, we used to be able to say we could build a restaurant in ninety days, and you just can't build a restaurant in ninety days anymore.
There's just too many supply chain issues and too many labor issues to get that done. So I think that those are the you know that those are the big challenges but you know, we have four restaurants that are going to open, four new restaurants that are going to open before the end of the year. Our next new restaurant is going to be in del Mar just north
of La Joya in San Francisco. And then we have three they're going to be opening in in the South Bay in San Francisco, one in Mountain View, one in Sunny Vale, and one in Santa Clara. And then we have five restaurants, five plus restaurants in the pipeline, including two in Arizona next year. So making sure that you don't grow faster than you have. I love it here teams in place for is the is the number one is.
The number one priority for me.
You can't get too far out ahead of your skis. I love it here is a big reason why we're where we are today. And if we start opening new restaurants that can't deliver I love it here, then uh, then we're not gonna We're not going to be able to sustain the things that we've been able to build for the past few years.
That's great, man, Listen, this is fun, you know. Congratulations on your success, good luck moving forward. Thanks again for doing.
This all right. Thank you Michael. It's been a blast.
Yeah, it's good. Good to catch up, it's been a while. I also want to thank the listeners for tuning in. Keep an eye out for our next episode, airing in a few weeks. We'll be interviewing Howard Penny, Managing Director and senior restaurant analyst at Hedge Eye. Have a good day, everybody,