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Stephen Phillips - why do so many new restaurants fail?
96 Plays2 years ago
Stephen Phillips is a passionate restaurant professional, with a reputation for driving standards and bottom-line targets for the UK's favourite casual dining brands. In this episode of the First-time Founders Podcast Steve shares key learnings for first-time hospitality founders - how to select sites, shape menus, build great teams and generally increase a new hospitality business' chances of survival!
Interested listeners can reach Steve (https://www.linkedin.com/in/stephen-phillips-6b00b110/) at stephen@umamiconsulting.co.uk and Rob (https://www.linkedin.com/in/robertliddiard/) at Rob@mission-group.co.uk
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Transcript
Introduction of Steve Phillips and Podcast
00:00:00
Speaker
Hello and welcome to another episode of the First Time Founders podcast, the show where we talk about how to take a business from nothing and grow it into something meaningful. Today we're speaking to Steve Phillips. Steve's really well known in the UK hospitality sector as a leading operator, a guy that founder or corporate operators bring in to help them scale up operations from a handful of sites into national or regional chains. Steve started his career as a chef and he's worked his way all the way through the ranks so he understands
00:00:29
Speaker
really intimately how to do site selection, how to package product, i.e. food and drink offerings to make money and delight customers, how to recruit and retain people, how to implement systems.
Aspiring Restaurant Owner's Pitfalls
00:00:40
Speaker
There's almost nothing that Steve doesn't know about how you can mess up a restaurant operation as a first-time founder in that sector.
00:00:48
Speaker
Now I'm sure many people watching or listening are going to be like me and love the idea of owning their local restaurant or bar. So in this episode, I had some fun putting some concepts to Steve and see if he could help me guarantee success when I do take over my local place to provide beer and pizza to the masses. He almost took me out of it like any good industry veteran. He knows just how easy it is to go wrong as a first timer wading into what might seem like a glamorous sector.
00:01:16
Speaker
So if you're tempted to do the same, make sure you listen to this episode. And for God's sake, reach out to Steve before you put your life savings into whatever it is you're thinking of starting. Enjoy the episode.
Steve Phillips' Career Journey in Hospitality
00:01:34
Speaker
Steve, welcome to the First Time Founders Podcast. Thank you for doing this. No worries. Glad to be here. Good to catch up. Yeah, no, it's awesome. And we've only been doing this podcast for a while, but most of the people that have been coming on are either B2B software founders or purchasers from founders. Quite a few people in hospitality and of course, as we'll get onto, that's your background. But this is a special appearance because you're here to talk about something a little different. You're both a founder yourself now, which we can get into.
00:02:02
Speaker
But actually, we're going to talk about what it's like to be a hospitality founder, and in particular, where hospitality founders go wrong. So before we dive into that, would you mind telling people a bit about who you are, where you come from, and how you've ended up doing what you're doing now? Yeah. Yeah, great. So I'm Steven Phillips, Steve Phillips, to people that know me well. As you get older, you start using your long name, right? It's a bit weird. And hospitality of my whole life, really. So 30-odd years.
00:02:32
Speaker
very typical hospitality story. I remember sitting in school looking at the work experience. In those days, it was a Rolodex, right? You had to sort of go through and pick what card you were going to do. So random. And I just remember thinking, don't want to be behind a desk. And there was this cooking thing in a hotel. And I was like, well, that sounds like a bit more fun. So yeah, from that part time job, then a full time job. One of the things I've
00:03:00
Speaker
As a non-UNI attending person, I love to tell is that I bit Jeremy Clarkson for it, but I left, did my last GCSE exam, went home, packed my bags, moved into the staff quarters of that hotel that day, and went full-time the next day.
00:03:21
Speaker
And thankfully, touch wood. I've never been out of work since. So I've just always stayed in hospitality, carried on as a chef, went to Cafe Rouge in the really early days when it was operated, the original Pelican group, Karen Jones, et cetera, and opened their Hartford branch as a chef.
Challenges in Hospitality Roles
00:03:42
Speaker
Transition front of house there again, we'll probably come on to it, but met some amazing people that gave me amazing opportunities Still friends today. This is the late 90s now early 2000s and Went into Frankie and Benny's again in its sort of heyday. I think I joined at sort of site 70 opened the branch in Stevenage which were one of their first sovereign restaurants at the time and went on to be a big success for them and
00:04:12
Speaker
The restaurant was fantastic and was a real sort of example of what Frankie and Benny's was back in the day before it went very different, let's say. I did eight years there and that's where I transitioned from a manager to an area manager and a sort of senior area manager and that kind of thing. I went to GBK in the
00:04:34
Speaker
in the time where the Nando's guys had just brought it. So again, very people-focused business, great founders. They were doing a semi-turnaround job at that point.
00:04:48
Speaker
Did a start-up with Levi Roots and his business partner, which was very exciting, but very, very challenging and very different, but gave me a lot of backbone as his founder. Partner, he used to say, gave me a rhino skin that I probably didn't quite have by then.
00:05:14
Speaker
Then we went to Basaba, which by that point was a 20-year-old business and very much a local tyre, an Allen Yow business that had really lost its way, tried many times to get outside London and expand and it was in
Transition to Consulting
00:05:29
Speaker
a bit of a mess. That was a bit of a turnaround job with a new exec team. And then on to Marigami.
00:05:38
Speaker
Toradol kept easier partnership and Toradol are the brand owners that have got sort of over 800 marigames across the world at sort of 1,200, 1,500 sized estate of other brands as well and stock exchange listed in Japan. So a big, big PLC that decided to come to London and launch their very famous and very admired brand from Japan. I've been doing that for the last three years.
00:06:07
Speaker
Right up until this very point where I'm about 9, 10 days officially away from becoming, some people are saying, crossing to the dark side, becoming a consultant, like the world needs more of us, right? A founder consultant. So this is your first business, right?
00:06:29
Speaker
Yeah, yeah, yeah, I mean, well, yeah, as usual, a couple of things that gave me a bit of a backbone of income to make the leap happening. And what I didn't want to do, it's a bit typical, I suppose, but I didn't want to just just, you know, set up a generic email, become a become a consultant and see
Advice for Aspiring Restaurateurs
00:06:49
Speaker
what happens. And I thought if I'm going to do it, I'll do it relatively properly. And, you know, we'll start it as if it could be a
00:06:58
Speaker
Um, hopefully, um, you know, relatively decent sized sort of practice one day maybe. So using people that, you know, to collab with at the moment that I know from the industry and see, see how that pans out. What sort of services will you be delivering, um, through the new vehicle Steve? The reason I ask is obviously for the rest of this conversation, I'm going to get into shamelessly extracting pro bono consulting advice from you for my benefit and then for the benefit of those listening in. So what sort of things will you be advising clients on in the new business?
00:07:27
Speaker
Well, I think that my bread and butter is obviously operations, but I think where I'm relatively uniquely places as an operator is that I really understand food. I mean, obviously operators do, but I understand it on a foodie level. I understand it on a, I want to say molecular. I wasn't that kind of chef, but
00:07:50
Speaker
I understand it on a process-based level and I sort of get flavor profiles and I can put together a dish still, myself, that kind of thing. I was chef trained, hospitality trained, so I think the food side of things, menu creation, flavor profile, product. I've been called a product guy by bosses in the past. I think it's a big thing for me.
00:08:18
Speaker
But then the other unique elements, I guess, or relatively unique is that in the opportunities I've had, I've worked on quite a lot of hospitality technology. I'm definitely not a technology brain, but I kind of know how I want something to work and things to talk to each other. So I do a lot in that sort of hospitality tech stack space, and I've sort of built that with some very clever people, much cleverer than me.
00:08:46
Speaker
in Marigami and in some other businesses. And then your bread and butter, people, operations, SOPs, labor, cost of sales, so on and so forth. But then I think I work with some great people over the years, so I've definitely got some collaboration with some training partners, with some marketing partners, commercial partners, finance partners, et cetera. So I'd like to think with my network, I can bring
00:09:13
Speaker
the whole shop to somebody.
Common Mistakes in Restaurant Industry
00:09:16
Speaker
And I think in particular, I really got a passion for owner operators, people trying to find a way using my sort of 30 odd years of experience to save themselves a whole load of pain and energy and effort and time, just tap it. I've seen it already. It's that classic consultant thing, okay, our day rate reflects our experience and what we've done.
00:09:43
Speaker
Boy, can we cut a lot of time and pain away from what you might have to go through. It's hard to bottle that experience, right? Yeah. I mean, time and pain, they're inherent to the founder journey as a lot of these new operators will find out.
00:10:00
Speaker
Okay, Steve, so like all good software guys that have had at least their first exit of whatever size, I obviously desperately want to be a restaurateur. So for the... This is where I've talked you out of it, right? Yeah, do your best. So right, I want to open a beer and pizza joint, my hometown Brentwood in Essex on the east side of London. Let's talk through all the things I'm going to cock up as a...
00:10:28
Speaker
As a non-hospitality, non-food, non-restaurant guy, I think I understand operations because I've delivered software to operators for the last 10 years, but I know I don't actually understand operations, but just for the benefit of our audience, humor me. Can we go through and sort of, as we were preparing for this call, we talked about some of the areas where you
00:10:50
Speaker
specializing, you've mentioned some of them in the setup to this, you know, product, financials, location, all that kind of stuff. Can we talk through like an illustrative concept and basically just tease out where people get it right and get it very, very wrong and get around this, this sort of idea of someone and, you know, let's say I'm going to open mine in Brentwood, but maybe someone is wanting to open theirs in Manchester or somewhere else. What's the first thing they need to think about? What's the first irrecoverable mistake people make when they wander into hospitality and try and set up a business?
00:11:22
Speaker
First of all, would I open a pizza beer place in Brentwood? I'm not talking about Brentwood, by the way. But probably not because it's just, you know, it's stacked against you, right? expand on that, Steve, because you're probably right. That's why I'm having some fun with it. Yeah, yeah, look, I mean, I mean, I mean, I as in the average Joe, not necessarily
00:11:48
Speaker
you know, myself would like if I was given the opportunity. But I think that there's that saying of if you've got if you've got a bucket of cash to open a restaurant, why don't you put it in a bin, set fire to it for a while, stamp on it and see how much you got left. You might have more. Right. You might get a better return. But I think the first thing is experience. And it goes back to back in the day.
00:12:14
Speaker
when I was sort of coming up through the ranks, I worked for a few owner operators of pubs. And that was the thing then, right? Bankers made some money and opened a pub. And it was a big thing. And maybe pubs are a bit more available, I think, probably at the time than they are now.
00:12:34
Speaker
no experience i
Site Selection and Economic Model
00:12:36
Speaker
mean it's just it so going back to the point of everything stacked against you if you then go into that with no experience because you think your experience is as as a customer um i mean it's when you just put that down on paper it's the craziest statement ever right let's unpack that then so let's say that i persuaded you to be my co-founder we're well financed and i say steve i know that i don't have the skills to do this myself come in
00:13:04
Speaker
You know, you can have the equity because I'm going to set fire to my money if I do it without you. OK, so now you're like, all right, Rob, fine. You pay for the whole thing. We're going to own it equally. You might even be the majority owner. So now we've solved the experience point. What's the next thing you're thinking about when you're thinking, Rob, I'm not going to let you drag me down. Yeah. I mean, site selection.
00:13:27
Speaker
I forget, even at this point, the brand or the idea or the concept, because invariably
00:13:35
Speaker
you know, average brands will do better in great sites. And it takes a really, really good concept to do well in a poor site. So for me, site selection, and now that doesn't necessarily mean, you know, prime high street next to Starbucks, but it's got to suit the business and it's got to suit the economics of the business. I think that's the other thing that
00:14:03
Speaker
that people get wrong, they sort of take the site and then start working the rest of the economics backwards. So in this example, you might say to me, Rob, I don't give a shit that you live in Brentwood. We're not starting a restaurant in Brentwood just because it's convenient for you.
00:14:18
Speaker
Yeah, yeah, but also if it was Brentwood, does it need, does it, you know, is, I know Brentwood a little bit, but is it on the high street or is it tucked down one of the side roads or, you know, is it on the approach road from the M25 rather than right in the middle of town, that kind of thing?
00:14:36
Speaker
I think you got us all that out, but what I mean about the economics is that if you've got a really low margin product, which of course if you did PC probably would be in the better side of that, then to a degree you've got a bit more to play with in terms of how prime you can go.
00:14:55
Speaker
high-protein estate restaurant, if you're then going to go and pay for prime high street location, then you probably just don't stack. Can you give a worked example of that, Steve? Because I know that you thought you toyed with taking a site for a coffee concept, didn't you? Do you want to talk people through how you thought about that property and where the economics stacked up? Yeah, it was opportunistic, really. So it's near where I live.
00:15:25
Speaker
I live in Bowe in East London. There's a lot of building going on. It's right on the very edge of the Olympic, whatever they call it.
00:15:36
Speaker
the follow-up regeneration project where they call it legacy something or other. So it's just getting out to the edge of Bow, which is a weird place, probably by Bow is a weird place. It's sort of 15 minutes from nowhere, but very close to everywhere. I've been in zone two. I can't get a coffee and we might, you know, first of all problems, I get it. But, you know, I have to walk across to McDonald's, which is very close, or go to the Costa machine in the Tesco's, you can't.
00:16:05
Speaker
get a coffee. So they've just worked up a load of apartments and they're all, most of the apartments going up are built by not-for-profit organizations. So there's a Guinness Foundation, Pension Foundation that's just worked up the biggest state. So therefore, they're not institutional landlords. They don't understand how to play that game.
00:16:32
Speaker
And what made sense though was that this coffee shop, this potential coffee shop was on the way to the tube. I walked past it every day. I could do a very, very, I sat there one day for most of the day, did some work on my laptop outside, sitting on a bench. And just people counted and just very quickly worked out that
00:16:55
Speaker
you know, you only need to sell 70, 80, 90 cups of coffee in the morning commute and about 50 cups of coffee in a sort of longer stretched out coming home time to make it work, assuming all the other economics were in place. So to, you know, assuming that I was going to get handed a shell that I could use and so on and so forth.
00:17:20
Speaker
So, and I knew what the cost of sales would be on it and I knew roughly what the label would be on it, of course. So I knew what the rent needed to be by working it back like that. As it turns out, the because of the story I told you about the
00:17:35
Speaker
the landlord effectively that that site was just not going to be useful for anybody because it just wasn't finished correctly, it didn't have the right electricity, didn't have the right gas, didn't have the right HVAC, didn't have the right heating.
00:17:55
Speaker
fire suppression, et cetera, et cetera. It was just crazy. So basically it was 200, 250, 300 grand in before you got to building it. And actually, I know that they had an offer on it before from an independent. Now, if I was an experienced and I didn't have people I could draw on to help me come to that conclusion,
00:18:19
Speaker
I hate to think that somebody could potentially sign that lease because the rent looked great, right?
00:18:26
Speaker
and then realize they got 300 grand's worth of just getting it to a standard that they can even fit it out. Does that happen often? Because I like to think that wouldn't happen to me because I'd have the brains to call someone like you and say, please take some of my money to stop me losing more. But I'm assuming that's partly because I have the second time founder and I've made so many mistakes that it's knocked at least some of the cockiness out of me. I guess people that haven't had that experience could easily wade in and sign a lease, right? As the first thing they do.
00:18:56
Speaker
Yeah, I think you're right. I think they absolutely could. And I think there's obviously, I mean, not definitely not talking about all
Hidden Costs in Lease Agreements
00:19:04
Speaker
of them, right, but there's definitely also some, you know, not fantastic contractors out there that might, you know, might kind of, you know, not do their homework. And, you know, once that lease is signed and you're in and you're discovering problems, you know, that's game over, right? You're in a mess to start with.
00:19:23
Speaker
Look, it's better experience. I've obviously been exposed to property stuff, but I was able to pick the phone up to a very useful chap and say, look, can you do me a favor here? And of course, it's very, very nice to actually do me a favor as well. So that sort of hour, hour and a half that he spent on it on a couple of calls and a few emails for me stopped me making an enormous mistake.
00:19:49
Speaker
That's unbelievable. Okay, so we know site selection is critical and site selection is what drives your sort of opportunity through your footfall and then depending on what your product is, that informs the margin profile. That makes sense. So generally, would you advise someone to have a concept in mind and then go and look for a property for
Concept vs. Site Selection
00:20:08
Speaker
it? Or as a first time hospitality founder, does it make more sense to find a site
00:20:14
Speaker
and then think about what the right concept is for that side, if the economics pencil, or is there no right answer? I don't think there is a right answer, actually, because I think people are definitely successful doing it both ways. Personally, I think the best way I could answer it is that
00:20:34
Speaker
As an operator over the years, you end up just having 100 ideas in your head of things that you think you could do. So I think if I ever went down that road, I would probably be looking for a site, and then something would trigger. And you know that idea you've always had for that, that would work there. I mean, the coffee shop, for example. I'd never thought really of a coffee shop, but as soon as I saw that, it was just a coffee shop.
00:21:01
Speaker
my take on it really was that it could have been a bit sort of Vietnamese biased, a bit of a nation twist, therefore you can just something a bit more exciting with the simple food offer and you know, rather than just crusty sandwiches and whatnot.
Challenges of a Successful Sports Bar
00:21:17
Speaker
So it sort of evolved in my head after I saw the site, whereas, you know, I think we all, I think I don't know what it is about us right, but I think we all love a sports bar as crap as they normally are.
00:21:31
Speaker
So, you know, I've got this kind of sports bar idea. I've probably had it since 17. So, you know, getting the right site, you know, might drive that. What would the right site have to be like for a sports bar to be less crap than normal? I don't know. 28 years in, I haven't found it. So I think it's probably not out there.
00:21:52
Speaker
I don't know. I mean, it's obviously there's a lot there's a lot a lot naff about sports bar But at the same time there's there's I think we all pine for a really good one, right? We're really good Well, all the pubs have turned into restaurants, haven't they? It's it does it does feel like there's a bit of a void like just just consumer side You know you want to go for a pint?
00:22:13
Speaker
Yeah, there's not really that many choices. So many of those pubs now are turned into restaurants to try and open your wallet a bit wider. It makes sense as to why they have to do that, but it does leave a bit of a gap in your sort of social opportunities. Yeah, yeah, no, I think so. I mean, again, I think it's I think a site like that is always going to need to be high foot for high footfall.
Unique Dishes and Customer Experience
00:22:35
Speaker
It's, you know, it's going to need to be where there's lots of people clearly, you know, I mean, actually, in a
00:22:44
Speaker
In a way, I think London's doomed for something like that. It's just all too expensive. But I think other cities, the UK and certainly abroad can make that work. And we're also still quite biased here. We're sports fans in the UK. And I'm not, by the way, I'm terrible.
00:23:03
Speaker
every sport and I don't really watch very much of it. So not competitive eating, I bet you could throw down a hot dog or two. Yeah, well, yeah, I definitely I definitely have been known to do that. So yeah, I think I think I think if you can go somewhere where that actually there was so many sports where people are into that you don't have to just rely on football, because I think football puts a lot of people off, right? For example, but yeah, when you can really
00:23:34
Speaker
So that again, is that actually more Europe? I was in Riga recently and it was when Riga would pay in the ice hockey world cup against Canada and he was electric, absolutely mental. But then as soon as the match ended, a football game came on and as soon as that ended, this was all a big square, a square in the square. Something else came on from a different part of the country and a different time zone and everyone stayed.
00:24:00
Speaker
You know, the football, yeah, you know, you talk about football in the park in the UK games, everyone runs off, right? goes on. Yeah, I hadn't thought about that. And I guess America, of course, they have what is it like, they're big five sports or whatever. And so when you think about the American sports bar, and anyone that's traveled across the Atlantic and likes to drink, it's an experience many of us enjoy.
00:24:21
Speaker
I hadn't actually thought about the fact that they'll switch from baseball to basketball to NFL, ice hockey. Sometimes those things are playing simultaneously on those crazy sort of multi-screen experiences. I hadn't thought about the fact that in the UK, you might have a bit of cricket and the football. It's just not the same, is it? Yeah. And also those games, right? They're days out in the States, you know, a big baseball game there and you start looking at the watch game and it's over.
00:24:51
Speaker
That's it, it's interesting, isn't it? Because even as you talk about that, you're sort of flitting between operator and customer persona. It's so easy, isn't it, as a potential founder to overlook what the likely customer journey is actually going to be and realistically how many customers are there that match the thing that you've idealized in your head. Should we get onto it? That probably brings us on to product then, doesn't it? When I say product in hospitality or founding hospitality business, like what does that encompass for you? Is that mainly about the food offer?
00:25:22
Speaker
For me, yes, because, you know, I've never, again, weird in hospitality is that we're, you know, you whack in their bars, drink, food, hotels, accommodation, but we all move in very different circles, right? We kind of give the same experiences and sort of understand each other's language. I liken it to a
00:25:44
Speaker
In Asia, lots of countries will speak very different dialects, as I'm sure most people are aware. But so you might go to, I know the Philippines well, so you might go to the Philippines, and the main language actually is Tagalog and then English. But there's so many dialects there where they won't understand each other. Tens, if not hundreds. And I think it's the same in hospitality.
00:26:14
Speaker
bar people don't understand food people, food people don't understand hotel people, you sort of come from the same place but you don't get it. So I think that's the first thing and for me it's definitely food when it comes to product. And I've stuck by a really simple rule in my mind and that's the
00:26:37
Speaker
If you, as a customer, feel that you can go home and put together that dish you've just eaten in, I don't know, 20 minutes, half an hour, no problem at all. You're not daunted by it, where to start. You're not wondering where you might get the ingredients. And you feel like you've got enough skill to pull it off.
00:27:02
Speaker
I think as a restaurant, you've just served a dish that you should not be serving. That's interesting. That's quite, that's quite punchy, but it makes sense. Do you want to unpack that a little bit? Yeah. I mean, I, I, I, I, I call it come back and get me dish, right. Um, you, you got to want to go back to that place because one, it it's more ish, you know, you want more of it. You want to go back, but two, um,
00:27:29
Speaker
you don't even know how to begin to replicate it. So I think that's the thing. And I think over the years, take certain pasta brands, for example, in the sort of mid 2000s, some nice ravioli, a really tasty sauce, a bit of grated parmesan, and some fried sage.
00:27:52
Speaker
That was a bit like, whoa, what is this? It's not spag bowl. It's not carbonara with cream. It's something different, right? But these pasta guys kind of
00:28:06
Speaker
got caught out, I think, by the supermarkets, you know, producing fresh pasta, producing little tubs of fresh sauce. You know, actually, I can just air fry my sage. And I can make this look very nice. Actually, thanks to people like Jamie Oliver and whatnot, I can even give it a crack with, you know, he's shown me how easy it is just to roll a bit of fresh pasta and make it myself if I want to do it for my friends. So I think these guys got caught out by that. Why would you go to said
00:28:36
Speaker
Pasta brand pay 14 15 pounds for a bowl of pasta, which you know you can do, you know You know, okay a bit more than Monday night dinner, but you know, you can do it And I think there's lots of brand sadly some of which I've worked for that just have just not realized that and they've just just lost their way right and I haven't thought about that, but it's true actually even though I'm not much of a cook I
00:29:04
Speaker
I like to eat and I consequently shop quite a lot. And it's true, as I walk down the aisles, even if I don't buy the items, it's building a level of familiarity with things that used to be sort of the preserve of restaurants. And you're right, it's harder and harder to push me into a place of novelty and excitement as I roll my eyes down the menu, even if I don't pick those items. I would imagine that's the same for most of the general public that would make up a customer base.
00:29:32
Speaker
And it's great, right? It's absolutely fantastic when you think about it because, you know, UK is a culinary hellhole was was a culinary hellhole, right? It was terrible. We couldn't cook and we didn't have much identity to our food and so on and so forth. And actually, my opinion is a consequence is we still don't really have a lot of identity to our food.
00:29:53
Speaker
But what we've done is very typical UK thing and very typical hospitality thing, which I'm very also passionate about, is we've just embraced all these other different cultures and potentially done some of this food better.
Innovation in Restaurants
00:30:06
Speaker
I mean, there's definitely trains of thought that you go to somewhere like Dishoom and you're getting Bombay cafe style Indian food as good as you would get in Bombay if not better.
00:30:18
Speaker
pizza pilgrims I love for pizza, you get a Neapolitan pizza, as good as you might get in Naples, if not better. So I believe that UK, especially London, is fantastic at drawing that identity out. Now, they've had to do that, because we're being so well educated over the years, and the supermarkets are pushing us, and so on and so forth. So to get brands can't be lazy, or restaurant concepts can't be lazy, you can't offer something that
00:30:48
Speaker
You know, you can easily replicate or everyone's doing or it's not not to a good standard So and it can't be every menu on the item, you know, everyone could probably beat fry some chicken wings and put some nice sauce on it and it'll be decent but You know take the chicken wing brands, you know, they're spending hours, you know tumbling marinating You know ensuring that these
00:31:16
Speaker
These wings are kind of soaked and left in the best possible condition, double frying, etc. Doing all the stuff you probably wouldn't bother doing, just to eke out the 10-15% improvement to what you might get at home. So again, you start going, I've got to go back to X-wing shop and get this amazing buffalo wing, whereas we could go to Tesco's and get some wings.
00:31:45
Speaker
slap them in a fryer put some frank's hot sauce over it you know you're 60 70 of the way there but it's not it's not enough right that's so true okay so you've talked me out of robbed beer and pizza in brentwood i i'll focus on on software and services well played imagine that i was an experienced chef
00:32:03
Speaker
Do you have to talk those men and women off the ledge sometimes in almost being too creative and assuming the customer has a level of discernment that they don't have and aren't willing
Creative Chefs vs. Profitability
00:32:12
Speaker
to pay for? I'm assuming it's just as dangerous, maybe not just as dangerous, but pretty dangerous going too far the other way, isn't it? Yeah. That sounded like that was a tone of resignation in your voice. It's so complicated, I think, actually. Look, chefs,
00:32:29
Speaker
I was very much, I'd call myself, I split into two types, creatives and productions. Now that sounds unfair on production chefs and I put myself in that camp to start 100% that myself in that camp be a joke to think of anything other than that. But what I mean by that is that
00:32:49
Speaker
These are process guys that get food, get flavor, but absolutely know how to do it at bulk, on speed, and make money. I think that's the big thing. Get a good GP, get an amazing product that can be replicated, can be done fast, and we'll still make good margin.
00:33:08
Speaker
Sorry, so good GP, so good gross profit, right? Like, don't be cooking things where there's not enough profit to cover the operating costs of the restaurant. Exactly. And then you have the creatives, and these guys are incredible, right? But they are artists, and they are artists in the sense of every other artist cliche that you can think of. You know, they're temperamental, they're passionate about what they're doing, they don't think business first, and so on and so forth.
00:33:33
Speaker
But of course they produce the most amazing plate of food that you've ever seen and I think it's really rare and well publicised of course that It's rare that you get people with even the right even with a decent balance of those skill sets And I don't quite know. What is the balance? Maybe maybe it's actually a bit more Yeah, maybe it's 55% creative is 45% production is perfect but
00:34:02
Speaker
I think, yeah, I think that's the key
Essential Roles for Restaurant Startups
00:34:05
Speaker
to it. So again, whenever I think about anything that I might do, two people jump to mind. One is very creative and one of the best chefs I've ever worked with, known.
00:34:20
Speaker
I mean I'm again I'm talking I'm not talking at Michelin level or anything like that I'm talking about just coming up with a concept and you need to put some dishes together for me incredible and the other excuse me the other is Mr.
00:34:36
Speaker
Excuse me. The other one is Mr. Process, right? He'll suss out, right, if we replace that with that, that will get our margin in line and it will be just as good. If we could get it like this and not like that, we'll do it faster and so on and so forth. Could they work together, do you think? Could you build a founding team with those two individuals in upper management or ownership or do you think they'd kill each other? They can with somebody looking after them.
00:35:04
Speaker
Yeah, for sure. But you can put them in a room and say, see you later. I'll be back in an hour. That's interesting. Okay, so let's imagine you, CEO of a new casual dining concept, looking to scale up, you decide you got these kind of two brilliant, different, but complimentary food product leaders.
00:35:27
Speaker
What are the other key roles you need to build around that, or I guess all the key areas of competence? I guess what, finance people? I mean, is finance driven, you've sort of covered finance in a way, I suppose, haven't you? Is it people next? Yeah, look, I mean, just staying on finance for a minute, I think you
00:35:48
Speaker
The job that operators and the food people probably everyone else does is so intense That if you've not got somebody counting the numbers And you know keeping coming back and keeping you in line I think that's a bit Yeah that it can be finished before it started. So I think that is important now whether that's just a great outsourced accountant or whether that's
00:36:14
Speaker
a proper outsourced or in-house CFO or whatever else. It depends what size you're going for. But clearly you write size into the business, but I think that's enormous. That is key. And there are some good fractional finance directors CFOs, aren't there, hovering around the restaurant sector? I know a few. And companies and services, et cetera. And I've seen that on both sides of the coin, I'd say.
00:36:43
Speaker
you know, really, really tightly managed, and, and therefore, you know, ultimately successful, and maybe not quite tightly managed. And then actually, the operators love it for a while, but then as soon as someone wakes up, all hell breaks loose, right? And then you start making decisions that you really didn't want to make or shouldn't have made in the first place. So I think that is an absolute key role, especially with what we talked about right at the start of this is that
00:37:12
Speaker
you're really talking about such small margins. So pay someone to make sure that at least happens. So I think that's key. Look, assuming that you've got the menu and you've got somebody that is doing the food and drink side of things.
Hiring for Cultural Fit
00:37:32
Speaker
I mean, I'm going to say operator. I think
00:37:35
Speaker
I think we're the master of all trades, sorry, the jack of all trades and, you know, by nature of the role. So, you know, most operators can do a bit of people, they can do a little bit of marketing, they can do, you know, certainly
00:37:51
Speaker
you know, do the service stuff, they can, they can write SOPs and things like that. So I think, I think the operator tends to be a key role. And again, I would say that if you're doing a startup and the operator doesn't want to do that stuff, you've got the wrong operator. Massive red flag, right? Like if they wanted to delegate everything. Big time, you know, and unfortunately, that's where operator consultants, you know, naturally come in, right? But they,
00:38:18
Speaker
I think that's the point is that even if I went to a business and they didn't have that person and they wanted me to consult but that person wasn't there to do it, I couldn't work with that business, right, be impossible. So I think that's key. And then it depends, I think the next role then depends on really what you're going for. If you're going to scale, and that's always the plan and that's how you're funded,
00:38:45
Speaker
Then for me, a HR stroke people person. And when I say HR, I don't mean a policy person because you can you can buy policies or you can print them off the internet. You don't need that to get going. I mean, someone's going to drive your culture and and really look after.
00:39:05
Speaker
people and you know keep everyone in check because again at the start you're making really tough decisions and you're under loads of pressure if you can do that within a framework of what values you've agreed you're going out to achieve in the first place you just need that that that culture person on your shoulder saying yeah but yeah but is that in line does that match what we're doing what are some examples of i mean on a no-name basis but can you are any
00:39:32
Speaker
Do any examples pop to mind of where you've seen a business veer off course because of the absence of that cultural check? Not from the start, to be honest, I would say. Because the operator tends to have a handle on that, right? They intuitively know what a culture is supposed to be and they're strong-willed enough to sort of impose it on a small group. Yeah. I mean, I've done two things from the start, which I can talk about.
00:39:56
Speaker
marigami from the start and it was super important to us. I did a lot of the culture stuff from from from day one in terms of you know owning it but we we as a team and with our with Keith our CEO we did
00:40:10
Speaker
you know, it was always a really important thing. In fact, it was one of the reasons that without even getting into what the business was and who they were, that I went to work for him. I knew Keith, I knew his values, I knew what he'd be going for. And sure enough, we sat down and we had that as a core thing. So we did it really, really well. And as soon as we knew that we had a bit of business on our hands, we brought in a head of people. And she's carried that on.
00:40:38
Speaker
And I could talk about Levi's because it doesn't exist anymore. But in that business, especially with a sort of relatively well-known figurehead, we didn't do an awful lot of people culture talking. We did lots more business talking, which was mainly coming from his business partner. And when times got tough, we certainly focused on margin and not on people.
00:41:06
Speaker
And ultimately, I don't think it was, you could describe the culture there. I don't think you could say what it was, what it stood for. How does that manifest in terms of sort of negative business impact? Is it you just end up with inconsistent customer experience? Yeah, yeah. I mean, there was a whole host of stuff going on there and two business partners that had different ideas of what the business should be in the first place.
00:41:33
Speaker
But yeah, ultimately, I think that that that came down to no one knew what they was working for. I think that's that's the key. And obviously, a lot of people felt they were working for this this sort of public figure that they that they recognized and knew.
00:41:51
Speaker
And actually that probably helped actually because that at least that's something people could, you know, well, they say tie your flag to, right? Whereas in Marigami, the cause, the direction, the idea, the
00:42:09
Speaker
the thing we were going after was always really clear. And people joined for that. That also sifts out some people. Why would you want to do that for some people if you just... I used to say in interviews, if you just want to come in, do a job, go home, it's probably not for you. And I say that with caution because
00:42:35
Speaker
What I don't want to do is I don't want to sound like that typical old-school operator that says, if you don't want to work 70 hours a week, then this is not for you. That's not what I mean by that. That is quite toxic culture that we've unfortunately had in our industry for a while. But what I do mean is that I'm going to tell you to do something one way, and then the next day I'm going to tell you to do it another way, and then the next day I'm going to tell you to do it another way, because I'm sussing this out with you.
00:43:01
Speaker
If you go and work for said other established 50 odd site brand, they're not going to do, they'll be lucky if they tell you to do two different things in a year.
Recruitment Challenges in Hospitality
00:43:12
Speaker
So your life there is going to be far easier than your life here.
00:43:17
Speaker
But this is gonna be really exciting and we're gonna be on a, you know, we're gonna be on a roller coaster. That's for some people, it's not for others, right? What type of people did that tend to appeal to? Like, why did it appeal to them? Because I think a lot of people listening know that they need to hire for cultural fit. They don't really know what that feels like. And particularly if you're trying to start a hospitality business, we don't really have the lever of pay. No, we don't.
00:43:46
Speaker
Do you know what? I think it just weeds out people that aren't really passionate about hospitality. Because actually everything I've just said is what hospitality stands for and what makes it special. So if you've got negative feelings towards those kind of things that we stand for, okay, it's accelerated in a startup.
00:44:11
Speaker
then I think we've all met them, right? You're in hospitality, you should probably be working in a bank. Yes. You know, so that's, you know, that and that, you know, it's definitely no slight on the person. Of course, it's not. But hospitality is so accessible and so easy to get into. I think some people get into it when they shouldn't. And then it's so
00:44:36
Speaker
I don't want to use the word trap, stickable, that it's hard to get out of as well. So actually, I think we retain people that we shouldn't necessarily be retaining a lot of time.
00:44:48
Speaker
I think that's right. Like it's quite easy to sort of hide as the average just below par employee, right? And you can over time collect a ton of those people. I guess where you've got what feels like a recruitment crisis, you can understand why brands are settling for people that shouldn't really be there. So does that mean that one of the key drivers of sort of success for a hospitality operator is finding some sort of unique and reliable talent
00:45:18
Speaker
acquisition. Yeah, look, it's luck as well, right, because when you first start, where are you in the supply and demand curve? When we started Marigami, we were very much in the supply curve, right? We had jobs, it was the middle of Covid, there was loads of managers out of work. We were always going to get
00:45:44
Speaker
have a good opportunity. I didn't need to use agents to start with. But what it did enable us to do, which I think is probably once in a lifetime, is run the recruitment process I've always wanted to run. First of all, myself and Keith sat down, and this is where he always had great vision and understanding as
Marigami's Recruitment Strategy
00:46:11
Speaker
well. And we kind of said, look,
00:46:13
Speaker
We think we're going to do, you know, we're funded to do 25 sites before we get on to before we get onto more funding or franchising. We don't know how this first site is going to go. We've definitely got a bunch of other sites lined up.
00:46:28
Speaker
Why don't we hire the first eight general managers straight away? And the reason for that is most CEOs are going, what? But what we got to is, well, one's a general manager and they're on 100% of their salary, and the second person
00:46:48
Speaker
is a senior deputy manager, and they're on 95% of that salary. So it's only costing us 5%. And the next three are assistant managers, and they're on 70%. So they're only costing us 30% each. And then you go all the way down to it, and there's a bunch of people who just need to be supervisors, and they may be 60%. So actually, the true cost
00:47:10
Speaker
isn't seven extra managers. It's the seven extra people are going to go and do 45 hours work a week in a restaurant. So they're not costing you, you know, they're 100% wages, but at the same time, you've got great
00:47:27
Speaker
people or very high-level people. And if you do go for a fast rollout, you can very quickly say, right, as we did, open site two, four there, four there, open site three, three, three and three, and so on and so forth. And that's exactly what we did. So that enabled us to do this great process, which
00:47:47
Speaker
I love that because it was really drawn out, but it was fantastic. Everyone had to do video applications. And again, a recruiter would say, in a recruiting market, you're just going to put people off. Yep, you're absolutely right. You are going to put people off. But anyone that's willing to do it is probably the people that I want.
00:48:10
Speaker
So we made them do video applications. And I sat there in my bedroom in the middle of COVID reviewing hundreds, we had eight roles, hundreds of managers applying, again, unheard of. And that turned into stage two, I can't remember exactly but stage two, they had to submit
00:48:37
Speaker
some kind of food plan. I think it was some sort of what they think about hospitality, food and so on and so forth. Stage three, they had to do a cooking video. So they had to cook their best dish, you know, live and not live in terms of in front of us, but they had to film it. There's criteria around how fast it is to be and so on and so forth.
00:49:02
Speaker
And, you know, I mean, there was some amazing stuff in that, you know, one guy that we hired, you know, dressed up as karate kid, Japanese business, right? Had his mum in the video as his sous chef. It was brilliant, right? That's amazing. You know, there was loads of people that were polished hospitality professionals, some people I knew, you know, of course, people give you awkward in front of everyone. I'm not particularly comfortable in front of a camera, but
00:49:32
Speaker
You know, they didn't have the passion to take it to the extra stage. They didn't have the extra drive to kind of go, whatever did this or whatever did that. And some of the people we hired, I mean, they won't thank me. They will thank me. They know I talk about it as taking Mickey out of them, but they produced a plate of trash, right? But they did it in such a good, fun way. You know, it's just great.
00:49:58
Speaker
And then we made them, and we were now in, by this stage, we were in semi-open. If you remember the early years of, you probably weren't, but I'll bring it back to the early years of 2021 was when it was really, really cold for like a week, snowing, super icy. And so January, February, we were getting ready to sort of the final stage.
00:50:27
Speaker
And we split them down to 15 or 20 or something like that. We split them into three groups. And we made them work with each other. So that was another test in there. They were all applying for the same eight roles. But we had 20 people that had to work as teams to help each other out. They couldn't throw each other under the bus. So if they did, it was clearly going to stand out as a problem.
00:50:51
Speaker
And we made them do food tours, so we made them construct a food tour to bring me and Keith, the CEO, around London on this food tour, which then turned out to be eat our only. So then they had the extra complication of doing an eat our only food tour because of Covid in London.
00:51:08
Speaker
So we're walking around like a, you know, a dead borough market, you know, telling the police that we're out for essential food and all that sort of stuff. But they had to construct it. They had to put story behind it, had to work with each other. They had to physically take us on the tour as if they were a tour company. And from that, we hired eight.
00:51:28
Speaker
That's unbelievable. You know what's interesting? I started my career as a corporate lawyer where they put crazy resources into finding the right kids. I mean, they made a mistake with me because I qualified and then promptly left because I should have been in sales and entrepreneurship from the beginning. I was a lousy lawyer, but we did a lot of group exercises to see how you performed in that situation against, like with your rivals. And then interestingly, I would did a terrible job of originally kind of recruiting and managing for the App Store because it was an eight year journey and I'd never run anything before. So for the first four years, I was terrible.
00:51:57
Speaker
for the next two, I was average. And then finally for the last two, I think I was okay, because it was forced on me by COVID. And we had a multi-stage process exactly like you've just described with like tests for candidates, because it turns out that what people say they like to do and are gonna do is not in any way representative of how they'll behave when they turn up for a role, as you well know. And it's just really interesting that I've never heard a hospitality leader operator
00:52:28
Speaker
really talk about implementing a rigorous talent, a truly rigorous talent process as you would have to in professional services or technology where literally all of the value in the business is the code that the people write and the product that they build. I know you're self-aware enough to know that obviously it's a slightly different recruitment market post COVID, but people have got to try and find a way to imitate that, haven't they? I mean, that probably after site selection is what it comes down to. I don't want to put words in your mouth, but it sounds like it.
00:52:58
Speaker
Yeah, sure. It's just, it's just. Site selection and product. Sorry. Yeah. I mean, you said product, right? Site selection product. And then maintaining it is about not filling your business with people that don't give a shit.
00:53:10
Speaker
100% and I say it was once in a lifetime that I was able to do that. You can't unsee that though, can you? Now you've seen it. It must be almost painful to not implement it again. Yeah, I think the trick is you've always got to strive for that. You've got to give yourself enough time. Again, go back to the pizza and beer joint in Brentwood.
Involving Key Management Early
00:53:32
Speaker
If you're going to hire that gentleman to do it. Let's finish by really making sure I don't do it. I'm talking myself out of my equity here.
00:53:41
Speaker
That general manager that you hire, I mean, in Brentwood to hire a decent general manager, you're probably in the sort of high 30s, mid 40s per year salary. Now that with everything else you're putting into that business is a relatively small amount of money, right? But yet,
00:54:05
Speaker
another classic mistake is right eight weeks to go let's hire the manager and then and then we've got to open on time because we start burning rent or if you don't get the right manager well we'll go with him he'll be all right what that is just crazy right that that's the person that's going to look after your 1 million 1.5 million investment um like what um so
00:54:31
Speaker
you know, for three and a half, four grand a week, go early, get the right person, get them involved with, you know, everything, make them feel that they're also giving birth to this business, right? Get them involved with it. Okay, of course, they're not going to be as productive as they will be once they're up and running. Of course, it'll be a bit of an easy life to start with.
00:54:56
Speaker
But that's an investment. That's like enormous investment, right? Just, you know, don't try and trigger it at just the right time where they're going to definitely work their full week or whatever. It's just mental. Pay it upfront, get it done, get the right person.
Conclusion and Contact Information
00:55:12
Speaker
Steve, this has been so fun, so useful. I'll put your email and your LinkedIn in the show notes. I know you've got a full crop of starting customers for now, clients for now. Are you happy for people to reach out to you if they've enjoyed? Yeah, of course, of course. Always, always. Yeah. I mean, it's good just to chat to people, right? It's good to know what's going on.
00:55:29
Speaker
A conversation always leads to another conversation and so on and so forth. So always good. So aspiring hospitality founders, if you want to be talked out of losing your life savings, then Steve is your man. And if you decide to still go with it after that, he's still your man. Steve, thank you so much. This has been amazing. No worries now. Great. Thanks very much. Thanks for having me.