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Dog Haus Aims to Disrupt the Franchised Model · Choppin’ It Up by Bloomberg Intelligence

• 0:13
  Speaker 1: Welcome to Chopping It Up.
• 0:15
  Speaker 2: I'm your host, Mike hal and the senior Restaurant food
• 0:17
  Speaker 2: Service Analyst at Bloomberg Intelligence. Our research and that a
• 0:21
  Speaker 2: bi's five hundred analysts around the globe can be found
• 0:23
  Speaker 2: exclusively on the Bloomberg terminal. If you enjoy the pod,
• 0:28
  Speaker 2: please do me a solid and give us a five
• 0:30
  Speaker 2: star review on Apple and or Spotify. Today we're joined
• 0:35
  Speaker 2: by Michael Montagano, CEO and board member of Doghouse. Welcome
• 0:40
  Speaker 2: to the pod, Mike.
• 0:41
  Speaker 3: It's great to be here, especially with a great friend,
• 0:44
  Speaker 3: and I've given it a five star I think from
• 0:47
  Speaker 3: a few different accounts, so you know, for your listeners
• 0:49
  Speaker 3: out there, it's a please go ahead and do that.
• 0:52
  Speaker 3: It's an awesome podcast. It's fun to finally be on
• 0:55
  Speaker 3: it after being a fan of it for a number
• 0:58
  Speaker 3: of years. So thanks for having me.
• 1:00
  Speaker 1: Yeah, thanks for keeping us afloat man and listen.
• 1:03
  Speaker 2: Before we get into it, there is something I have
• 1:06
  Speaker 2: to address with you that frankly doesn't make any sense
• 1:10
  Speaker 2: to me. So I was doing some background work, you
• 1:13
  Speaker 2: know that I always do, checking you out on LinkedIn.
• 1:15
  Speaker 2: I saw that you were a lawyer by trade and
• 1:18
  Speaker 2: you ran for public office.
• 1:21
  Speaker 1: I don't even know you anymore.
• 1:23
  Speaker 4: Bro.
• 1:25
  Speaker 3: I mean, if you can put all the things that
• 1:27
  Speaker 3: people hate about, you know, different professions, I think I've
• 1:31
  Speaker 3: done most of them at some point in my life.
• 1:34
  Speaker 3: But you know, I'm proud to call restaurant operator as
• 1:37
  Speaker 3: my home. It's been the family business for a few
• 1:42
  Speaker 3: generations and I think it's a great overall fit. But yeah,
• 1:45
  Speaker 3: I did start as a as an attorney. I practiced
• 1:49
  Speaker 3: primarily in restaurant m and A and corporate finance. I
• 1:52
  Speaker 3: did a lot of work for what is now El Cadterton,
• 1:56
  Speaker 3: and I think in this climate of politics, I don't
• 1:59
  Speaker 3: even want to go back that far.
• 2:00
  Speaker 4: Are Why don't we just move on?
• 2:01
  Speaker 1: You know, yes, we'll do that.
• 2:05
  Speaker 2: But like I said, it didn't even make sense to
• 2:07
  Speaker 2: me because I'm like, I love this guy a politician.
• 2:11
  Speaker 2: Maybe that's why you're no longer a politician. You went
• 2:13
  Speaker 2: from working with some of the worst people on the
• 2:15
  Speaker 2: planet to the best. So so, good job on making
• 2:19
  Speaker 2: that move. And you know, I guess if you could
• 2:22
  Speaker 2: talk a little bit more about how that transition happened
• 2:25
  Speaker 2: so and also a little bit more about the family business.
• 2:28
  Speaker 3: Yeah, you know, so I am blessed to be in
• 2:32
  Speaker 3: what I consider to be the best industry in the world.
• 2:34
  Speaker 3: You know, we are surrounded by a group of people
• 2:36
  Speaker 3: that are all hospitality focused, that at our core, we
• 2:40
  Speaker 3: just want to make other people happy. And I think
• 2:42
  Speaker 3: that's what attracted me to dog House so much now
• 2:45
  Speaker 3: several years ago, and I first joined as a board
• 2:48
  Speaker 3: member and then as a shareholder and then eventually as
• 2:52
  Speaker 3: as CEO and chterman of the board. And you know,
• 2:56
  Speaker 3: through that process, you know, reminded me of the family
• 2:59
  Speaker 3: that I grew up and my grandfather immigrated here from
• 3:02
  Speaker 3: Italy and him and his brother started a couple Italian restaurants.
• 3:06
  Speaker 3: My grandfather's was casual dining. Is was fine dining, and
• 3:11
  Speaker 3: you know, they were where everyone went to have a
• 3:15
  Speaker 3: great time, where they knew everyone in the community.
• 3:17
  Speaker 4: It's where you went for your birthday.
• 3:19
  Speaker 3: The jukebox was blaring, the Kate came out with sparklers.
• 3:23
  Speaker 3: He's a you know, local celebrity of sorts that brought
• 3:26
  Speaker 3: it out, tended bar, and it was the true kind
• 3:31
  Speaker 3: of fabric of the community. And you know, I believe
• 3:35
  Speaker 3: restaurants continue to serve that purpose and to be you know,
• 3:38
  Speaker 3: one small part of that is a great way to
• 3:42
  Speaker 3: spend a career and a living. Certainly better than practicing
• 3:47
  Speaker 3: lare or politics, that's for sure. But now look, it's
• 3:51
  Speaker 3: it's a great brand. Love to be here, and it's
• 3:53
  Speaker 3: been a lot of fun and a great journey along
• 3:56
  Speaker 3: the way.
• 3:56
  Speaker 1: Yeah, you have hospitality in your blood, man, and it
• 3:59
  Speaker 1: comes through what acted.
• 4:00
  Speaker 4: You to Doghouse, warn the people.
• 4:03
  Speaker 3: But more so than that, you know, my dad always
• 4:06
  Speaker 3: told me said that a business or restaurant should be
• 4:10
  Speaker 3: like a tree. Most trees grow down at the same
• 4:13
  Speaker 3: pace that they grow up, and it normally sustains the
• 4:17
  Speaker 3: storms that come. You know, it's got deep roots and
• 4:19
  Speaker 3: can take whatever conditions are coming at it. And I
• 4:22
  Speaker 3: think there's no difference in a business if you're growing
• 4:25
  Speaker 3: incrementally down and your infrastructure and your stability that whatever
• 4:29
  Speaker 3: macro conditions or headwinds you face, you'll be able to
• 4:32
  Speaker 3: come out of it generally stronger and better. And I
• 4:35
  Speaker 3: look at Doghouse and you know, this brand is fifteen
• 4:40
  Speaker 3: years old. We're celebrating our fifteenth anniversary this year. We
• 4:44
  Speaker 3: have historically and I think it's it's our culture that
• 4:48
  Speaker 3: just a love for our customer, a love for our franchisees,
• 4:53
  Speaker 3: a love for our employees, and even probably more so,
• 4:55
  Speaker 3: a love for our product and our food and the
• 4:58
  Speaker 3: hospitality that we deliver to our custoustomers. We've been very
• 5:01
  Speaker 3: incremental about the growth over the years, and this business
• 5:05
  Speaker 3: has roots that have outpaced you know, the actual trunk
• 5:09
  Speaker 3: of the tree and the growth of the tree by
• 5:11
  Speaker 3: ten times. And for a growth guy like me out
• 5:15
  Speaker 3: there and thought, boy, the infrastructures here, this is a
• 5:17
  Speaker 3: brand that is ripe for growth to be able to
• 5:20
  Speaker 3: just pop off. And that's been the case the last
• 5:23
  Speaker 3: couple of years that I've been in the role. We've
• 5:25
  Speaker 3: had a lot of success, particularly on the growth side.
• 5:27
  Speaker 3: You happy to go into kind of our plan and
• 5:29
  Speaker 3: so forth, but you know, I think about some of
• 5:33
  Speaker 3: the headwinds that we're facing as an industry, you know,
• 5:36
  Speaker 3: around gop ones and increasing input costs. Have seen considerable
• 5:42
  Speaker 3: pullback amongst delectables, some certainly in the QSR space, and
• 5:47
  Speaker 3: I believe a brand like ours is so well positioned
• 5:50
  Speaker 3: and that's why we've seen you know, seven percent you
• 5:53
  Speaker 3: know to your comp growth and steady growth each consecutive year.
• 5:58
  Speaker 3: Because we are in experience, we are a bit of
• 6:00
  Speaker 3: a no disrespect to our friends of Chili's or or
• 6:04
  Speaker 3: or Buffalo Wild Wings. They do a fantastic job as well,
• 6:07
  Speaker 3: but we're a smaller footprint hack on that version. We're
• 6:10
  Speaker 3: in twenty twenty five hundred square feet. It's where you
• 6:13
  Speaker 3: want to you can offer that same full service bar,
• 6:17
  Speaker 3: video walls, watch the game, NFL Sunday ticket, have a
• 6:21
  Speaker 3: beer with your with your boys after your shift, to
• 6:25
  Speaker 3: where you want to take your kids after the soccer game,
• 6:27
  Speaker 3: and it emulates that always full experience, but in a
• 6:30
  Speaker 3: much capec light, leaner way that brings that camaraderie in
• 6:35
  Speaker 3: that hospitality that I think we all love. I think
• 6:38
  Speaker 3: it's that fabric that will ultimately drive even more occasions
• 6:42
  Speaker 3: as people begin to talk to robots all day long
• 6:45
  Speaker 3: and the limited human and interaction and eat less frequently
• 6:49
  Speaker 3: with now twelve percent of the population doing gop ones.
• 6:53
  Speaker 3: We think it's it's these sort of occasions that will
• 6:56
  Speaker 3: continue to grow. And we love kind of that culture
• 6:59
  Speaker 3: part of our brands. So that's what's attracted me to
• 7:01
  Speaker 3: it over the years.
• 7:03
  Speaker 1: Very cool.
• 7:04
  Speaker 2: How many restaurants are there total in the system? Where
• 7:07
  Speaker 2: are they primarily located? I know, there's none in New
• 7:10
  Speaker 2: Jersey and the one I see in New York is
• 7:12
  Speaker 2: pretty far away from me, unfortunately. And are there any
• 7:15
  Speaker 2: company owned units or is it all franchised?
• 7:18
  Speaker 3: Yeah, So we're about sixty stores around the country. We
• 7:21
  Speaker 3: started in California in the Los Angeles area in Pasadena,
• 7:25
  Speaker 3: so we tend to be heavily concentrated here. About twenty
• 7:28
  Speaker 3: of our sixty units are in California. The other forty
• 7:31
  Speaker 3: are spread out across an additional twelve states. We have
• 7:36
  Speaker 3: large footprints in Phoenix, Texas, Chicago, the DMV, and then
• 7:42
  Speaker 3: we have more emerging markets we continue to grow in
• 7:44
  Speaker 3: like Colorado, Utah, New York State and so forth. But
• 7:49
  Speaker 3: we've got big growth plans on the horizon, you know,
• 7:52
  Speaker 3: which which we can talk about. But that's principally you
• 7:56
  Speaker 3: know where we've been and we're going to continue to
• 7:58
  Speaker 3: double down on a lot of those areas, including open
• 8:01
  Speaker 3: up spots like like Florida and the southeast and the
• 8:03
  Speaker 3: northeast and so forth.
• 8:04
  Speaker 1: And we'll get into the growth in a second.
• 8:07
  Speaker 2: But you know, I noticed you you have like better
• 8:11
  Speaker 2: for you type proteins on the menu, So if you
• 8:15
  Speaker 2: could talk a bit about that and what's your alcohol mix.
• 8:18
  Speaker 3: Yeah, so one thing we will never sacrifice on is
• 8:22
  Speaker 3: our proteins, you know, hormone free, antibiotic free, responsibly raised.
• 8:26
  Speaker 3: Our dogs are nitrate free, et cetera. And that's across
• 8:30
  Speaker 3: the spectrum from whether it's Creekstone Farms beef to our
• 8:34
  Speaker 3: own you know, custom recipe manufactured dogs and sausages, to
• 8:40
  Speaker 3: the quality of our chicken. And so that is that
• 8:43
  Speaker 3: is a key principle of our brand. We still managed
• 8:48
  Speaker 3: to do extraordinarily well on our costs of good sold
• 8:50
  Speaker 3: and kind of how we how we think about our menu,
• 8:53
  Speaker 3: which I'm happy to touch on as well. But overall,
• 8:56
  Speaker 3: about twenty percent of sales will be alcohol sales. It's
• 9:00
  Speaker 3: principally driven from the bar. As mentioned, you know, our footprints,
• 9:04
  Speaker 3: our experience footprints, despite being smaller ones. So it is
• 9:08
  Speaker 3: a full service bar with a bartender, twenty four beers
• 9:11
  Speaker 3: on draft. Most of our stores have full lickor and
• 9:14
  Speaker 3: so you know, between the mixed cocktails and the bar,
• 9:18
  Speaker 3: it is quite an experience and drives about twenty percent
• 9:20
  Speaker 3: of sales. We think there's probably some additional room for
• 9:24
  Speaker 3: growth there. We're leaning more into our non alcoholic menu,
• 9:29
  Speaker 3: both in mocktails, non alcoholic beers. But we're also doing
• 9:33
  Speaker 3: kind of just a complete makeover of our of our
• 9:39
  Speaker 3: soda program. We're going into kind of a nostalgic feel.
• 9:41
  Speaker 3: We making a big move away from kind of the
• 9:45
  Speaker 3: two principal players, and so we're pretty excited about that too.
• 9:48
  Speaker 3: But yeah, so all in that's about the way the
• 9:51
  Speaker 3: p mix works. Happened to walk you know, through the
• 9:53
  Speaker 3: different proteins. But you know, we're pretty heavy burger. It's
• 9:56
  Speaker 3: about twenty five percent of sales. Similar mountain kind of
• 9:59
  Speaker 3: our dogs and side sausages, a similar mount in our chicken.
• 10:02
  Speaker 3: And then we have these burritos that have become, you know,
• 10:05
  Speaker 3: kind of a cult following opened up a whole breakfast
• 10:08
  Speaker 3: day part for us, which is very unusual to come
• 10:09
  Speaker 3: out of what's more like a sports bar, and that
• 10:13
  Speaker 3: makes up about a quarter of sales too.
• 10:15
  Speaker 2: So yeah, so as you're doing breakfast too, what are
• 10:18
  Speaker 2: your typical hours?
• 10:20
  Speaker 4: You know, it's it's it's funny.
• 10:21
  Speaker 3: We offer some flexibility to our franchisees, but almost everyone
• 10:24
  Speaker 3: is opened by ten. Many of our franchisees that really
• 10:28
  Speaker 3: do really well are opening by eight and so you
• 10:31
  Speaker 3: see a real consist consistent flow. We've done our first
• 10:35
  Speaker 3: licensing deal on breakfast, which is in the University of Cincinnati,
• 10:39
  Speaker 3: and many times we'll have three hundred orders within the
• 10:42
  Speaker 3: first you know, seven minutes of when they open. It's
• 10:46
  Speaker 3: it has kind of this cult following. But for us,
• 10:48
  Speaker 3: it's historically been a prep time of day, so we've
• 10:51
  Speaker 3: already had we've already been burdened by the labor during
• 10:54
  Speaker 3: many of these hours, and so it allows us to
• 10:56
  Speaker 3: open up really sales principally through pickup and delivery. We
• 10:59
  Speaker 3: don't have a whole lot of dine in in the morning,
• 11:02
  Speaker 3: and so it allows us to continue to staff pretty
• 11:04
  Speaker 3: lean in the front of house, but add some incrementality
• 11:07
  Speaker 3: to sales given that you know, everyone's already basically in
• 11:10
  Speaker 3: the kitchen and it's worked out extraordinarily. Well, that was
• 11:12
  Speaker 3: a COVID era innovation that has ultimately stuck.
• 11:16
  Speaker 1: So yeah, smart, Uh. So, you closed a very interesting
• 11:20
  Speaker 1: deal with a group of Jersey Mike's franchisees last year,
• 11:23
  Speaker 1: and it really sounds like it has the potential to
• 11:27
  Speaker 1: disrupt the current status of the franchise or franchisee relationships.
• 11:31
  Speaker 1: How was the deal structured, Why is it superior to
• 11:34
  Speaker 1: what's currently found in the industry, and what kind of
• 11:38
  Speaker 1: unit growth do you think it can fuel for Doghouse.
• 11:41
  Speaker 3: Yeah, and I'll take just a step back for just
• 11:43
  Speaker 3: a second on it to give a little more context.
• 11:46
  Speaker 3: We're obviously super excited about it. We think it's a
• 11:48
  Speaker 3: complete game changer for the brand. When I came in
• 11:51
  Speaker 3: a couple of years ago, we instituted really a four
• 11:54
  Speaker 3: part plan for growth for the brand. The first was
• 11:57
  Speaker 3: really just back to basics on the fundamentals of the
• 11:59
  Speaker 3: unit economics, which I'm sure we'll touch on in a bit,
• 12:03
  Speaker 3: but we've seen you know, AUVs grow from one point
• 12:05
  Speaker 3: six to one point nine. We anticipate crossing the two
• 12:08
  Speaker 3: million dollar mark this coming year. We've taken a scalpel
• 12:13
  Speaker 3: to our cost of good soul, took twenty five skews
• 12:16
  Speaker 3: out of the kitchen, kept the core basics of the menu,
• 12:19
  Speaker 3: but made it simple to operate, cut down on our
• 12:22
  Speaker 3: overall operating costs, and then really leaned in on the
• 12:26
  Speaker 3: development side. We know we have input costs rising around
• 12:29
  Speaker 3: the country. We took you know, build costs down from
• 12:31
  Speaker 3: what we're trending over a million bucks down to five
• 12:34
  Speaker 3: hundred eight hundred thousand to open a restaurant, and so
• 12:37
  Speaker 3: focused on that core economic to really attract the next
• 12:40
  Speaker 3: generation of franchisees, which is what you're referring to. At
• 12:44
  Speaker 3: the same time, we knew you had kind of touched
• 12:46
  Speaker 3: on our footprint that were heavily concentrated in one part
• 12:49
  Speaker 3: of the country despite having you know, stores throughout the country.
• 12:53
  Speaker 3: We thought we really needed to get more operating leverage
• 12:55
  Speaker 3: out of our marketing fund and so we took a
• 12:57
  Speaker 3: big risk, although I don't think it's much risk. It
• 13:00
  Speaker 3: turned out fantastic, But we leaned into a great partnership
• 13:06
  Speaker 3: with Jake Paul and his team, which gave us an
• 13:09
  Speaker 3: insane amount of brand awareness throughout the country a billion
• 13:12
  Speaker 3: impressions in the first seven days of the partnership and
• 13:16
  Speaker 3: it's been fantastic. And so that allowed us to become
• 13:19
  Speaker 3: more of a national brand on top of really quality
• 13:21
  Speaker 3: fundamentals and then all with the idea and not of
• 13:25
  Speaker 3: course to improve and continue to drive earnings for our system,
• 13:29
  Speaker 3: but even more so to help spur that growth in
• 13:32
  Speaker 3: partnership with what we would consider to be the best
• 13:35
  Speaker 3: operators around the country. And so our goal was to
• 13:38
  Speaker 3: really lean into national corporate multi unit operators that have
• 13:44
  Speaker 3: not only dozens of stores, but in some cases hundreds
• 13:46
  Speaker 3: of stores. In order to do that. Part of it was,
• 13:49
  Speaker 3: you know, building a brand that they would want to
• 13:51
  Speaker 3: be a part of. The second part, which I've always thought,
• 13:54
  Speaker 3: which was more addressing your question that I thought was
• 13:57
  Speaker 3: a little out of whack when you think about kind
• 13:59
  Speaker 3: of the franchise or franchisee relationship, and we thought there's
• 14:03
  Speaker 3: some real kind of structural problems historically with the way
• 14:09
  Speaker 3: that brands have done this that I think maybe you know,
• 14:13
  Speaker 3: the industry itself has outgrown to a certain extent, and
• 14:17
  Speaker 3: we really wanted to lean in what we'd considered to
• 14:19
  Speaker 3: be a more disruptive but more you know, future forward
• 14:24
  Speaker 3: approach to how to develop a relationship with your franchise
• 14:27
  Speaker 3: ease and how to grow your ultimate brand. I think
• 14:30
  Speaker 3: historically we've seen this bit of an ivory tower approach
• 14:34
  Speaker 3: where you've got kind of a revolving door of several
• 14:37
  Speaker 3: people at the top that move kind of brand a
• 14:38
  Speaker 3: brand or open brand a brand and and ultimately do
• 14:43
  Speaker 3: a fantastic job. But ultimately the brands are grown on
• 14:47
  Speaker 3: the back of your franchisees that are out taking a
• 14:49
  Speaker 3: lot of the exposure on ten year leases, multimillion dollar leases,
• 14:54
  Speaker 3: in some cases raising capital to fund their restaurant expansions,
• 14:59
  Speaker 3: with some as their own some cases friends and families,
• 15:02
  Speaker 3: some cases SBA, some cases bank that, some cases a
• 15:05
  Speaker 3: combination of all of that. And then they're the ones
• 15:07
  Speaker 3: that are employing human beings on the ground in an
• 15:11
  Speaker 3: environment that is tough for labor in many parts of
• 15:13
  Speaker 3: the country, if not all parts of the country. And
• 15:16
  Speaker 3: so that's an interesting dynamic where franchisees are really incentivized
• 15:20
  Speaker 3: on sales growth and opening stores, and really the franchise
• 15:25
  Speaker 3: oors are about, you know, more earnings at the store level,
• 15:30
  Speaker 3: at the store unit level, and so you know, there's
• 15:32
  Speaker 3: a disconnect. I believe in mutually lining incentives, and so
• 15:37
  Speaker 3: what we sought out was to really change that structure
• 15:41
  Speaker 3: and to more mutually lined incentives between these fantastic national
• 15:45
  Speaker 3: franchisees and our brand. We don't think there's a world
• 15:49
  Speaker 3: in which and not to pick on Dave's Hot Chicken,
• 15:52
  Speaker 3: I'm I admire them. They're you know, my neighbors here
• 15:55
  Speaker 3: in Pasadena. But when you sell for a billion dollars
• 15:57
  Speaker 3: and you emit fifteen millionaires at corporate that's fantast but
• 16:01
  Speaker 3: what about the seventy five franchisees. And so for us,
• 16:04
  Speaker 3: it's about how do you mutually wign interest with your
• 16:06
  Speaker 3: franchisees and so how do when you win, they win
• 16:09
  Speaker 3: and when they win, you win. And so what we've
• 16:11
  Speaker 3: structured is a deal. You know, with our fifteen year anniversary,
• 16:16
  Speaker 3: we broke the country up into fifteen different parts, and
• 16:19
  Speaker 3: we attracted fifteen of the world's best franchisees to oversee
• 16:23
  Speaker 3: each one of those territories is area representatives and they
• 16:27
  Speaker 3: did one hundred unit deals each, and we've effectively sold
• 16:30
  Speaker 3: out the country and partnership with our ads. And what
• 16:33
  Speaker 3: attracted them to the brand was in part some of
• 16:36
  Speaker 3: the things we had done along the way, but also
• 16:39
  Speaker 3: in part that we opened up twenty percent of the
• 16:41
  Speaker 3: company for them to be able to buy into. We
• 16:44
  Speaker 3: offered board representation amongst the syndicate or larger franchise e group,
• 16:49
  Speaker 3: and we offered some spots in management. So I'm you know,
• 16:52
  Speaker 3: thrilled that you know, joining is my partners and fellow
• 16:56
  Speaker 3: guys leading the company will be a new CEO who
• 17:00
  Speaker 3: comes from, you know, a twenty years in the Jersey
• 17:04
  Speaker 3: MIC system as a franchise e who recently exited at
• 17:07
  Speaker 3: a very impressive multiple and a new Chief Development Officer
• 17:12
  Speaker 3: and president who will oversee this AD program who comes
• 17:15
  Speaker 3: from one of the Lark who was formerly the CEO
• 17:18
  Speaker 3: up until recently of one of the largest Jersey Mike's
• 17:22
  Speaker 3: franchise groups in the country. Both come with an insane
• 17:26
  Speaker 3: amount of knowledge and energy, and so we get that
• 17:29
  Speaker 3: feedback loop between our franchises and their franchises. They actually
• 17:33
  Speaker 3: are of doing fifty stores themselves, the two guys in management.
• 17:35
  Speaker 3: The rest of them are obviously area developing and doing
• 17:38
  Speaker 3: a whole bunch of self developed stores on their own
• 17:40
  Speaker 3: as well. And so to have that feedback loop between
• 17:43
  Speaker 3: what's going on in the ground and what's going on
• 17:46
  Speaker 3: and how we're assisting them is immediate and then also
• 17:51
  Speaker 3: mutually aligned interest when we looked at that stage four
• 17:54
  Speaker 3: now that we've brought in a great group of franchisees,
• 17:56
  Speaker 3: Stage four is to get to three hundred stores and
• 17:58
  Speaker 3: you know, put a bill, you know, by our valuation
• 18:01
  Speaker 3: and and and I think that uh, that benefits them,
• 18:05
  Speaker 3: it benefits us, It benefits everyone in the system, arm in,
• 18:07
  Speaker 3: arm walking, and lockstep, you know, towards the larger goal
• 18:11
  Speaker 3: of the brand. I think I believe this to be
• 18:14
  Speaker 3: the future of franchising. I think it's certainly a differentiator
• 18:16
  Speaker 3: for us and candidate. I think it's fair and long overdue.
• 18:20
  Speaker 3: So you know, that's the you know, really exciting thing
• 18:22
  Speaker 3: that we've been working on and working towards over the
• 18:25
  Speaker 3: last couple of years, and and excited to kind of
• 18:27
  Speaker 3: put the flag in the ground and and now let
• 18:30
  Speaker 3: it cook.
• 18:31
  Speaker 1: Dude, that's awesome.
• 18:32
  Speaker 2: I mean having everybody aligned, ah, man, that sounds like
• 18:35
  Speaker 2: a breadth of fresh air in this industry.
• 18:37
  Speaker 1: I mean there's.
• 18:37
  Speaker 2: Always franchise groups arguing with the franchise, you know, the
• 18:42
  Speaker 2: franchise or there's always issues throughout the industry, you know.
• 18:47
  Speaker 2: So that's really exciting, and I wish you good luck
• 18:52
  Speaker 2: with it.
• 18:52
  Speaker 4: Man.
• 18:53
  Speaker 2: Let's you know, where where are your like most urgent
• 18:57
  Speaker 2: areas of expansion here in the United States?
• 19:00
  Speaker 3: Yeah, look, I think that, you know, I don't think
• 19:03
  Speaker 3: there's anywhere that we're not right now looking to expand
• 19:06
  Speaker 3: under this new Area director program. I think what I
• 19:09
  Speaker 3: love about it is that you're decentralizing your expertise to
• 19:14
  Speaker 3: localized operators. You know, So from our standpoint, in a
• 19:18
  Speaker 3: program like this, you're obviously giving up royalty, you know,
• 19:21
  Speaker 3: to incentivize others to kind of own these various territories
• 19:25
  Speaker 3: in the country. But to me, it's money well spent
• 19:28
  Speaker 3: because they're experts in that area, you know, bringing in
• 19:32
  Speaker 3: an expert. We've had our number one store in the
• 19:34
  Speaker 3: system is actually in Utah. It's just outside of Salt
• 19:37
  Speaker 3: Lake City. It's not open on Sundays and it but
• 19:40
  Speaker 3: we've never expanded there, and so we're bringing in, you know,
• 19:43
  Speaker 3: an area director who understands Utah, understands Colorado the area,
• 19:49
  Speaker 3: and is looking to grow at breakneck speed because there's
• 19:52
  Speaker 3: so much unlocked opportunity there that you know, as a
• 19:55
  Speaker 3: California operator, you know.
• 19:56
  Speaker 4: You may not know as much about.
• 19:59
  Speaker 3: And so I think this a lot us to really,
• 20:01
  Speaker 3: you know, delegate to experienced experts in particular trade areas.
• 20:06
  Speaker 3: So I think is so exciting about the growth is
• 20:09
  Speaker 3: that there's really nowhere that's off the table because you're
• 20:12
  Speaker 3: growing with partners that are that are proven experts in
• 20:16
  Speaker 3: some cases does in some cases hundreds of stores in
• 20:19
  Speaker 3: these particular trade areas. And so what we have done
• 20:22
  Speaker 3: is we've also reconfigured, you know, our structure at corporate.
• 20:25
  Speaker 3: We've brought in director of real Estate, our vice president
• 20:29
  Speaker 3: real estate for us that comes from the Jersey MIC
• 20:31
  Speaker 3: system and the KAVA system. We've brought in new construction leads,
• 20:35
  Speaker 3: new project managers, new data sets and really intelligent data
• 20:40
  Speaker 3: systems that you see kind of the big boys using
• 20:42
  Speaker 3: that have become more democratized for mid market brands like
• 20:45
  Speaker 3: us to get far more intelligent in the tools that
• 20:48
  Speaker 3: we're empowering in the system that we're empowering these these
• 20:51
  Speaker 3: these local operators with to do a lot of really
• 20:54
  Speaker 3: intelligent site selection. But we think there's fantastic markets that
• 20:58
  Speaker 3: are that are very proven in our system, just completely
• 21:01
  Speaker 3: underpenetrated Utah, Colorado, the Mountain West. We think the same
• 21:06
  Speaker 3: as with the Northeast. Our stores do fantastic through the
• 21:09
  Speaker 3: d m V. We hope to have some stores up
• 21:11
  Speaker 3: in your neck of the woods in Jersey, although you
• 21:13
  Speaker 3: got to, you know, lean on your local politicians about
• 21:17
  Speaker 3: liquor law and and liquor license costs. There maybe the
• 21:22
  Speaker 3: only part of the country that is in just prohibitive
• 21:26
  Speaker 3: almost from you know, opening up and doing doing a business.
• 21:29
  Speaker 3: But your your neighbors around the area are much more friendly,
• 21:33
  Speaker 3: you know, in New York State and kind of other otherwise,
• 21:35
  Speaker 3: We've got a lot of growth opportunity there and some
• 21:37
  Speaker 3: great partners developing there too.
• 21:39
  Speaker 4: So cool.
• 21:41
  Speaker 2: You know, you touched on the AUVs and the strong
• 21:44
  Speaker 2: sales to investment ratios. Is there any other uni economic
• 21:47
  Speaker 2: data that you're willing to share.
• 21:49
  Speaker 3: Yeah, Look, I think you know, we're uh an open
• 21:52
  Speaker 3: book about what we're what we're focused on. I mean, obviously,
• 21:56
  Speaker 3: you know, as a franchise business, you know, we'd encourage
• 21:58
  Speaker 3: everyone to look at the FDD for the exact numbers
• 22:01
  Speaker 3: and rely on that principally and solely in any decisions
• 22:04
  Speaker 3: that they ultimately make about investing in the company or
• 22:07
  Speaker 3: partnering with with us. But talking more broadly, you know,
• 22:11
  Speaker 3: hopefully this will help your audience. Because we are a
• 22:13
  Speaker 3: private company, we can you know, certainly share our insights
• 22:16
  Speaker 3: and what we're seeing in the market.
• 22:19
  Speaker 4: You know, we are.
• 22:22
  Speaker 3: Overall we've seen you know, strong AUV growth mentioned that
• 22:25
  Speaker 3: before from one six to one one nine. Some of
• 22:29
  Speaker 3: the drivers of that, I'll touch on is that. You know,
• 22:31
  Speaker 3: we've really seen heavy growth around the catering business. Our
• 22:35
  Speaker 3: new loyalty platform is continuing to perform. We've seen about
• 22:39
  Speaker 3: ten percent of sales now on our first party, which
• 22:42
  Speaker 3: we consider to be for a mid market group, you know, outpacing.
• 22:45
  Speaker 3: I think some of that is the awareness that we're
• 22:48
  Speaker 3: getting from social media from Jake Paul. Also, we leaned
• 22:51
  Speaker 3: into another big growth engine has been our limited time offerings.
• 22:55
  Speaker 3: This is we've completely delegated in a partnership with our
• 23:01
  Speaker 3: our food influencer social partner, Josh Elkin, who has done
• 23:05
  Speaker 3: just a fantastic job of coming up with kind of
• 23:08
  Speaker 3: new unique and collaboration with our team here on new
• 23:13
  Speaker 3: menu items, and then he takes the lead on promotingum
• 23:16
  Speaker 3: and you know, we're up sixty percent on lto sales
• 23:20
  Speaker 3: simply by having new different channels that we're promoting them through.
• 23:24
  Speaker 3: I think the culinary has always been fantastic at the brand,
• 23:28
  Speaker 3: but deck collaboration and then that mouthpiece has done very
• 23:32
  Speaker 3: very well. You know, we push hard on loyalty and
• 23:37
  Speaker 3: rewards platform which I led to before, but the happy
• 23:40
  Speaker 3: hour portion of that continues to do well. I think
• 23:42
  Speaker 3: customers are obviously looking for value. One thing we have
• 23:46
  Speaker 3: not done that some others have done, which may be
• 23:49
  Speaker 3: somewhat interesting to those that are listening, is we have
• 23:52
  Speaker 3: not leaned heavy into value meals. So we've led into
• 23:56
  Speaker 3: value occasions like happy hour and only happy hour at
• 24:00
  Speaker 3: the bar, so we're driving kind of that that always
• 24:02
  Speaker 3: full bar occasion. And then and then also you know,
• 24:07
  Speaker 3: the higher alcohol incidents or even mocktail incidents, which obviously
• 24:11
  Speaker 3: are bigger margin drivers for the brand. But uh, but
• 24:16
  Speaker 3: we've not we've we've we've not gotten into that value war.
• 24:20
  Speaker 3: I think, you know, we've focused more on loyalty, on
• 24:23
  Speaker 3: you know, hitting those on bringing our customers back, you know,
• 24:27
  Speaker 3: hitting you know, really high rates in that regard and
• 24:31
  Speaker 3: and and so far that's worked without you know, having
• 24:34
  Speaker 3: to pinch margin. And well, we're more focused on quality
• 24:37
  Speaker 3: proteins and so forth. You know, you've got to be careful, like,
• 24:40
  Speaker 3: you know, we don't want to devalue the brand. You know,
• 24:43
  Speaker 3: our brand is about offering a quality product that is
• 24:45
  Speaker 3: superior to you know, our competitive set, and so we're
• 24:49
  Speaker 3: not afraid, you know, to charge for it because we're
• 24:53
  Speaker 3: offering a lot. It's a big portion it's a fun experience,
• 24:57
  Speaker 3: and and so we shouldn't be ashamed to say this is,
• 24:59
  Speaker 3: this is what, this is.
• 25:00
  Speaker 4: What it costs.
• 25:01
  Speaker 3: Likewise, we haven't taken a lot of price, you know,
• 25:04
  Speaker 3: so we've also been more cautious about taking price. And
• 25:07
  Speaker 3: so I think that's allowed us to stay out of
• 25:09
  Speaker 3: the value wars. Is being a little bit more cautious
• 25:11
  Speaker 3: about price. And then and then you know, being strategic
• 25:14
  Speaker 3: about our offerings to our most loyal customers and framing
• 25:18
  Speaker 3: that more around the experience in the bar.
• 25:20
  Speaker 2: Yeah, you know, it's it's I think it's smart. I mean,
• 25:24
  Speaker 2: out of the change we cover over the last handful
• 25:26
  Speaker 2: of years that the companies with some of the highest
• 25:29
  Speaker 2: food costs have performed the best on traffic. Right, Customers
• 25:33
  Speaker 2: notice what they're getting on the plate, right, and when
• 25:35
  Speaker 2: they're being more discerning with their dollars like they are today, you.
• 25:38
  Speaker 1: Know, they're not going to go to somebody that's skimping.
• 25:41
  Speaker 2: Out on them versus what they were, you know, what
• 25:43
  Speaker 2: they were getting a couple of years ago.
• 25:44
  Speaker 1: Right, They're going to stick with who's taking good care
• 25:46
  Speaker 1: of them.
• 25:47
  Speaker 3: If you can bounce both like Chilbi's has done, you know,
• 25:49
  Speaker 3: like more power to you. You know, I think they've
• 25:51
  Speaker 3: done a nice job with their probably lost leaders, you know,
• 25:54
  Speaker 3: to bring people in and their upsells and the Margarita's
• 25:55
  Speaker 3: and the feed is and everything else. Certainly a lot
• 25:58
  Speaker 3: of respect to the tip of the hat. I mean,
• 25:59
  Speaker 3: you know, it's it. They're doing something that I think
• 26:01
  Speaker 3: no one's ever really really done. But but you know,
• 26:05
  Speaker 3: we don't always pretend to compete with them. You know,
• 26:07
  Speaker 3: we're we have a different segment, different market, you know,
• 26:10
  Speaker 3: and a different experience, and we just you know, we're
• 26:14
  Speaker 3: offering a premium product and we're not afraid to charge
• 26:16
  Speaker 3: for it.
• 26:16
  Speaker 2: So yeah, no, I think that's a good position to
• 26:19
  Speaker 2: be in in the state of the current case shaped economy.
• 26:24
  Speaker 2: And know what's been cool about this conversation, man, is
• 26:26
  Speaker 2: like you guys aren't greedy, Like you're very willing to
• 26:31
  Speaker 2: bring in partners to help you grow the brand and
• 26:34
  Speaker 2: cut them in nicely into the growth opportunity here.
• 26:38
  Speaker 4: Yeah.
• 26:38
  Speaker 3: Look, I mean it's the culture of the brand. I
• 26:40
  Speaker 3: can't you know, take credit for that. I think you know,
• 26:43
  Speaker 3: we have, you know, a fantastic group of founders that
• 26:47
  Speaker 3: you know, founded this business fifteen years ago. And the
• 26:53
  Speaker 3: same kind of collective culture that they welcome so many
• 26:56
  Speaker 3: great people into over the years, whether it's at the
• 26:58
  Speaker 3: franchise level or at the employee level. I mean, heck,
• 27:00
  Speaker 3: our leadership team has been here for over a decade
• 27:03
  Speaker 3: each that I was fortunate enough to inherit and work
• 27:06
  Speaker 3: alongside every single day and have integrated so well with
• 27:09
  Speaker 3: some of the new partners that we're bringing into that
• 27:12
  Speaker 3: I think, you know, at some point, you know, maybe
• 27:15
  Speaker 3: it's us old dogs that kind of realize that that
• 27:18
  Speaker 3: you'd rather have, you know, a smaller sliver of a
• 27:22
  Speaker 3: big pie than an entire pie, that that kind of sucks,
• 27:25
  Speaker 3: you know, And so you know, and so I think,
• 27:30
  Speaker 3: you know, they have realized that from the beginning, that
• 27:33
  Speaker 3: you know, it's a it's a it's a collective community
• 27:36
  Speaker 3: that what it will take to ultimately grow the brand.
• 27:38
  Speaker 3: And I've you know, been fortunate to take that baton
• 27:42
  Speaker 3: at the right time to kind of expand our thinking
• 27:44
  Speaker 3: beyond maybe just you know, who's working in the four
• 27:46
  Speaker 3: walls of the store, or who are the great partners
• 27:49
  Speaker 3: that we've been fortunate to have over the years, but
• 27:51
  Speaker 3: also you know, how do we take it to the
• 27:54
  Speaker 3: next level and and and and bring in new and
• 27:57
  Speaker 3: interesting and different people that have different experiences than us,
• 28:01
  Speaker 3: and we'll offer you know, a whole lot of guidance
• 28:03
  Speaker 3: on you know, how to become that next big brand.
• 28:07
  Speaker 3: I learned this and you know, I worked in restaurant
• 28:08
  Speaker 3: tech for maybe like fifteen years. And you know, there's
• 28:13
  Speaker 3: a companies of Baton race, you know. I mean, there's
• 28:16
  Speaker 3: there's different people that are great at different parts of it.
• 28:21
  Speaker 3: And I think this next iteration of who we're bringing
• 28:24
  Speaker 3: in have seen businesses scale on the restaurant side, and
• 28:28
  Speaker 3: the growing pains that happened from sixty to six hundred
• 28:31
  Speaker 3: and six hundred to six thousand is very different from
• 28:34
  Speaker 3: zero to sixty.
• 28:34
  Speaker 4: I still think zero to sixty is probably the hardest.
• 28:36
  Speaker 3: You know, But but you know, on on on these
• 28:39
  Speaker 3: different on these different ways, they are all varied, very different.
• 28:42
  Speaker 3: And I think that our group are of board members, owners,
• 28:47
  Speaker 3: stakeholders have been very attuned to that over the years
• 28:49
  Speaker 3: on when is the right time to hand the baton
• 28:52
  Speaker 3: and and and I'll tell you what, right now, I've
• 28:56
  Speaker 3: got it and I'm sprinting. I think it's, uh, you know,
• 28:59
  Speaker 3: it's a some time to be in the industry particularly,
• 29:02
  Speaker 3: and I think the way that we're positioned in it,
• 29:04
  Speaker 3: and we couldn't be more thrilled about the people that
• 29:08
  Speaker 3: we've welcomed with open arms. But yeah, I'm a big
• 29:12
  Speaker 3: believer in that. I think that greed is tough. He
• 29:15
  Speaker 3: usually doesn't usually doesn't yield the outcome that everybody's looking for.
• 29:19
  Speaker 3: And I think we've got, you know, a locked vision
• 29:22
  Speaker 3: on where we're going and an outcome that we believe
• 29:24
  Speaker 3: is very tangible and and we're willing to share.
• 29:29
  Speaker 4: It to get there.
• 29:30
  Speaker 2: So yeah, very cool. Listen, man, that's the perfect spot
• 29:33
  Speaker 2: to wrap it up. It's a super exciting, yeah story.
• 29:37
  Speaker 2: I wish you nothing but luck man. Thanks for doing
• 29:39
  Speaker 2: us Hey.
• 29:40
  Speaker 3: Thanks for being such a great friend over the years.
• 29:42
  Speaker 3: Your content has been fantastic, at second to none. I'm
• 29:46
  Speaker 3: honored to have been a small part of it here today,
• 29:51
  Speaker 3: but a perpetual fan.
• 29:54
  Speaker 4: So thanks for doing what you do.
• 29:56
  Speaker 1: Thanks Man. I also want to thank the audience.
• 29:59
  Speaker 2: If you like to find your nearest doghouse, go to
• 30:02
  Speaker 2: doghouse dot com that's d O g H A U S.
• 30:07
  Speaker 2: Or search doghouse on your favorite social media platform. If
• 30:10
  Speaker 2: you want to keep up with what's going on there.
• 30:13
  Speaker 2: If you like the discussion, please share with your friends
• 30:15
  Speaker 2: and colleagues. Check back soon for an interview with Lyle Tick,
• 30:18
  Speaker 2: CEO at BJ's Restaurants.