Transcript: How to Run a Restaurant - the Story of a Former CFO's Journey With Systems
DSP: Hey there, restaurant pros it's David Scott Peters and welcome to episode nine of the Restaurant Prosperity Formula. I've been coaching restaurant owners since 2003 and the Restaurant Prosperity Formula™ is based on what the most successful restaurant owners I've worked with do on a daily basis to achieve their success. The basic premise of the formula centers around achieving prosperity, freedom from your restaurant and the financial freedom you deserve. To achieve prosperity, you have to follow a very specific formula made up of leadership systems, training, accountability and taking action. Today's topic centers around the story of one restaurant owner who learned how two simple changes to his operation meant a major change to his restaurant's financial future.
Now I want to tell you about our guest today, Steve Eller, owner of the Cosmic Cowboy Grill, with two locations, one in Coeur d'Alene, Idaho, and one in Spokane, Washington. Steve created the concept back in 2017 to be a healthy, fast casual concept to fill a need for the community he lived in. As a former CFO, Steve was already very much a numbers guy. Being new to the restaurant industry however, he searched to find what the industry standards were to run a profitable restaurant. His challenge – the industry, publications and websites most people find were wrong.
Now, Steve is not somebody who sits back and waits for good things to happen. He immediately hired an industry professional to help him design and run his new concept, hired and trained full management teams for both restaurants, and implemented an all-in-one restaurant management and accounting software program. His numbers were dialed in. But profitability was still a challenge and then COVID hit.
All Steve needed to understand is what was really possible when it came to restaurant financial targets and ultimately how to hold his management team accountable to the systems. With just two simple changes, he was able to reduce his prime cost by 13 points during the pandemic. Listen in on our conversation as he shares with you how he is able to make this major shift in his business. I want to welcome Steve Eller to today's show.
But first, a word from our sponsor.
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I want to welcome our guest today, Steve Eller, owner of two Cosmic Cowboys up in the inland northwest, and somebody who I think quite honestly is one of the top operators when it comes to understanding his numbers, putting systems in place, having a team execute what he wants done. And the reason being is I've seen a huge shift in his in his company. And really somebody who knows the numbers, knows how to put those numbers together, to put them into use to make change. And that's why I'm really excited about bringing Steve to the show today. Steve, I want to welcome you today.
STEVE: Well, thanks, David. I appreciate the time to talk with you today.
DSP: Well, do me a favor. Tell everybody a little bit about your business and kind of where you started in and what it was like before you and I met. Talk about your two concepts.
STEVE: Cosmic Cowboy Grill is a healthy, fast, casual concept that we created back in 2017 and Coeur d'Alene, Idaho, which is in the Idaho panhandle, basically a near Spokane, Washington, which is the center of gravity for this part of the world. Pretty active town. We knew there were a lot of athletes and outdoorsy people that like to eat healthy. They didn't really have a alternative in this area. So, we jumped in. And you know how hard could the restaurant business be? We jumped in and started a restaurant and did pretty quickly gather a decent following but have struggled to make the numbers work until we found you and you nudged us in the right direction. So.
DSP: What were some of those challenges that you had? Like so we can say try and make the numbers work because you're somebody, again, was already like you're like me. You're a spreadsheet geek. You are in your past life, a CFO. I mean, you know, numbers, numbers, numbers. But there was a little bit of something missing. What were those challenges? Because you, again, had a lot of systems in place.
Steve The things that we were missing were number one knowing what was possible, so when you read all the trade rags and they say, oh, 30 percent food, 30 percent labor, we never question that wisdom. We never question whether that was appropriate for our business and whether we could be successful at those metrics. Don't know why. I mean, I did plenty of research before I got into this, but that was not any advice that we ever questioned. And then the I think the one of the biggest things that has happened in Cosmic Cowboy Grill is that our management staff is now not only willing to look at the numbers, they're willing to put the work in to make the numbers happen in real time, which is a huge shift for us.
DSP: So when you talk about let's explore a little bit about prime cost, my favorite number, right. Total cost of goods sold plus total labor cost. You talk about the rags, the 30, 30. You know, a lot of times I read it, it's thirty four percent food cost and a three-time markup. Labor around thirty-three or so and that puts us at about a seventy-seven, seventy eight percent or sixty eight percent prime cost I should say. And you know I always talk about hey well if you do a million dollars really eight hundred fifty thousand dollars more in sales a year, gross sales, you should be running a fifty five percent prime cost or under. And when you and I first met I think the biggest discussion was nobody ever told me that was even frickin possible. So, what was it about finding that just that little new truth that that could be different? How did that change things for you?
STEVE: Well, it made us have the strength of conviction to make the changes in the business, menu engineering, increasing some prices which was a little bit uncomfortable, honestly, pushing back on the management staff about, oh, I need more labor for this. I need more labor for that. It gave us the ability basically to take your conviction and make them our conviction and push them on to the team in a way that the team bought into what we were saying. And I liked it. But they understood the wisdom of that advice and the fact that these are the things we need to do to be successful in the business.
DSP: So talk to me a little bit about your numbers, your prime cost beforehand. What was labor like? What was food cost like? Before you said, OK, well, I could make this complete shift in what's possible. What was what were your numbers looking like then?
STEVE: Our food was running thirty to thirty two percent and our labor was running thirty-two to thirty four percent.
DSP: So you literally said this is the number you managed to it and they executed it. So, you had a good management team. They did what you asked them do. Right?
STEVE: Yeah, I was making the wrong ask. We talk about making the ask all the time even before we discovered you. Like you've got to ask the team to do these things. They're not going to do it just because it's common sense or everybody knows that this is what to do. You've got to go say I need you to do X, Y and Z.
DSP: And this is the number one reason why I've always been impressed with what you and your operations manager, Chris, have done, is you lead. You know, if we look at the Restaurant Prosperity Formula™, you know, the very first skill set you've got to have to be successful in your business is to be a leader. So, the truth of matter is you weren't lacking in leadership skills. You weren't lacking in getting your team to do what you wanted. What the problem is, you gave them the wrong North Star to follow, right?
STEVE: Well, that's absolutely right.
DSP: Go ahead.
STEVE: Well, and let me expand on that. You've told us several times and you know; this is just an accident of who I am and how we've been doing business. None of your twenty whatever steps I should know the number, but I don't. I apologize.
DSP: Twenty-three. It's OK.
STEVE: None of those. I mean, we were doing a whole lot of those steps, but we weren't doing them right. And nobody told us how to glue the steps together into a way that actually let us pull levers to change the business. So, we were looking at menu cost, but not in the right way. We were looking at food costs, but not in the right way. We weren't getting it into the daily blocking and tackling of the business like your Checkbook Guardian does. You know, that's a pretty simple thing. If you don't spend more money percentage wise than your sales dictate you can't be over on food.
DSP: That's right.
STEVE: You might be shorting the walk-in and we've dealt with that, and that's another thing that, you know, we have to work on to keep from running out of items. But, you know, that's a better problem then why did you spend 30 percent of our sales on food this month? "Oh, I don't know." Well we don't have it anymore.
DSP: I can remember going back to our discovery call, and we were talking about what you were doing. I'm like, man, you've got all the tools. And I said, you're the easiest fix because you're the person who has all the information. You're doing all the right things, but you're missing that cog, that little gear that ties all the gears together that you can do something with all this information. You gathered a ton of information. You did a lot of the right things that you're supposed to do. But the Waste Sheet wasn't necessarily connected to food costs, Key Item Report wasn't connected, right? Budget wasn't connected. Nothing was connected. They were just separate islands of information. So, they didn't tell the complete stories. Does that sound accurate?
STEVE: That's exactly accurate. And because they weren't connected, my team didn't value them as tools. Like oh this is just busy work. We're doing this, but it never amounts anything. Why are we doing this waste log when we never use the waste log to change the business? Why do we have a budget when we never hit the revenue on the budget and then none of these other numbers make sense? Why? Why are we doing it? So, then you don't get the buy-in. Then people don't use the tools and they don't use it to manage the business.
DSP: Now, what were some of the struggles when you started to teach people where the numbers came from and how they tied together? All of a sudden that makes the software you're using makes sense. But you did get some pushback. Did you did you lose anybody? Did-you know I always tell people I guarantee them to lose one or more of their best employees, who they thought they were their best employees, because all of a sudden you're asking them to do more. Did you find-did you experience that? Did anybody give you so much pushback or you found out that they rose to their highest level of incompetency and now when you ask them to do more, they were no longer the right person on your team?
STEVE: We've been a little fortunate in that. We did lose somebody, but it wasn't because the systems were too tough or didn't make sense or they didn't want to do the work. There were other personnel issues that just happened to come up during this time period. As luck would have it, though, that person's replacement is probably the head of the class when it comes to running the systems. So, the other person had the skill set and the inclination and the real drive and desire to say, "I see the value in this." He jumped in with both feet. He's the guy that every morning, in fact, probably during this call, I'll get a Slack post saying, "COGS food and labor are in the system." And, you know, we'll get a little ding on my laptop here. But so that part has been good. You know, the key on this as an owner is how does your top management going to react to these programs? In my case, Chris, my GM has been struggling with this concept with me since the very beginning back in May of 2017.
DSP: And he's a seasoned, seasoned restaurant pro. And he's also not somebody who says, I know everything and he's somebody who doesn't say no. You know, you don't understand the restaurant business. It's different. Like you have an ideal individual in that spot. I want to make sure people know that that's who he is. Sorry, go ahead.
STEVE: And so that that's what made this work. Because if I was fighting with Chris the whole time, so you got to do this and his heart wasn't in it, that wouldn't have worked. And then step one of implementing your success plan would have been finding a new GM. Which, you know, I think we all know how hard and painful that can be, so Chris was onboard. He saw the benefits of it right away. He saw the promise of it right away. And we saw the benefits pretty quickly. You know, if we didn't see the benefits from the promise, then I think that would have been a different conversation.
DSP: Well, let's talk about some of that change, because, you know, just like everybody else, COVID is crushing and it makes volumes disappear. And it was already a concept that you were working on raising's, you know, getting sales to go up in the first place because it is a healthy concept in a very, you know, meat and potatoes kind of area. With that said, where you started and where you are today, what kind of swing? And this is in the middle of the pandemic. What did you see your prime costs go from to? What was that change look like?
STEVE: Well, we were in the high 60s, sometimes over 70 percent prime cost, and we've brought that down. The lowest we've seen is 63. But we think we can go lower than that. You know, I want to be honest with everybody. You're probably going to hit some speed bumps. We've got some we've got some mystery food costs right now that we don't know why we're stuck at twenty-nine and we're working to find it. Some of that is commodity cost increases. So, we lost a point on our food costs on the menu that we only redesigned three months ago. So, we probably need to do some more menu engineering to get that point back. You know, we're within two and a half points of ideal in Spokane. Unfortunately, our volumes there are so low. Well, fortunately for food costs, we have a chance probably to be within two points of ideal food costs.
DSP: Which is awesome.
STEVE: Our guys are you know, they're there like a hawk on that. Between the GM and the kitchen manager, there's hardly a plate that leaves the kitchen that doesn't have one of those guys bird-dogging it. So portioning, food quality, waste log and all that, that happens at a really high level there. Coeur d'Alene has more chefs, more people, less ability for the management to see every plate that goes out. You know, we're four points, four and a half points over ideal there, so there's work to do. And we still struggle with some Key Item Tracker, you guys can't count. Let's go count better. Come on, guys. I mean, we're counting burgers by the each. It shouldn't be hard. You either cooked it and serve it to a customer or you dropped it on the floor. I mean, come on. So, these are the struggles that we work on. But we're focused. The management's focused on it. We talk about it every week. You know, we're looking for those for those dollars.
DSP: Now, one of the big changes was we didn't pull industry averages. In fact, whether I say prime cost can be lower or not really doesn't matter. It's what's possible based on your location, your price point, your quality product, your core values. And at no point in time do I ever have a discussion with you to say, buy shitty food, right. Cheaper food, cheapen your product, go against all those things. But with that said, there was one key element. And this, again, is something you had already been doing. But again, changing the numbers, whatever is budgeting, let's-because you are the budget king, you're a 13-period guy, you literally accrue everything perfectly line by line by line, like you drilled down your numbers. But what was it like going through the budgeting process and how we were able to create your plan for success and come up with the numbers you needed to hit? Talk about that process a little bit.
STEVE: Well, I mean, we had budgets before. But they weren't, I think the fundamental difference between what we were doing and how you do it is you say start from where you are and trend off of that. There's not going to be some miraculous, the sales fairy is not going to come and drop another 15 percent of sales on you just because you're a nice guy and you work hard. So, you are where you are. Use those numbers. Maybe you can operate better. We just finally got a loyalty program installed after three years, you know, no thanks to my old point-of-sale who will remain nameless. But it you know, that should be one of those one-time opportunities to generate more sales in the future. So, we have that system. You know, we're already up to 400 members after about a month. We want to be at a thousand active by the end of the year. That should help sales. But those things don't happen very often. So, trending off of our existing numbers and then making some changes, say, in food cost or labor percentages based on proactively implementing some system that's going to help control them.
DSP: So as we looked at it, like we took you're where you are today, we didn't put fairy dust over where sales are going to be. What is realistic? We got your food cost numbers, your pour cost numbers, we got your labor costs numbers and so on. But the most amazing thing in that process is we kept asking the questions why? Like, we probably spent six hours on one of those budgets, on multiple calls, literally drilling down to even, so everybody can associate with COVID often many of our operations are at minimum staffing level. Like how does that affect things? And because sales are lower, your labor costs may jet through. And then we made decisions on what do we think was realistic we could get our food costs down to? In fact, I believe we were shooting for a twenty four percent ideal food cost, twenty six percent actual. And we're still struggling to hit that. And talk about some of the challenges it was to say, how do I drill down labor? How do I bring food costs down? Because it wasn't just snap our fingers. There was a lot of work behind that.
STEVE: Well, that's where having a good relationship with Chris and being able to talk about things with mutual respect was really important, because I can say, Chris, I need you to only spend 4,500 dollars on labor this week. And he could push back and say we cannot run the store at our level of quality and service at that level, and you're going to burn the employees out and we'll lose some of the best ones.
DSP: And let me let me just chase that squirrel real fast. Chris is not somebody who goes, well, we've got to have more labor. We're a scratch kitchen, which you are, you know, didn't come up with excuses. He literally sat there and wrote out the ideal schedule with the minimum amount of hours and put the people in place and how much money you would spend and literally came up with that number. Like he didn't just pull it out of his air and go. You don't understand, Steve, that we can't do that. He showed you the numbers, right?
STEVE: That's right. And then it became a decision. Do we keep this meal period or not? We probably still have some format concept tinkering to do to get where we want to be, because with the high level of, you know, from scratch cooking that we do and the fresh ingredients, you know, we're not opening bags from Sysco. I know everybody says that, but we really aren't. And there's a certain amount of effort that it takes to cook food the right way. We may have to change our menu still to make our labor less impactful on the bottom line. So these are conversations we have, but it's all driven by the budget, the budgets saying this doesn't give you the numbers you want. So what are you going to do besides hope? Because hopes a really horrible business plan to make better numbers happen.
DSP: And that's the beautiful part about the budget. You put together your proactive plan. It's not just, well, tomorrow we're going to run a twenty six percent food cost. Well, no, we realized we had to look at the menu engineering to make sure the recipe cards were accurate. I can't tell you how many hours and calls you spent just making sure that in your software the recipe cards are right, so that we could have good numbers, you know, again, garbage in, garbage out. And then the analysis that we did on the Menu Profitability Monitor and finding ideal and changing prices and getting rid of items and all these things and all the things that were balanced in there was not only balancing. Speak, David. Food costs, but cash contribution and labor cost. Realizing that, hey, we have a certain side dish that isn't as popular and you guys made the decision to make the change, go we're not going to have that anymore because we're going to try and simplify prep and all those things, like everything was on the table because you had this guiding light, if you will. The new North Star was your budget, your plan, at your speed, right?
STEVE: Oh, absolutely. And so, we like that system so much. We are now doing your Menu Profitability Monitor every week. But as I annoy you with, I take that and put it into another spreadsheet where I can track it week by week so we can watch it. And then we can say how much of our food price has changed because the customers changed the mix and how much of it has changed because our food service are both broadline food providers charging us more money.
DSP: So would you say, I always tell people the two most important systems any restaurant should have in place are budgets and Recipe costing cards. Am I lying? I mean, are those not like.
STEVE: Oh not a bit.
STEVE: Otherwise you are flying blind.
DSP: You couldn't do what you do without those two things, right?
STEVE: Right, because then I mean, you can see what your food cost is on your PNL even without those. But how are you going to know why? What's contributing? You know, we have a couple of commodities on our purchase list that really are the only ones that matter at the end of the day. And so, we either have to keep pricing our menu to reflect the market for those commodities or we're going to have to reengineer the menu. Maybe, you know downsize our–
DSP: Let's go back to found a foundational system that kind of helped change your culture a little bit. And you struggled with it like everybody else does, even though you're a systems-oriented guy. I want to talk about checklists. Right. And how checklists, really bleed all the way into that your kitchen manager was doing inventory accurately versus just going through the motions. Talk about your challenge with checklists and why you may agree or disagree with me that checklists are really the foundation to all of your principal systems in the culture in your business.
STEVE: Well, you have a different take on checklists than I happen to agree with your take over some other advice I've gotten from some industry advice websites and your highly specific. So just to paint the picture here, some people think checklists are memory jogs to help the staff remember to go clean the bathroom. You think it's no, go get the bucket of cleaner, take it to the bathroom, squirt one second of squirt in there. Do the toilet brush three times, flush it. To ensure a higher level of quality and consistency, and we've gone back and forth, we've tried both systems over the years. It was hard to get buy-in for my crew with the detailed checklist before. But, when David Scott Peters said "No, those checklist need to fix everything that pisses you off." Suddenly everyone was like, well, OK, I guess that's how the checklists are going to be. We were also bad at training. And I will say that teaching the checklist, you know, while it's not as robust of a training system as I would ultimately like to have, it's a good start. You know, with more detailed checklist, they at least tell people more or less how to do the jobs. Are they perfect? No. Do we need to take another lap through them? Yes. It's been a little bit of a I mean, there's only so many hours of the day and you only want to burn so much management labor a week. So, we have to meet our efforts out and put them put the dollars where they can do the most good. So, it's probably time to take another lap through the checklist and improve on them. And we did get an electronic checklist for the managers. We haven't ruled that out for the staff yet because I'm still not convinced, they won't throw the iPads on the ground.
DSP: Well, you can get them on their own phones, but that'll be a whole other story. So, did you see that when your managers would follow those checklists and now see the detail allowing you to impose your will without being there. Did that translate into better numbers? Because, again, you had software, they were putting inventories in. They were doing recipe cards, they were putting schedules in. Was there a tightening up of that? Because now the little details mattered.
STEVE: It's helped. That has been one of the harder areas to really get the buy-in from the team on, it's taken more double checking on Chris, the GM's part to make sure that they are following the checklist. It took a while to get management buy-in from the assistances and the kitchen managers. And like I say, that we're due for another lap on that where we make some improvements to the checklist we get. You know, we got to keep reminding, reminding, reminding. I think that the assistant managers are there, but I'd like them to be there a little more, to be honest. Really start driving that home.
DSP: So let's talk a little bit about I always tell people that, again, Restaurant Prosperity Formula™ one of the major parts of your responsibility that starts off the whole formula is leadership. And that's what you do. You are not a restaurateur by background. Real estate came across it, this will be an investment, something that works. You from the beginning said while you do jump in the store and you do help out and you know how to run your restaurant, that is not your primary role. You have somebody what I call Chris is your implementor, somebody who gets shit done to put it eloquently. Right. And talk about that relationship, because I tell restaurant owners who are doing things themselves or trying to save fifteen dollars an hour by flipping a burger, they're taking inventory themselves, are doing everything themselves versus teaching others to do it. How important is that role that you are leading the team, working on budgets, working on marketing, developing your management team, and that, Chris, is the one that executes that with the rest of the team? Talk about that relationship and why that's important.
STEVE: Well, now that I have a I mean, I always had a reasonably good idea of what an owner should do and I heard the advice, you know, day one work on your restaurant, not in your restaurant, but, you know, when you have staffing problems. And we're in a very staff constrained market in Coeur d'Alene, Spokane, a little less so. But, you know, there's still not I hear from the old timers where you used to have people come in all the time handing off resumes, saying, I'd like to come work for you. That doesn't happen in our market. Maybe it happens elsewhere right now. But so staffing has always been a problem. It's always the old saying it's hard to drain the swamp when you're battling the alligators. Well, that's the big alligator right there. So, it's easy to get sucked into the into the store. So-and-so called out, now the GM has to go and do that job and then I have to go do the GM's job. And if you do that enough, then there's no strategic time. You know, we're still dealing with a pretty decent sized COVID problem in our Spokane location that's requiring me to spend a fair amount of high level strategic time to try to find a third store for us to put some people on so that we can. And it's a good time to be looking for a restaurant opportunities right now as other places wither on the vine. So, for me to make my restaurant company successful, I need to be out looking for those things. I need to be working with my lenders. I need to be you know; I still have to apply for PPP loan forgiveness. You know, that's a lot of time. That's going to be me in my office doing a paper chase. You can't do that if you're on the register in your store. And I used to do a lot of sailboat racing, and unless you're like Dennis Conner, one of the best sailboat racers ever, you can't watch the boat and call tactics and drive the sailboat. It just it doesn't work. So to be a good sailboat racer, you have to keep your head out of the boat, maybe looking around, where are the other boats doing, drive the boat and let the crew be the crew and do their jobs and not micromanage them. And so that's the approach I always tried to take. But with you in in injecting some of your systems into our business, it's been a lot easier to push things down to Chris. And then Chris is pushing things down to the assistant managers and saying. "Instead of me giving you numbers, you need to give me these numbers, I'm going to show you how to do it. But you need to know these numbers and you need to bring them to the meeting on Wednesday. And you need to tell us what's going on with food and what's going on with labor."
DSP: And that's a major culture change. Instead of the owner of GM saying, here are your numbers top down and people go, "Whoa, where the frickin number come from? I don't know. You know, that's the software that's wrong. I don't believe that." When they come to the meeting, they say, my food cost was, we're this far off, this is what I had on a waste sheet. Here's what I did to fix it. Da-da-da. Man, they put them in a position of truly knowing their department and being a part of the team. It's more than babysitting the idiots. They learn to run a business and now they own, they take ownership and what's going on, right?
STEVE: Oh absolutely. And actually, you know, there's so many moving parts right now. We did have a guy that he was struggling with the numbers and he ended up leaving us over that. I don't know why I didn't think about that when you asked me earlier. But it was it was clearly a struggle for him. He ended up voting himself off the island. New guys much better at the numbers.
DSP: Well, sometimes whether they make a decision on their own or we let them go, people provide value to us. But, as we change and we elevate expectations, sometimes people don't like change. They are not willing to do that and they quit or get fired. That's the negative. The positive. You've got some people who were struggling that that now have better structure and they shine. You've got people who always shined but now they feel like they're not the only one. And then anybody brand new goes, "Oh yeah, that's how you do it. OK, sure." They don't go, "Hey, that's not how we've done that for the last three years. That's not what we do." And that truly makes it easier for you to run your business. Do me a favor. Talk a little bit about what you were looking for when you found me and you know how you found me, why you found me, talk about that that that process, because, again, you had systems, you got major piece of software in there that handles all aspects of your business. You had, you know, all the different pieces and tools and you had a pro in Chris joining your team that. And he truly cared, and he truly put things in place. So, what is it you were looking for? You know what led you to me?
STEVE: We knew that we were missing some piece of the puzzle. We knew that in the beginning, I got the opportunity before we even opened to talk to a major restaurant investor who had made a pile of money starting one of the largest franchises in the country, sold it. Now he buys and sells the up and coming restaurant concepts. He gave me some advice, but it wasn't it wasn't the David Scott Peters glue to put it all together. We talked to, had a guy on retainer for a while who was an area manager for a national chain concept, really knows how to run restaurants. He came in and gave us advice, but again, it wasn't enough to glue the pieces together. We've had people do some consulting on our menu and their input was valuable, but it wasn't valuable enough to say you can have a twenty four percent menu. That was real simple advice, we never thought that it would be appropriate for a restaurant like us to have a food cost that low. But it turns out it is. Business works a lot better at a twenty four percent food costs. So, we knew we had some nebulous idea of what was out there, that we knew that there was some piece of advice that we were missing that we weren't getting from these other consultants. You know, would we have discovered this on our own with all the systems we were already running? I don't know, maybe after another four or five years of beating ourselves against the wall, but that's not a whole lot of fun. I ran across you on a website. I looked at your website and said, this seems awfully close to the advice that we're looking for. Then we did that initial call. What do you call this?
DSP: A discovery call.
STEVE: The discovery call. And in that conversation, you said a number of things, there's like. That this this is the guy that we've been looking for. Once after that discovery call. It was easy.
DSP: Did you have apprehension? Like, you know, often people are like, does this guy really know what he's talking about? Is it truly going to work? So on and so forth. Was there anything that said, well, let me pause, you know, before I make a decision.
STEVE: You know, being a Mastery Plus member for you is not cheap, it's a financial
STEVE: commitment, but the promise of the savings that you have there would I mean, they dwarf what we have paid you. I mean, it's. In a big month, we could almost save that in a month. It was a no brainer. So, I you know, given the site that I found you on is a trusted site for me, and that was a Good Housekeeping seal of approval. Our discovery call was very informative. And I could tell that there was more to be there. It was an easy decision for me. In fact, I think I you almost had to beep me off and "Steve calm down."
DSP: No, no. Give me. Yes, give me your credit card. No, no, no, no, not yet. Let me tell you about it. Talk a little bit about maybe some of the unexpected shifts that went on in your company that you didn't expect in our relationship when we started to work together because you had a very specific idea of what you wanted to have happen. Was there anything that kind of came out of nowhere and said, wow, that's a benefit I didn't expect?
STEVE: I think the way the teams responded to the check-listing and some of the other things that we've put in place, they it that was a lot easier. We're not their 100 percent. But say the team responded to these things that we pushed in and we pushed a lot on them pretty quickly because.
DSP: That's an understatement.
STEVE: We had the back end stuff done. So was already in software. We already had Recipe costing cards. So, for us rolling through your twenty-three steps was, you know, a lot faster than it would have been for other people. So, we were able to push and push and push and we were a little worried about breaking the staff, but it didn't happen. And so, the staff responded very well that nobody's putting up a fight. Now, does everybody do the checklist at the level of fidelity I'd like them to? No. Is that an ongoing management challenge? Yes.
STEVE: Yes, exactly. So, I mean, that's to be expected. But we did not have people up in arms and saying, oh, my God, this is too much work and we can't do that or this. So that's been gratifying. That's been helpful. And now it's been gone, going on for 90 days of this and nobody's putting up a fight, if we ask them to do another checklist like, oh, OK, it's another checklist.
DSP: Well, again, you know, as I talked and I bragged about you in the beginning, you are you are already a systems-oriented person. You had a ton in place and all you needed was that cog. But with that said, in the beginning, there was a ton of work. We were worried about that you're going to push your managers to their breaking point in the middle of COVID as we're cutting their labor and taking things and expecting more from them. But they rose to the occasion. Your culture change they bought in, which is awesome. Again, that has to do with your leadership. And now we spend a lot of our time literally going over a budget and seeing where we hit or missed and talking about what you can change going forward to get back on pace. What's that like? What is it–how does that changed your life? When you know you have good numbers and you know you're never going to hit your budget, there's always something that changes. But knowing that you can take control of your future.
STEVE: Well, you don't talk about this number as much as Chris and I do, but we really look at that break even point number in your budget model. And I have made it a goal to try to work that number down as low as possible, particularly at our Spokane, center of downtown location which is struggling because of COVID. So anything we can do that pushes that number down. You know, I always knew that fixed cost and overhead were obviously important. But, you know, again, you go back to the trade rags, food and labor, food and labor, food and labor. Well, that's all great but rent, utilities and debt service are pretty important, too. You know, we as I alluded to earlier, we had a point-of-sale change thrown on us, which we got through. We actually ended up saving about 250 bucks a month and dropped by credit card merchant ID, saving another 250 bucks a month out of both stores. I mean, that was something that I probably wouldn't have focused as much on before your budgeting process as I did. Now, I'll also tell you, I got a little bit lucky. There was you know, I asked you your advice on point-of-sale and your answer was, don't care, make sure your rep is great. Well, our rep is great. I've wanted to work with this guy for a couple of years. And so, we ended up with a point-of-sale that actually ended up doing everything we wanted and cost us considerably less money and dropped our merchant ids. So that was all great. But I don't think I would have looked at it that way before your budgeting.
DSP: So what is lifelike for you today? So, where you started, where you are today? Because we truly kind of met right as the pandemic hit and we're still in the pandemic. I know it, it's still a struggle. And sales in the Spokane location because downtown is damn near closed like anybody in a big city. But what is your life like today when you look at your business? Is there more hope because you made the changes? Would you still be in business if you didn't make the changes? You know, where are you personally and business wise?
STEVE: Well, I mean, COVID is a real problem for us, so I will tell you that your changes have helped us weather this storm a lot better than we would have. It's taken our cash burn down significantly at the Spokane location and helped us lower our break even point in Coeur d'Alene, which is great. We have the strength of conviction to know that we can run a million dollar plus store for a sub 60 food and labor. And so I can't guarantee you that I'm not going to have a problem with one or both of my stores. Who knows how long COVID is going to last. But we are already looking for new opportunities to go into broken restaurants, put these systems on and make a profit. So, I started my real estate career in 1986 in Texas, it was like a neutron bomb went off. It was complete total destruction and people made a lot of money because they were able to buy good real estate at very low prices. And this feels a lot like that. You know, we feel like we could come in, particularly if you could find a restaurant that has sales but has horrible expense numbers.
STEVE: You can come in and especially if it's a foreclosure or, you know, taking over a lease from somebody else where you don't have a lot of debt coming in on it. We can make those very profitable. And so that's.
DSP: I think you would agree with me, that's because once you know the systems, the envelope, what style of food, you know what food you have, style of service, location doesn't matter. These are the foundational systems that you drop into any operation. You're going to make it more efficient, make money, right?
STEVE: Exactly. Exactly. So, I would love to find a restaurant with million-two sales and 75 percent food and labor and an owner that's ready to throw in the towel.
DSP: Well I guess if anybody's listening to us and you’re in his area, give me a call. Do me a favor. What would you tell somebody who's trying to evaluate whether they should work with me and go through my membership process and the tools that I provide and so on, what would you tell them if they were thinking about it today?
STEVE: I would tell them that you can provide the glue, the systems and the glue that glue the systems together, but don't come to you unless you're ready to do some soul searching and look long and hard about how you are managing your business and whether you're really willing to make some changes at the end of the day.
DSP: Because the truth is, I don't change your business, right. You change your business. It's about transforming your life, your management style, your business. It's less about me. It's more about you. Correct?
STEVE: Well, Chris and I have our regular Tuesday morning meeting with you, and we're prepared to get kicked in the balls every Tuesday morning. "Like guys, come on. Why are you doing this?" You're the reality fairy. You're what we need. I mean, you're the no bullshit monitor. We can, you know, everybody has stories about themselves and how they run their life and. You know, we bounce these things off of you and you repeat back to us what the reality of the situation is, sometimes you agree with us and sometimes you say, no, that's not going to work. And this is why. And we need to hear that. I mean, that's why we hired you. You just told us we were great all day. And yeah, you guys are doing great. Rah, rah, rah. You wouldn't be worth your money. We want you to take us to the woodshed and paddle us. Say, "Guys, come on."
DSP: Well, the truth is there's always opportunity in our businesses. And often when we see our only our businesses, we don't we don't see those cracks. Right. It's if I invited you into my business, you'd go, "David, why do you do that?" And if I come to you and say, "Well, that's the way I've always done it." Most dangerous phrase in your business, you're dead like you always have to be looking to change. But I love what you said is that and I agree 100 percent. I can't help you if you're not ready and willing to do the work, to change yourself, to change your business, put the hours in of changing from being the guy who flips the burger to the one who does a budget and trains managers and hold them accountable. And that's really what you're saying yeah?
STEVE: Absolutely. That's exactly right.
DSP: If there was anything. You know, I want to thank you for taking time. I really do appreciate so much you sharing. Before we go, is there anything you would share with anybody that you say, you know, a piece of advice, something we didn't talk about, that you want to make sure they walk away because they had an opportunity to listen to us?
STEVE: But we haven't really asked me about it. I mean, we drove around it, but I take from you that quality of life for the business owner is a huge thing that you're trying to improve. And we appreciate that. I mean, I have worked way, way, way more hours than I ever thought I would still trying to get these businesses where I want them to be. You know, the dream is they start doing well enough that, you know, it's not a daily blocking and tackling. It's more high level checking in with the management. I think we're on that path, but we're not there yet. So, I get up and strap it on every day. But there's hope that there's, you know, we can get it where it needs to be or that's not as much of a problem.
STEVE: So that's my goal.
DSP: Amen to that. I mean, quality of life is important. It's the big rocks. It's the family, the friends, the, you know, spending time to make ourselves happy. When the restaurant industry consumes us, it literally consumes our families, our relationships are just our psyche. And so, yeah, it is really important. And my biggest thing that I've learned working with people like you is it is less about the financial and it's more about that life, because if you are getting two days off in a row, if you are getting time to go on vacation and spend time with your family, then you are making the money you deserve. And that truly is it's kind of the opposite approach. It's not, and man I, and for 18 years I talked about, hey, lowering prime costs, lower, lower, lower, lower. But the truth of matter is, it doesn't matter where that is. If you're the one required to make that all happen, it's the quality of your life part that translates into your business, right?
STEVE: Absolutely. So that's the balance we're trying to find now.
DSP: Steve, I want to thank you so much for agreeing to spend time with me and share your story with everybody. I like to think that you are somebody that everybody should model in the sense that you are a strong leader and I'm not bullshitting you. You know, I would I'd tell you otherwise. I mean, you know what systems need to be put in place. You put all these things in place. But the biggest thing is you understood one of the hardest lessons that anybody who's a restaurant owner would know is and that is you don't know what you don't know. And you were willing to go find out there. Take the risk. You know, you put you put literally your financial you know, investment in me, is was the big risk. Like, I could have sucked. Could of not happen. But you also, man, the moment I said do something or this is it, you never said no, that's not possible. Are restaurants different, da-da-da. And I think that's the biggest quality, what makes you such a great operator and Chris is pretty damn good too though.
STEVE: Absolutely. Well, we've really appreciated your help and guidance to this. And, you know, we want to keep having you over our shoulder and helping us make the business better.
DSP: That's awesome, man. Thank you so much. I really appreciate you taking the time today.
STEVE: Have a great day, David.
DSP: Hey, that was an awesome episode. I want to thank you for taking the time to take action on building a better, more prosperous restaurant. Before you go, I want to give you these three thoughts. One, by combining leadership and taking action with systems and training being checked by accountability, you are on your way to creating prosperity for you and your restaurant. Two, I have something I need from you. Please leave a review on Apple Podcasts, Spotify or wherever you happen to listen to podcasts by leaving us a review. Other restaurant pros seeking out this information are able to find it. I read the reviews and hearing how this information has benefited you, does wonders for me. And three. If you find any of the discussions helpful, share them. The more restaurant pros who have access to them, the better we become as an industry. For more restaurant resources or to get in contact with me, connect with me at DavidScottPeters.com. Be passionate about what you're doing, be persistent, but more importantly, become better and help everyone around you become better and your restaurant is going to kick some ass.
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