Advice Line with Todd Graves of Raising Cane's

0:08 Hello and welcome to the advice line on how I built this lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show. who will help me try to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Leave us a one minute message that tells us about your business and the issues or questions that you'd like help with. Alright, let's get to it. Joining me today is Todd Graves, founder of Raising Canes. Todd, welcome back to the show. Hey guy, how you been? Great, great to have you back. You were first

0:47 On the show a few years ago in twenty twenty two. A lot of people ask me What's your favorite episode of the show? And I don't have one because I love all my kids. But I do cite yours often'cause it was so funny. And fun and I think you remember that. Do you hear from people about that episode now and again? Oh, I do. All the time. Yeah. Of course, it was so funny and p if you guys haven't heard that episode, go back and listen to it. It's so good. And we'll put a link to it in the show notes.

1:12 Uh the story about how you you had this dream of starting a a fried chicken joint in Baton Rouge where where you grew up and you couldn't get a loan, so you worked in oil refineries and in commercial salmon in Alaska and you basically save enough money to open the first restaurant and then you know, it took a while, but of course today it's just an unbelievable story. I think I read that This past summer of twenty twenty five.

1:36 Canes surpassed Kentucky fried chicken as the third largest chicken quick service restaurant in the US. Yeah, you know, th I grew up with KFC chicken and buckets of chicken. In the colonel in the red and white stripe buckets and you're just all of a sudden you're like, wow. You know, it just blows you away. Bigger than the colonel. It's also really interesting too our our unit count, you know, we don't even have a thousand restaurants. And uh looking at the average unit volumes, it's kind of a different way to grow, right? We just not have these mass volumes, but having the highest of the highest average unit volumes per restaurant, that really adds up. So uh anyway, sometimes that stuff hits you and I told the team, let's enjoy it. Yeah, let's enjoy it for a minute. I bet. I mean, you know, one of the things I think that you guys have done well and smartly is

2:18 You've got kind of a hybrid model. You're not a f you're you're you've m m I think mainly corporate owned locations, but you do have some franchises, and I think overseas they're mainly franchises. That's harder because you've got this quality standard, right? It's easier in a corporate owned store, but when you've got a franchisee, it's a different ball game. So what are the ways you're able to or you guys focus on maintaining those standards when it's It's not you guys who are directly controlling it. Yeah, you know, it's it number one is picking a good partner, obviously, right? If you're gonna have a if you're gonna have a franchisee, you're basically you know, you're licensing Uh the brand.

2:54 package, you know, the not know how the training, the product knowledge, all those things, but it's their business and they're running it. So picking the best franchise is so clutch. So clutch. So so let me give you an example. Mohammed Al Shaya, the Al Shaya company in the Middle East, that's my partner, been partner now for over ten years. Yeah. I Corded we we talked Mohammed and I talked for two years before we did something. We got to know each other. We mystery shopped our

3:19 Each other's brands, right? Look, I spent weeks of the time over in the Middle East in the different regions seeing all the brands that that his his team ran. And I saw the same thing I do at Kings, you know, happy, happy people giving good customer service, selling good product, uh integrity, the brand standards were were handled well, and then the yeah I have been in business now with this franchisee over ten years and we've had no problems. Now it doesn't mean we hadn't made mistakes, but we can work together to make them better because they were the right partner. Yeah. You know, one of the things I'm sure you're asked this all the time, and we are too, is a show. It's like, oh, well, what are you gonna how are you gonna change? How you gonna go, how are you gonna what what are the radical things you're gonna do? And it's a common question, it's a good question people often ask. And one thing that I think a lot of people fail to recognize is consistency, especially when you've got a strong brand, is critical, right? It's actually oftentimes better to double down on what you do well. And I know you cited In and Out in our interview. The In and Out was an inspiration for you because they did a very simple thing. They've been doing the same thing

4:16 For whatever, fifty plus years, you know, very minor modifications like the double double, but it's like a menu with three things: hamburger, cheeseburger, double double. Right. You walk into a canes, it's got the one love, it's got the a lemonade and the Soda fountain and it's got a very simple menu. So

4:33 When people say to you, Hey Todd, how are you gonna what are you gonna do next? You gonna introduce tacos, you know, chicken tacos and stuff and you guys gonna do like uh I don't know chicken cheese dip things, what do you say? Yeah, I mean, look, I don't get it as much as I I used to, but uh man, just from starting out and going through Even though our sales were of the highest unit volumes. It was literally us and Chick-fil-A, we blew away everybody, the suggestions still kept coming in. Um, knowing from my core and having, you know, seen restaurants that do very well off that cravable product, you know, and staying true to that. has had so much to do with our success, right? Because the so called experts will tell you too, in the food industry, you're gonna have to change. You're gonna have to add spicy spicy chicken. Right. They're saying, Oh, people are gonna get tired of this and you're gonna have to get a V two vote and you don't have the variety. And then look when when when the success of Nashville hot chicken, like in Dave's chicken, you know, growing all over the country in the world and you know

5:26 know, even bankers be like, Well, you consider a spicy alternative. I'm like, No, we're not considering a spicy alternative because'cause our concept is quality food. Quality, cravable food served with spa fast food, speed, and convenience. You know, for speed, if you add choices and you add people thinking in their head, ah no, you know what, I do want spicier, I do want this, it's gonna add a second or two. Second or two adds up and it adds up to a lot of profitability because as many cars you can get through there on low Low margins and high volumes, what you do. Now let's also think about quality. I have a cook to order process just like in and out burger, right? You walk in and out burger, you see that grills filled with those burger patties and they're selling that product. Now if it's slow during the day, you might actually see them put that raw beef down and start cooking. Same at cages, right? If you're the first one today, you're gonna you're gonna wait your five minutes. But when we pick up volume, we're we're the cooked order is processed. We don't have heat lamps, we're selling that food, it's going out hot and fresh. Right.

6:18 If you added the spicy. Now I got two things to cook. You would start doing what uh the other quick servers do. They start cooking food, holding it in warming bids, and assembling it to orders what they do. So my quality and my speed would go down. So knowing I don't want to be all things to all people. 'Cause if you try to be all things to all people, you're not really gonna serve any of them very well. Uh knowing that and staying disciplined to that.

6:40 Is what's important. I think that's right. I think in an in a world where there's infinite choices, having fewer great choices is actually an advantage. You think of Trader Joe's. You know, they they have f I think three thousand products compared to a Walmart, which has you know, two hundred thousand products in in their grocery. And uh I think people see a Trader Joe's peanut butter and it's like creamy or crunchy. They don't need like fifteen different kinds. They know that the the vetting's been done for them and that's why they're doing sixteen billion in revenue a year. Agreed. You know, I it's a natural human condition to want to keep changing, evolution and growing. It's it's it's just in us. Like if you're doing something really well, it's ooh, what you know would make it even better. I mean, like look, it's just for young entrepreneurs, staying focused is so clutch. It's so key. Knowing what you're good at and doing that and focusing your efforts on that

7:28 It's what will make you successful. So like let me just tell you me specifically is like not having all these different LTOs, limited time offers, right? I've served the same menu for twenty nine years now, almost thirty years. If I had LTOs, which might spike business for a tiny bit, right? Something new at Keynes. My managers would have to like then be putting up point of purchase materials. Getting training everybody on how you cook this one thing during this small period of time and it would wear'em all out. Then my customer service would go down because the crew members are a little bit frustrated. And we wouldn't be doing what we do great every day consistently. by adding different things to that. So we no same menu serve for Thirty years.

8:05 Good cravable food and good customer service. I love that. And it's so counterintuitive today because and we've done brand we've done awesome brands that do drops, okay. But there's it's gimmicky. It's like that's a thing that that marketers and social media people that you gotta do these drops, you gotta be on social media and Instagram show, Hey, this week we're gonna do uh Raising Canes, you know, whatever, chicken rolled and Doritos. But the thing is you're right. It's like that might get you hype for oh a couple of weeks, but it's not It doesn't necessarily Bring in the repeat customers. That's what matters.

8:39 Right. Uh I'd say that kinda be great. Rolling in Doritos, crispy Doritos. Friend, I mean you might if you do that, I want my name on that product, Todd. You won't have to worry about that. Um Anyway, you ready to take some calls? Yeah, it'd be fun. All right, let's bring in our first caller. Welcome to the advice line collar. Tell us uh your name, where you're calling from, and uh a little bit about your business. Hey guy, hey Todd.

9:02 Seven sledge here. I'm uh out here in Toller, Texas. And I'm the owner of Whiskey Morning Coffee. Evan. Yes, sir. Evan, how you doing, man? Doing good. Tell us, yeah, tell us a little bit about the business, just a line. Yeah. So Pretty much. We're a flavored coffee company.

9:19 that uses non traditional ways to flavor. such as bourbon barrels, barbecue smokers. Things like that. I love that. Welcome to the show, Evan. Thanks for calling in. All right. So do you know, uh many years ago we we had Howard Schultz on the show, and then I went out to Seattle to the roastry there with him, and he gave me this is like 10 years ago, he gave me a whiskey flavored Starbucks coffee. It was so good. I still remember it now. So I love this idea. How did you get into this business? So I'll be honest, we grew up like drinking folders in community. So the last thing I love we thought we'd be doing is

9:54 Coffee. Folgers at the church, like through the big uh coffee whatever percolators. Yes, sir. But my granddad, uh he's an old moonshiner, so we have a family distillery. So we grew up making whiskey and bourbon, still do that. And um I to start a business in college at TCU and Said I could get a hold of some bourbon barrels and

10:16 Another kid said he knew how to get a hold of coffee beans and and we just started aging it in our apartments and and roasting it out in the parking lot. So how did a guy like you who grew up on Folger's Crystals or whatever in kind of small town Texas Get into Did you get into were you into coffee? Oh no. We we didn't know nothing about it. We drank it every day. That's for sure. Um

10:38 But yeah, we made our first coffee roasters, got some barbecue pits from tractor supplies and welded up a drum and Definitely just learn by A failure, that's for sure. How did you know that whiskey barrels was gonna make coffee taste delicious? We we didn't. Um We heard from a guy that if they keep the coffee in the barlap too long

11:00 It'll start to taste like Burlap. So that was the only research we had really done. And uh Yeah, we got we had three hundred and twenty bucks as a group from the class and and we bought green beans off of Amazon and and aged it and and luckily people around school bought it. Uh ma how long ago was that?

11:19 That would have been twenty eighteen. Senior year. Wow. Okay. So tell me where tell me where the business is now. Do you guys have a a store? Do you guys have a a shop in are you in Toller, Texas, you said? Yes, sir. So really right now we're mostly online e-commerce. Mm-hmm. I'm direct to consumer. We do a lot of Events and trade shows as well as roast for other coffee. companies or coffee shops now.

11:45 Last year it still Me and three buddies, so there's four of us on the team full time. Last year we did about nine hundred and twenty four thousand, which is wow crazy. That's amazing. So what percentage of your business is roasting and what percentage of your business is is selling beans.

12:01 So we're about sixty percent. direct to consumer from the website. Whether be subscription or just one time purchases. Um, the remaining forty percent, that's either what they consider toll roasting for other people or coffee shops or events. That's a great business. You got a nice diversified business. Okay, before we dive in more, what's your question for us? So my question is

12:24 We seem to be stalk staling at growth and we kinda looked at what we're good at. And it's definitely the customer service small town deal, word of mouth. And what we're starting to do is build these many drive through coffee shops. In small towns that You know, your seven Brewing Dutch brothers aren't going to. You haven't done this yet. This is your idea. We're building out our first one right now that'll open in March.

12:49 In Toller, Texas. In Grand Barry, which is Same town pretty much. Okay, I I'm looking at the map, I see it. So you guys are like an hour or half hour out of Fort Worth? Yeah, so the it's gonna be different'cause you know For us to build our stand, it's gonna cost about a hundred and fifty grand. For all the equipment and buildings.

13:07 gonna be ran by one to two people. And we're trying to figure out. As we start to grow. Is there an advantage to franchising and partnering with other Influence on people in these small towns.

13:20 Or should we Look to grow kind of As our own. It grows slowly. Oh man, you've come to the right place with Todd Graves. Todd, I wanna bring you in. Do you have any questions for Evan or thoughts? Yeah, Evan, so when you just said a hundred and fifty thousand, that is um

13:36 That's all in. That's building, um equipment, everything you need to open up. Yes, sir, besides the the land. Got it. And so you maybe your ground lease in the land? Yeah, sir. The first one we're uh we purchased it. Okay. So we're gonna own that. And you're building a facility. You're actually building a drive through location.

13:56 Yeah, sir. They're kinda like these modular buildings you're seeing popped up. But um A lot smaller scale. So it's gonna be about Sixteen by twenty. Okay. Okay.

14:08 And it drive through only. And espresso drinks too, or just like r like more like uh Dutch Brothers. So it's gonna be espresso drinks. And it's gonna be Tex Mex, so the only food is gonna be tamales. Oh.

14:22 Okay, food too. All right, all right. Something different. So actually kinda kinda it's kinda funky. I kinda like it. It's just our espresso drinks and some tamales. Um For you, what are you estimating your sales will be at? This first first unit. So at the location

14:36 We're hoping to do about I think we're gonna try our Get about fifteen hundred to two thousand. Dollars a day. Mm-hmm. In revenue.

14:44 And we're basing that off of other coffee shops that we supply beans for in in similar locations. That seems a little high to me, Todd. It it it is. That's w but he've he's basing it off of other drive through sales with other coffee shops they're selling to. It sounds like there are a lot of coffee drinkers in your part of Texas, man. Yes, sir.

15:05 They do early in the morning. And then throughout the day, and are you basing your sales off the tamale sales too, or no? Yes, sir. We sell tamales at the distillery. So that's kind of taking information from ourselves at the distillery and And Christmas orders, things like that. Well look it sounds high to me too, guy, but I think you know, look a a normal Starbucks would be doing a lot higher than that every every day, uh Dutch Brothers, et cetera. So

15:29 I think that could be achievable. And then do you on just real quick on your margins, last thing I'll ask you, do you have, you know, financial projections and what your cost of goods sold margins will be and what you think you'll make on the bottom line. So I don't have all of that figured out. I've got um The coffee market's kinda crazy right now. So uh Oh yeah. So that part's changing every day. Yeah, it'd be good to do some financial projections, right? And you can get those models just looking just Google it. But I would look at that and your your labor, your things like that just before opening, because you'll know what where you're tight about and where you need to what you need to work on.

16:01 To be profitable because that's the first thing you have to do is man, you got a cash flow because the quickest thing out there, if you bought bought this property, you got$150,000 in that. I don't know if you're paying cash or you're financing that, but you're gonna have payroll, you're gonna have vendors to pay, you're gonna have all those things, and those payments don't stop, right? So being profitable out of the right out of the gates is very, very important. I made thirty bucks my first month. month. Um which was pretty funny, right? But but but what that meant is I could pay everybody. And I wasn't going further in the in the in the hole. So And then God, I don't know if you want to answer the the franchising question on this perspective about it. I have some thoughts, but I I no, I'd love to hear what your thoughts on it. I mean you're you've done this. Yeah, I mean Evan, look I it's there's different ways to grow your business, right? And you know, the first way to grow it is at your mother's ship, which I call the first raising canes, right? You're opening your mother's ship. And learning the business inside and out while you do that. That will be your plan. And then if it's something that's profitable, can be replicated, then you got look at growth. And you can grow, you know, three different models. You could grow all company restaurants, you could grow all franchise restaurants, or you could do a mix of both.

17:04 Now I wanted to do a mix of both when I started. So I liked running my restaurants. I felt like I could run my restaurants very well. I like hiring people, bringing them to have new jobs. I like teaching them how to how to become managers and lead and earn people's money. It's it's it's it's a calling for me. And then I I when I'm doing that, I wanted to grow quicker. And I couldn't grow quicker uh without using franchisees in my mind because one, I couldn't have that much access to capital. There's only a certain amount of money I could borrow from the banks. These franchisees had their own money to grow. And it wasn't for me about being debt averse. I I I'm not. I would take all the debt on I could. I just didn't have the capacity. So franchisees serve they could grow. And the second thing was I thought that the franchisees got picked really good restaurant people. that they would actually be better in their community. being, you know, right down the road of all the restaurants than I would.

17:55 And so I went that route and I had exceptional franchisees. And we grew company restaurants as quickly as we could, you know, as much money as we can get lent and But over time I saw that The franchisees didn't run their restaurants. as good as I did. Okay. And so we'll say a hundred point scale. If we're running our restaurants in a ninety five, which is like just

18:16 You gotta care so much to do that. Right ninety five. Our franchisees were about at eighty five. Which is exceptional in the franchise world because most of them in quick service food run at about a sixty five seventy. Wow. And so we should be very thrilled about our our, you know, about our franchise partners and I appreciated them because they did care. But that eighty-five to ninety-five just drove me crazy, man. I mean, like it was just like, oh, if you just do this, your customer service would get better. Or if you just did this, the quality would get better. Now, an advantage about company is you can control that. Second thing that I thought was inefficient about franchising is We've we needed to change something that we were doing, right? Like here's a better operational procedure. There was so much time you had to talk into these franchisees because it's their business and they're like, Well, we don't agree with that. We think it should be this, and but that wasted time to me that when, you know. We have company restaurants, we can roll something out. Three months later, it's adopted and we roll the efficiency goes away. So that's there. Another advantage of having your own restaurants, company restaurants is that your valuations are way higher, right? So your sales, your profitability, your IBITA that goes through as you grow company restaurants.

19:21 just the company's worth so much more, man, because if you think about it, if you were taking a franchise system, and we'll say you were charging them six percent of sales, right? But that's what you're making, then you have your G and A that's going to the constant support systems, branding, processes, et cetera, et cetera, you're you're just not gonna be worth nearly as much. So I w if I were you, if you I would think about some things and questions about In my debt adverse, because if you are company restaurant model is not gonna be a great model for you to grow because you're gonna grow and you're gonna need to take on more debt and grow. You can do the other franchisees. How how much is this a baby? And you'll see that in that first year you're opening this your mother's ship down the road. If this is something where you're just like, you don't even leave your shift if things aren't right, even though you had a great date plan that night. You're not gonna feel good with franchisees don't might have that same type of passion as as your so I just would figure out is if there's no good or bad to it. It's just a personality thing and really see where you're at. I totally agree. And I would I would say in in your case, uh again, Evan, it's not

20:17 I don't know if you can make that decision now. You have to first prove the model. Right. You've got to take that store one and just instrumental like crazy. It's just everything is data in that store. And once you figure out how to make that work, then you open two or three more stores. And you write everything down because to make it successful as a franchise model it has to be

20:40 You've got to have repeatable unit economics. You got a training system. There's got to be a brand voice. You got to have quality control. You've got to have a solid menu. Операціонал сидів, all of these things. If and only if it works after three to five. corporate owned stores, then you can start thinking about whether It makes sense. So I think it's a a multi step process and step one is you've got this great laboratory now in Granbury, and then you can answer the question if and when

21:08 you get to a a point where it does tick all these boxes. Does that make sense? Yes, sir. That makes total sense. Uh I think both y'all just hit it right on the head'cause like what you were saying, Todd, with the The baby part in ninety five and eighty five. We we we run everything at a hundred and five miles an hour and if it falls short, that's cool, but as long as you're all out.

21:31 And I think the franchise model, like you said. People aren't gonna do that and And that would probably frustrate us and This really helped a lot and I appreciate it. Awesome. The brand is called Whiskey Morning Coffee Evan Sledge. Thanks for calling in, man. Congrats. Good luck.

21:46 Thank you, guys. Good luck, Evan. Yes, sir. Uh that's awesome. I have been I've done some work with a a huge quick service restaurant a couple years ago and uh I went to their annual convention and

21:59 Man, the franchisees, they have the power. It's not corporate. You got a guy who's got uh two hundred franchise locations of this quick service restaurant. Like he's the guy that everybody's got to talk to, not the CEO of the company. That is right. W which just the way it should be. Yeah. But of course, it can be of like Dave's hot chicken is an example. They went franchise right away. And that's that's one of the ways they scaled so quickly. And it it worked out for them, right? I mean eventually they sold the business. But That was a model that worked for them.

22:26 It is, right? And they wanted to expand rapidly. They want to do it with people that had other concepts and knew how to do it and roll through it. And then and ultimately, but you just you nailed it in the head right there. The ultimate thing is they sold a business, right? So what's the quickest to get to scale to sell, right? And so for me is I'm not selling the business. I love the business. I want it to be generational business. And to keep rolling and the best way to have something I'd be proud of for me personally was to own company restaurants. We're gonna take a quick break, but when we come back, another collar, another question, and another round of advice. I'm Guy Ross, stick around, you're listening to the advice line on how I built this. Welcome back to the advice line on how I built this lab. I'm Guy Roz. My guest today is the legendary Todd Graves, founder of Raising Canes, and we're taking your calls Todd, uh you ready for the next call?

23:31 Yeah, let's go. All right, let's bring our next caller. Welcome to the advice line. Tell us your name, where you're calling from, and just a line or two about your business, please. Thank you. I'm David Burmeister, calling from Saint Louis. I have Midwest Pasta Company. And I manufacture fresh pasta and frozen pasta for restaurants and grocery stores and farmers markets and the like.

23:49 Awesome. Welcome to the show, David. I just went to a delicious restaurant in Nashville and has fresh pasta. So there are restaurants that will sell fresh pasta, but you guys basically are the white label. You make you make it for them. Right. I make fresh pasta for about eighty different restaurants, about a hundred and thirty different grocery stores. uh food distribution, hotels, farmers markets. So w with the exception of the farmers' markets, you're B to B basically. Yes.

24:12 Tell me a little bit about how you got into this business. Have you been in food your whole career? Yeah, yeah. Well, I I grew up in restaurants and uh when I was twenty five uh had a thousand dollars an idea and uh me and some friends bought a restaurant in South St. Louis and had a small pasta making component. Uh fast forward ten years. I had a four year old. And at that point it went from being forty seats to a hundred and twenty seats, three o'clock bar. Wow.

24:36 And so we sold the restaurant and I took the pasta component with me. And then I had some help along the way, and it's been about thirteen years since then. And give me a sense of of what you guys are doing in terms of sales a year. Sure. gonna be pushing eight hundred grand this year. I hope to be pushing a million by the end of next year. And how big is your facility?

24:54 Three thousand square feet. Okay, awesome. All right, before we dive in further, tell us your question. Sure. So scaling up Is something that I'm about ready to do. And I don't have access to traditional capital streams. So I'm trying to figure out how do I finance and how do I get access to capital without sacrificing my equity. Okay, before we answer the question, tell us why you don't have access to traditional finance. Sure. Well part of the sale of the restaurant had to do with some tax liability and uh default on an SBA loan. Uhhuh. So I've been blacklisted by the SBA. And um I had to take a personal bankruptcy in that transaction. So I don't have

25:29 Bad credit, but I don't have any credit. Right. So you can't get a traditional loan because of this. Listen, restaurant restaurants tough business, even as it keeps growing and margins are small. Got it. Okay. So I want to bring in Todd Graves. Todd pasta business. 95% of his business is is to food services, restaurants. He's looking to expand.

25:51 Thoughts, questions, concerns? Yeah, uh so uh David, sounds like you're doing pretty good, my man. I mean uh something to be really proud of. Eight hundred thousand in sales right now, and you're saying by the end of uh next year you're looking to do one million. That's twenty percent growth right there. that you're just doing organically right now is fantastic. Um especially at three thousand square foot. Can I ask you, what what when you say you want to expand, uh, what does that mean? What is I mean, what is the how much cap you need to to do that growth plan? I've got two different plans. The initial plan is about one point four million. Uh the further plan is more like five and a half. what that would do is gain me capacity. So freezer space, for instance, is something that is a premium

26:32 I could uh expand my capacity, I could expand my offerings. I can improve equipment. The industry is very equipment reliant. Uh most of my gear has been on for years. I've been rebuilding and repairing, but a lot of my expenses are caught up in keeping that equipment going. and producing. So new equipment. better facilities and also more marketing.

26:53 I could hire someone to handle more front end things. My focus is on the creation and the production and the quality of the product. And managing my team. not as much focus as I could have on outward sales, internet presence. these kinds of front of the house tasks. Quick question for you. Outstrip your capacity?

27:14 There is more demand than I have the ability to touch. I I've actually been approached by national players asking to do copacking. Wow. And I just couldn't I I just don't have the capacity to hold what they wanted. They were talking about twenty thousand pounds a week. Uh which with a larger facility that's n you know, big players in this c in this industry that's nothing. But for me that's uh more than I could take.

27:35 So for the one point four million or the five and a half million, I mean, just right off the bat, my my gut says go the lower amount. Yeah. Um because of the exposure, right? Get good traction and roll. So and David, if you run through those numbers, one point five five four million gets me X amount of more freezer space, this equipment, and that's gonna relate to X amount of sales, which means bottom line, I make this so you can measure that return. You've done that. Yes. Great.

28:00 Your challenge is is that you can't get conventional financing. Which would be ideal, obviously, right. Uh right now you've got a proven business model and you need to go get um, you know Equity types of investments, but you don't want to give up equity. Yeah. That that's what I did with the restaurant.

28:18 And uh I ended up with a small slice of big pie where currently I have my own my h very own whole small pie. Yeah, so there's you know, there's lots of different ways to finance a business. It depends on um what your your appetite for debt is, right? What your appetite is for how much equity you want to sell. And you obviously it's already non negotiable for you. You don't want to lose controlling interest of the business, which I highly recommend. This is your baby, you started it, you're making a success. It now there's other ways that you can do things. Um there's, you know, angel investor uh networks and these are the people that you know, love your pasta. They're very passionate about this. And they're people that have enough money

28:58 put a way that they can do investments to be a part of something, right? Be a part of something special. And these are generally more favorable. That's why I call them angels, right? And so I got angel investors uh to help me as I grew the business because I did not want to give up equity. I didn't want to give up control. I didn't even want having other equity shareholders just to have that in my head, am I doing a good job for them? Cause it took me off my focus of what I knew was the right thing to do for our business. And so generally these higher interest rate things, so what I had was angel investors that I would do a 15% interest rate subordinated debt. Okay, it was a one pager, and I personally endorse these. I mean, if I personally signed on to it, so they knew anything I had in the world, which is all just tied up to business anyway back then.

29:41 that I was gonna be a hundred percent into this. And but there was no equity being done. But it was a 15% interest rate, but my cash flow could pay for that. So that's why I was asking you about that you run your numbers on that million four and you feel real solid for that. I was able to do a higher interest rate, but they were a part of it. I made them feel a part of the business. They got Kane's gear all the time. They came to restaurant openings and you know, their family was thrilled and we went and we I put together photo albums of look, look how look how great this Homa, Louisiana new restaurant is and how much the community loves it. And then they made a fifteen percent return, which actually was really good, but as soon as I could pay that thing off, I did. And that wasn't convertible debt. It was just a straight up loan. Straight up loan. And look at banking back then was a lot the you know more lenient. I could actually take that subordinated debt and actually use that as equity to get get loans, traditional loans, but you know, for a for a million four, if you had

30:33 five to ten angel investors you know that really wanna be a part of this, and everybody could break off, you know, put in a hundred thousand dollars. Put in two hundred thousand dollars, there's plenty of people in St. Louis that do have that kind of money, but subordinated debt. They have no no voting rights, no anything. They're just like, Hey look here's this. I hope you can pay me back my interest rate and do that. It's an idea. Yeah. You know, I'd look at anything from a ten percent to a Up to a twenty percent type of like like that, up to m mezzanine type blenders, that's a route you could go. Right. Yeah.

31:02 Uh, there are a couple of options for you. So as Todd mentioned. They're gonna be local angel investors who are focused entirely on St. Louis makers. And you can find'em on LinkedIn, you but they may have Facebook groups. A little sleuthing on the internet, you'll find those groups if you don't already know where they are. There are probably even some agricultural or food production grants available in the state of Missouri, I bet.

31:25 Uh these are you know ways to support businesses in the state that employ people in the state. And there are probably even some food investment groups in so those are all really interesting paths where you can do a Todd did with loans, or you could basically give away some equity, or you could take some convertible debt. The other option the other idea, which I I I don't know if you've explored, is you mentioned some of these big producers in uh on the coast wanna do coping with you. Have you explored

31:51 s come some kind of strategic financing from them, where they basically they do a minimum volume contract or or you know, or like they commit to a certain amount every month and they prepay it. Or you do a uh some kind of joint venture with them for just one line, right? So they don't own your company, but they co own one Like production line. Or even financing some of the equipment through those equipment manufacturers or they're even equipment lenders. So I think that there are a couple of interesting options for you.

32:21 That don't necessarily rely on traditional financing. Well yeah, absolutely. I I and actually one of the companies that I was uh talking to is owned by a private equity firm. When I did a little digging. Although I have a sense that I'm too small to even sit at that table.

32:37 I know that venture capital when I looked into that, it was way higher. Floor. for that kind of a transaction way higher than anywhere close to where I'm at. You're too small for that. But you're not too small for Especially for passionate, committed local I mean, Todd, Baton Rouge ha has groups of people who are committed to investing in Baton Rouge, right? I mean you are probably one of those people today. That's right. They want to see St. Louis uh exceed. You know, they want to see him do better. And so the community people will invest. I love it, guy. You said there's plenty of government resources to go into looking at what are grants, what are any of those things going on that you're creating jobs and doing well. You're a proven hardworking person. Right. And equipment leasing companies, since you have a successful company, look, it's gonna be higher interest than if you went in and

33:18 you know, you finance it tradition traditionally, but that's how restaurateurs like us grow, man. You can go in and get it'll be a higher interest rate, but the equipment lending is is another really big one. I love the idea of talking to uh these companies that want you to come in and do all this pasta for them is just saying look here's where I'm at. You know, you're just gonna be on you're an honest guy, so you're gonna tell here's where I'm at. I can do this, but I need this. Right. And would you be interested in helping me do that? These are all just creative ways to where you don't have to give up equity. That's right. There's a lot of creativity that you can build into those conversations. Yeah, great. I don't think you've got a capital problem. I actually think it's more of a an opportunity for you to identify those places where you can get the cash from and it may it may work out ultimately in your favor. Right.

34:00 Right. I agree. And look at the rest of the restaurants you currently sell to now, I'm sure they're thrilled with your product. I'm sure they love you because you give them good product. That those are those are those angel investors. You know, they're doing well and just saying, Hey, look, I just I want to grow. I'd like you to make a good return. Are you interested in this? I'm asking for smaller increments. I'm putting together a group of this many people and Look, they start talking, they know each other, they start talking, hey, this is exciting. This is you know, have'em come out to your plant and look, this is what I'm gonna do, and they feel a part of something. And you can do good for Saint Louis, I think those restaurant uh owners you're selling to right now are are a are a good place to go look. Hundred percent agree, yeah. David Burmeister, Midwest Pasta Company, thanks for calling and good luck. Thank you.

34:40 Well I it's interesting because a lot of people think that once you default or something like you're you're finished. But it's actually There are all kinds of ways to fight. It's not easy. No there's no question about it, but there are all kinds of ways to find to find that cash. Absolutely.

34:58 Stay with us because after the break, we'll talk to another founder working to take their business to the next level. That's after the break. I'm Guy Raz and you're listening to the advice line right here on how I built this. Welcome back to the advice line on how I built this lab. I'm Guy Raz and today I'm taking calls with Todd Graves of Raising Canes and let's bring in our next caller. Yeah, I'm ready. This is fun. Hi Todd and hi guy, I'm Shane Lyons, uh longtime listener, first time caller. Awesome. I'm the co-founder of Vestie in Los Angeles, California. Uh we specialize in delivering chef crafted snacks and signature sandwiches made on homemade faccia to retail partners. Offices and corporate campuses and direct to consumers via web orders all over LA and Orange County. Awesome. Vesty. So you make sandwich Faccia bread sandwiches. You're in LA.

36:06 Tell me a little bit about where you're uh like who where are you selling your stuff. Sure. So uh we've been on quite the journey, my partners and I, uh we're just about three years in. And we have forty five retail partners that we work with. So Alfred Coffee being of one of our most notable. They've got I believe twenty two locations in Los Angeles and we service eighteen of them with sandwiches as well as gourmet grocers.

36:30 And other coffee shops. So you make the sandwiches like a central kitchen and deliver them fresh every day to these different places? That's right. Yeah. We call it like a chef driven factory model. Because we're all chefs, my partners and I, um long time fine dining Boys and girls, and we love great food. We also wanted to make a really scalable, profitable business, so we're trying to find the balance of the two and we landed on sandwiches. And the sandwiches we design actually, believe it or not, get better as they sit because of how we've designed them. Um, they're low moisture.

36:59 relatively high fat due to the nice olive oil that we use. And so they have a shelf life up to we say three days, but in actuality it's four days where you really see almost no degradation in the product. And just really quick, what uh w uh you guys are profitable and what's roughly what are your sales? Sure, yeah, we had our first months of profit in June and July. Uh, we are targeting just under a million in sales this year. Nice. And you mentioned you were uh you were a fine dining chef. Tell me a little bit about your background and why did you l I can un I can imagine why you left that world, but why'd you leave that world? Sure.

37:34 I've actually had dual careers my whole life. Um when I was a kid, I was a kid actor. on Nickelodeon and Disney for many years and uh then that train stopped and at sixteen I went to culinary school. I went to the CIA Culinary Institute of America My mom's also a graduate from there, so sort of in the blood. And then I worked with some really fantastic chefs.

37:56 David Cheng and Daniel Blood. And then I had the opportunity to open up a restaurant in New York City with my cousin Nicki Hini. and legendary restaurant tour Drew Niapon. We did that for about eight years and eventually sold the lease to other restaurant tours. So after that I was I was sort of beat on uh you know done with restaurants. I was working six, seven days a week.

38:17 Back to back. lunch, dinner into brunch, all that sort of good stuff that chefs do and I was burnt out. And then found myself working in film and TV again. And during Covid. And like many people during Covid, you know, I was going one direction.

38:31 then I was given a COVID uh diagnosis I was supposed to actually star in a TV show and they recast. immediately. Wow. And so I had to regroup and I really spent a lot of time thinking about the background of being a chef and as well as an actor and the things I liked and the things I didn't like from the cultures that I was in. And I was just dedicated to doing something with my friends. So it sounds like you got your weekends back, basically. I do have my weekends, and I've I've seen what a Friday night not at a restaurant looks like, and it's really nice. Tell us what your question is before we dive in a little more. So our question relates to brick and mortar. Um, you know, should we invest in a brick and mortar and if so, when

39:06 Yeah, it comes up often in conversation. We have internal debates about it. We have some active investor interests and then constant guest inquiries. Um, you know, and our model right now as a chef driven factory allows us to excel at high volume, high quality food production. But it's not currently set up for on demand single sandwich orders, which, as you can imagine, leaves Some of our guests really frustrated and potentially turned off from the brand entirely. But given that our model's low fixed costs and high margins, what are the compelling reasons that we should be exploring in investing in a traditional bricks and sticks location? Okay, great.

39:40 Todd, I wanna bring you in former Michelin star chefs and Making Faccia bread sandwiches. To offices and coffee shops. But

39:50 They're thinking about opening a brick and mortar. Mm-hmm. Uh Shane, I'll give you a few things just from my experience. Um What happens is when you start to have success, you have other influences that come in and saying, Hey, you're doing great doing this, but you know what? Maybe you should go do this. And that's where I think this brick and mortar is coming because people are like, Your products are incredible. Then why don't you go do this? And

40:12 What's worked in my, you know, my passion, my career doing raising canes. It's been being staying focused, right? Focused on I know what I'm good at. I know what I can do to successfully make money, which you have to continue to make money. So for me, the whole thought of uh brick and mortar, and I'm not saying it's a bad one, but it's a uh as you know, it's a completely different business. You know, you're still selling your product, but now Now you're the one doing, you know, the all the front of house, back of house with people. You're taking on substantial debt doing that.

40:43 And to me, it's a distraction away from building your current. business that's doing very well. You can take that forty five retail partners and you can make a goal to say we want ninety retail partners and this is how we're gonna go out and do this and double your sales. So my advice would be go for the goals to you, keep doing great what you're doing right now. Focus on that, make it better. And I would table that brick and mortar. thought until after you get that next goal. Let's say it's 90 retail partners. Say, hey, do we really want to do that now and change our focus right now? Because this little guy Todd Graves and Baton Rouge of Louisiana had a chicken finger dream and stuck with it.

41:18 And now I got a thousand brick and mortars and we're playing on the next thousand, you know what I mean? But if I try to get into retail line, you know, the grocery stores want canes frozen in the in the in the grocery stores. Retail, they want our sauce bottle. They want all these different lines. And if I look at all those different product lines, it's gonna take my focus away from doing what I'm really good at. Yeah, I you know, it's so interesting. I've a couple of questions for you, Shane. I mean the first is Do you guys do pop ups? It's funny you should say that. I'm actually suited up because right now we're working at the Miden market in Los Angeles. It's a really cool hybrid concept, which we kinda consider an asset like brick and mortar. Basically we have a six week lease.

41:54 So for us, you know, we exactly what you're describing, Todd, it's back. You know, we're there every day. I'm there from nine AM to you know, eleven, twelve o'clock at night. And it's full on six days a week. And it's reminded me of you know that I really like my core business. Um, as much fun as it is to interact with guests, we're in hospitality for a reason. We love people, we love to make them feel great. We love delivering on the promise of providing a fantasy, which I think is what restaurants are ultimately there for, is to provide fantasy to some degree and fulfill on that promise. So it's been really nice to kinda be in a restaurant for the the w this period, but then we'll be exiting. Yeah, I mean I to me that's a brand building exercise, which is important because it it A lot of chefs go into catering. It's just more efficient, it's more profitable, better margins. And by doing these pop ups, right, you're exposing more and more consumers to what you offer. And really it's the lunchtime's you know, it's a five hundred sandwiches or two hundred sandwiches for the lunchtime

42:49 you know, offices that's really gonna be your bread and butter. What what's interesting to me about Brick and mortar is That And I I totally agree with Todd. It's like, do you want to get back into that restaurant lifestyle that you walked away from? I think there's a kind of a happy meet middle there, which is Is there a world where down the road, it may not happen right away, you basically open up a commissary kitchen that is a like an embassy, right? Like almost like a brand embassy, where you you might have a little counter where you can go in, a little bit of a brick and mortar, where you do offer maybe a window, but really it's just about putting your brand out there and

43:24 just building more awareness, but also having a kitchen, your own kitchen where you're making the product. I think that's right. Uh makes total sense. Uh and we've talked around ideas like that and we really love the hub and spoke model. We've kind of reverse engineered it a lot of restaurants uh move into catering because they're a la carte sales. or lagging and instead we've started exclusively catering and now there's demand for all the carts. So trying to find that hybridization of the two is is really what we're looking at now. And we do know that we would like to expand across at least North America

43:55 And there's the internal conversation of well, can you have a brand that can leave LA uh and go somewhere else and not have a brick and mortar presence? Is it even possible? And I we don't know. As far as expanding, right? Now you'll have some aspiring goals. It's a dream, you know, you want to expand across the country. When using retail partners They need good products, right? And and I like what guys saying on some of your product having its own brand. It's a pop up in the new area, right? You set up that hub and smoke model. You're gonna set up your commissary there and do it great. Some pop ups where people go, Man, that's the best Facatia sandwich I've ever had. Using influencers to where people know it's your brand, but but I don't think you need to have the brick and mortar. You also run the risk

44:34 of that brick and mortar not hitting the way you wanted it to hit. And the retail partners are like, hey, you know what, you didn't you weren't that successful in your brick and mortar. I don't want to get your product. You have something that's working very well right now. And I would focus you and your team all that energy on that and growing that side of your business. Yeah. Yeah, we we've been sort of like a uh slow growing indie band in LA, but the word's getting out and like it we can see the the opportunities are sort of everywhere now, and I'm very afraid of the shiny objects. I've been around enough to say most of them are a distraction. Um and so it's h it's a little challenging to navigate all the different feedback. And we have

45:12 three lines of CPG goods. I've never had anything on a shelf before. But I'm learning that I really like selling potato chips and I love the margins on them and people really love our potato chips. So I guess it's this is really helpful and what I'm hearing is is stay focused and uh go back to the core product, which is making sure that taste, texture, and temperature on all the things that we create are deliver on that promise. 'Cause that's what we can control. Yeah, Todd, they do a muffaletta. Oh they're doing a New Orleans sandwich. Man, that's not easy to do that right.

45:41 Oh, we'll take the Pepsi challenge, Todd. We'll take the challenge. I can't wait to try it. Awesome. Uh Shane Lyons, a brand is called Vesty Sandwiches and Snacks in LA. Congrats, good luck, man. Thanks, guys. Good luck, Shay. Such a pleasure. Thank you. Yeah, it's I mean it's it's interesting because d do you guys I mean, do you do uh is catering a significant

46:01 business for you. I mean you've your your stores are so packed, so I don't know. Yeah, it's it it's really not, you know, it's it could be up to like maybe three percent of total sales, right? So we we actually even looked at like when we could different times and experimented like going out and taking catering to places and it didn't to have the extra manpower to go get that done didn't make sense. So now we just make it easily packageable. You can pick up the restaurant and but for us it's just like stay at our model because if you're going after three percent and putting muscle behind that, you're losing focus, you're distracting. Just like with Shane Like him, like we said that too, he said something interesting. He's like, then I can make the great potato chips to go with that. That's still in that same vein. That's a great add on. Your margin's even better on potato chips, but you start doing two different businesses, which it is in that deal. He loses focus, he screws up something that's really working well right now. It is it happens to all success, right? It's you're doing great, but But you can also do this, and when you lose the focus, you mess up with y what really is your Your concept. At the end of the day, I call it God, Faith, whatever Buddha divine intervention. It's gonna what's supposed to happen is gonna happen. I think about Stacey's Pita Chips. It started out as a pita rep sandwich place, but people wanted the pita chips and then it turned into a different business. And y you never know.

47:09 Potato chips that might become the business. You're right, man. It's cool. Todd, uh before I let you go, quick question for you. If you go back to the guy that was the work at the oil refinery on the ship and starting the first canes, right, in down the street from Louisiana State, um What advice would you have given him that would have been helpful?

47:27 You know, I think number one would be concentrate. Moral progress rather than perfection. And uh, you know, entrepreneurs, when you start something, it's your baby, right? You just everything's into it. It is it's it's about an expression of yourself. And so I want everything to be perfect, right? So we'd be starting a new training program, but I wouldn't release it because it wasn't perfect yet. Well give me a couple more weeks. You're like, Todd, we we need this program. Two more weeks, I'll get it right.

47:53 I missed out on a lot of progress just trying to make it perfect. And then some Older mentors they taught me, look, Todd, nothing's ever gonna be perfect. And you progress is way more important than perfection. So get that training program out, but it's version one. And you can get to your version hundred that you're gonna do and get better.

48:12 I still use that today. you know, here thirty years into the business because I will literally want something to be so perfect and but a new marketing campaign, a new thing is, and then I'm like, I can't stop. progression in our business. Progress, progress, progress. Yeah. That's right. Todd, thanks so much for coming back on the show, man. Really great having you.

48:30 Thanks for having me on. That's Todd Graves, founder of Raising Cains, and by the way, if you haven't heard that episode, it's so good. I swear to God. If you don't like it, send me a letter, I'll send you a dollar. And if you do like it, you can send me a dollar. Go back, check it out. It's just so good. We're gonna put a link uh to it in the show notes, and here's one of my favorite moments from that episode. You know, back then we thought you could actually This is being naive. You could actually go to a bank, bring a business plan, and they'd lend you money. Here's my plan. I need uh a hundred thousand dollars.

49:00 Yeah, and I thought they'd give it to you. Isn't this a great plan? Isn't this a great idea? And and so did you do that? Yeah, yeah, yeah. Like we bought a couple of cheap suits and um And went to Office Depot and bought boxy briefcases with the brass combination locks. You remember those? Yep.

49:16 Yep. We went and we went and saw every bank in town. I had a briefcase, Craig had a briefcase, and sitting across from in our chairs and we would open the brass combination lock. Like somebody was gonna steal our chicken finger business plan.

49:32 Hey, thanks so much for listening to the show this week. And by the way, please make sure to check out my newsletter. You can sign up for it for free at guyroz.com or on Substack. And of course, if you are working on a business and you'd like to be on this show, send us a one minute message that tells us a little bit about your business and the questions or issues that you're currently facing, because we would love to try and help you solve them. You can send us a voice memo at hib at id.wondery dot com. Or call us at 1-800-433-1298.

50:06 Leave a message there and make sure to tell us how to reach you and we'll put all of this information in the podcast description as well. This episode was produced by Alex Chung with music composed by Ramteen Arablui. It was edited by Andrea Bruce, our audio engineer was Jimmy Keeley. Our production staff also includes Chris Massini, JC Howard, Casey Herman, Sam Paulson, Carrie Thompson, Katherine Seifert, Ramel Wood, Neva Grant, and Elaine Coates. I'm Guy Roz and you've been listening to the advice line. right here on how I built this lab.

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