Edge of your Seat!

Yeah I know you are all on the edge of your seat, just waiting for me to finish my story....well good! I'm going to keep it that way for a little bit longer and drag it out a little bit. So things are really going well at Pesto. We are really refining our system and getting the numbers where they should be. Now you can control a restaurant into profitability, to a point. At some point you can't make any more expense, labor, or food cuts. I think we are getting really close to that point. There is probably another 5% or so that we can shave out of our operations and send to the bottom line. But I have a feeling once we accomplish that, there is not going to be much more room for cost cutting. So we have been making money! Pretty incredible for a startup restaurant, that did no advertising until a month and a half after we opened. I'm not going to lie though, we did have some publicity that helped, but an article here and an article there isn't going to do it. It takes frequency and exposure. One coupon run one time isn't going to do anything...well unless it's for like a free gallon of gelato!

But what it's coming down to is that we are honing this restaurant into a money making machine. Our sales aren't quite where we want them to be yet. Which has been a very good thing b/c it has magnified what cost cuts we needed to make. Once we get out of the winter doldrums this place should be a living breathing thing. But for being in the dead of winter, we are doing damn good! Better than I would expect! I just can't wait for the spring time and to roll out some of our PR stunts. Stay tuned...

The Story continued...

So we did another catering event today...and it went much better! Our last event was, well, less than perfect. This one on the other hand went extremely well and I think we are just about there with figuring out how we are going to pull off the catering. I think we may forgo catering pizzas, b/c our pizzas are one size, 10'', and in order to achieve the quality that I want we would need to cook each pizza individually. So we may just stick with pastas, salads, and sandwiches for now...you can get pizzas anywhere, and on campus there are a million pizza places anyway. I want to give Olive Garden a run for there money when it comes to catering. When I was a Resident Advisor at OSU we would always get our pastas and salads from Olive Garden, not anymore! Plus we did a gallon of gelato tonight as well, and of course everyone loved it! But the catering could drive a substantial amount of our sales, a couple extra hundred bucks a day adds up quickly!

But back to my story now...So they said YES!! Yeah I'm not going to beat around the bush, they wanted to move forward with the leasing talks. Now all that meant was that I got to sign a letter of intent to lease a space. All the letter of intent did was create standard terms for the lease to be negotiated around and it in no way bound either party to any deal. So basically I was now officially not guaranteed a space, anyone could have come along with a better idea or bigger wallet and get the space. It was just a way of saying yes I want to go ahead and start negotiating the lease. This whole letter of intent concept made me very nervous b/c you never knew if someone better was going to come along and take your space. I remember being on edge most of the time during this whole negotiation phase. But my partners were confident that everything was going to work and that we just needed to keep moving forward.

Well the space we were offered was 2236 sq. ft. on 11th ave. In hindsight, which of course is 20/20, I would have gone for a different space. At the time I was just happy to get into Gateway and I let emotions get in the way of subjectivity. Don't get me wrong, the location is phenomenal, I think we would have gotten more exposure if we were on High St. But oh well that's life. I love where we're at, we're right in the middle of everything and essentially on the corner. I just need to do some marketing to let people know where we're at!

So the space was in the works, but there was just one tiny detail that I needed to figure out...where was I going to get the money to build this thing??

Key Note

Ron was in town last week and whenever he is in town I never seem to have time to make an entry, yeah Ron, it's your fault! His visit, has really paid off. It amazed me how many places he was able to see where we could make cost cuts, and therefore make more money! What ceases to amaze me is how razor thin the profit margins are. The difference between making money and not making money comes almost down to labor and food costs. Now once volume peaks out these things tend to not to be so much of an issue, but when volume is a little lower these things are magnified. Which really is a blessing in disguise...of course there is a silver lining to every cloud! Don't get me wrong we are doing some strong numbers, but I know we can do more. But with lower volumes we can really see what is driving our costs and we can really focus on how we can cut those costs. And that is exactly what we're doing. We are looking at many different costs and how we can lower them or eliminate them. Had our sales been say twice as high many of these things would be unnoticable. But this is allowing us to cut down costs to the most lean and efficient model possible. It may sound like we are slow but we are on pace to do around $1 million this year in sales...ideally I want to be pushing $1.3 or 1.4 million, so that's why I'm saying we're slow. So not bad for a restaurant that has not done any marketing!

Last week was also my birthday! I turned 23! We went out to Smith and Wollensky's for my big day and had the seafood tower! It was amazing! But other than that it wasn't too exciting. But I did finish out the week by being the key note speaker for the Alpha Kappa Psi business fraternity. I ended up speaking to around 100 people. We also catered the event, which went a little less than perfect, but it was our first attempt at large orders. Actually, much of the product came out not nearly as good as things in the store, so there is definitely some need for tweaking our catering capabilities. I think we have a good idea, but we're not quite there yet. But as for my speech, it went spectacular! I did start writing a speech several days before the event, but I ended up running out of time to finish it. I was planning on finishing it up on Friday morning, right before the event, but due to the chaos of putting the catering order together I wasn't able to do that. So, as usual, I had to go in there and wing it! I actually think I do better when I just wing it. I did my standard keynote/motivational speech...isn't it great that I have a standard speech now! I'm really starting to get it down. Each speaking engagement I hone it and it gets better and better.

My biggest problem with public speaking initially was reading the crowd. The first thing they tell you to do when public speaking is to "know your audience." But I was ignoring that for the first several times. Then I spoke to a high school class. Much of the things I was talking about weren't relevant to students in high school and I think I bored them to tears. But, thanks to my high school business teacher, whose class I spoke too, I quickly learned how to adapt. I spoke to two of her classes. The first one went ok but not as well as I had hoped. The second one went substantially better b/c some how she had told me or I inferred from her comments that I needed to adapt to the audience. So I did and the second speech was substantially better. And that is what I am focusing on now when I do public speaking events. Before I would just go in and speak without thinking about who the audience was and what they wanted to hear. I would just talk and tell my story. Now I think about my audience ahead of time and try to put myself in their shoes. I try to think about what I would like to hear from this kid who started this restaurant. And man does it help! I am getting more attentive listeners and many more good questions at the end of the speech. Perhaps my greatest measure of how I am improving is how many people come up and talk to me after I speak. I figure that if I have anyone approach me after I speak that at least some were listening. This past speech I would say I had about ten people that approached me after I spoke. That's about 10 times more than my first speech, 5 times more than my second, and about twice as many as my last! Of course I am taking into account the size of the audience as well.

But I love the public speaking. I get a high from it and I love watching people reactions and getting their feedback. My stock key note speech is basically my story. I simply stand up there and tell my story of how I got to where I am today. And it seems to work. People can follow a story. There is a plot and a point and it can be interesting. I'm sure not everyone is interested, but I know that when I hear the word lecture I am bored already. But when I hear the word story, I want to learn more about it. Stories work and that is what I am going to stick with. Plus it all happened to me so I can pull the story from my memory. I don't have to go back to my notes and try to remember a certain phrase or theorem or someone elses story, I just tell my own. Man does that make it easy. I can stand up there for hours if I needed too. But I usually keep it to about an hour. To me it is just so cool that on a whim if someone asks me to come speak without any notice I can go up there and speak for an hour to an hour and a half without even thinking about it! Imagine standing in front of 100 people for an hour and they are all listening to you and then asking you questions! I could never imagine doing that when I was back in my high school speech class. I would dread that day when I had to go in front of the class and speak. But I didn't know the stuff inside and out when I was up there. I know my story and I know how to get reactions from it. Now I want to learn to control the audiences emotions a little more. To get them excited or involved or motivated. But I have yet to finish my story on RawPesto so I will get back at it tomorrow...

Story Time

And then I died, b/c I held my breath for so long! Just kidding, that's just my sense of humor coming out there! Anyways, we did leave that day with our fingers crossed. My life had been building up to this final judgement day for the past year almost and it could go either way with the flip of a coin! I was scared to death, either way. If we got the space I was scared, if we didn't I was scared. I think I was even more scared of getting the space than not getting the space. That was a whole new world I have never even stepped foot in. I would have to do everything, from start to finish of leasing, to construction, to running the restaurant, to making money. Shit yeah I was scared! I was 21 years old at the time, what the hell did I know about anything...still what do I know about anything!

That was the thing, I didn't know what I was doing. How in the world was I going to pull this thing off. Of course that's what my business partners were for. They had done it before, they knew what they were doing. I was so reliant on them for everything. At the time I was using them as a crutch. It was not a good thing. I think it was a little bit necessary, but not to the extent that I was relying on them. Don't get me wrong, I still have my crutches to this day, and slowly but surely I am beginning to walk on my own, but it is a learning process. It takes time to get from baby steps to running.

But I was also scared of the alternative, what if it didn't work out. In the back of my mind had it not worked out, it would have been a giant sigh of relief. Had they turned me down for the lease, I could go back to just being a student and then when I graduated I could go out and find a stable job somewhere. I would only have to work 40 hours a week and the only risk I would take is where do I accept my checks from. But man, writing that, doesn't that sound terrible! I couldn't do it. No way in hell! So I was praying that I would get my chance to go for it!...

THE Story...Cont....

So it was fall. I had lived in Columbus that whole summer and basically I would wake up at 6am and go to work and then come back around 5pm go workout, shower, eat, watch tv and go to bed. That was my life. Day in and day out. Some days I would have to work the graveyard shift b/c well everybody had to do it and go to work at 10pm and go home around the time the sun was rising. It was terrible. Thank God it was over and school was starting back up again. Actually the did offer me a job with a starting salary of $36k and benefits. No way was I going to settle for that.

But I hadn't heard anything at all from Gateway. The restaurant was becoming nothing but a pipe dream at that moment. It had been almost 4 months since I heard anything and I didn't get anything accomplished that summer with regards to the restaurant. School started back up and I remember the day I got a call from Gateways leasing team. It was a gorgeous day. I had just gotten back from a business class and I was standing outside on the basketball courts. The leasing team I had been workign with at the time were tremendous. Their people were incredible. They were doing everything they could to push my concept through and get me into Gateway. Initially they called and said that Wolfgang Puck had fallen through, they were going to be the exclusive Italian concept at Gateway. They said that I would hopefully be able to get in but the deal was not solidified yet. Then not too long later I heard the exact opposite that Puck was going to be coming into Gateway. And it went back and forth. It was a roller coaster ride.

I didn't know what to do. At one point I developed a different version of my concept that if things fell through I would attempt in a smaller space. I really didn' t know how things were going to turn out. But just the fact that there was a glimmer of hope kept me going. I mean I was in school anyways so I did have a lot on my plate already. And I did have a job as well as the Resident Manager for my dorm, Taylor Tower. But I had to keep going after it. I knew I would regret if I didn't keep pushing.

At the time I did have a couple business partners that are no longer a part of the company. They own a restaurant in town and they were going to be helping with everything from development to execution. They had a very successful concept in town and I had really looked to them to get this thing off the ground. Though we hadn't heard a yes or a no we started meeting every Tuesday to go over what we needed to get done. We started talking to restaurant equipment companies, suppliers, architects, etc. etc. Then the day finally came when the landlords wanted to meet again and have us present them with the concept. I think what really helped sell Pesto was the business plan. It was ridiculously long and detailed, but it showed my passion for the business. We presented the concept and it seemed to be a hit. We left that day holding our breath with our fingers crossed...

Percentages

My story will continue tomorrow. But a few thoughts for today on controllable costs and their importance. I've been running through the numbers, catching up my books and looking at what we've been doing. Well our three main controllables are running high. Our food cost, labor cost, and paper cost are killing our bottom line. These are probably the 3 main controllable factors in the restaurant. Usually the main two come down to food cost and labor cost. Many of the other costs associated with running the restaurant are fixed costs so everyday we open the doors there is a certain amount of money we need to bring in to cover those fixed costs. Fixed costs are good and bad. They are good b/c you know exactly how much your fixed costs will be. Rent, loans, salaried positions, telephone, internet, any leased equipment are all fixed costs. No matter what you have to earn enough to cover those costs. The main variable costs then are the labor, food, and paper. Of course there are several other variable costs such as electric, water, credit card processing, etc. etc. It's very interesting to watch and it is easy to see that if you don't have a tight handle on what is happening in your restaurant things could quickly go down hill.

Our food costs for instance are about 6% higher than where we want the to be. That means our bottom line is taking a 6% hit from the food. If we can lower our food costs then we can increase our profitability. How can this be done? Well luckily in our case very easily. By simply looking at and using other products on the market we will be able to substantially lower our food costs. Why are our costs so high? Well when the menu was first conceptualized we decided to go with one price for everything on the menu. Our hopes were then that the overall menu mix would deliver the food cost we wanted. What happened though is that one item on the menu is substantially more popular than everything else on the menu. It just happens that our most popular dish is also our most expensive! A lose-lose you can say. It all came down to the chicken basically. We were going through so much chicken that it drove our food costs way above where we wanted them. So the answer was to find cheaper chicken! And we did and hopefully that one small change should substantially lower our food cost.

Now this is a good lesson. What if that particular dish wasn't our most popular? Then our food cost may have been lower. If our food cost was lower and came in around where we wanted it to be would we have tried to lower the food cost? Probably not...which is a problem. When it comes to profitability you can't be happy with the status quo. It could have been that we were hitting the food cost we wanted, but if we switched to a different product it could have increased our bottom line by maybe a percentage point. Which is nothing to cough at.

But you need to always remember, how is that product change going to effect the final result. Is the food going to taste worse or better? Is the customers perceived value going to be more or less? There are many factors that need to be evaluated from the consumer standpoint as well. Luckily the decision was a no brainer for us b/c the end result was substantially better anyway! So even when things are going great you need to always be looking for ways to make things even better.

My Story Cont...

Yes...An Italian version of Chipotle! There is no one in the fast-casual Italian market. Come on, when you think of fast Italian food what comes to mind? Well one does, and it's the f-word in my book...Fazoli's. Yeah they suck, the garlicky, buttery, breadsticks is what keeps them alive. They suck and they have 400+ locations! So our food is incredible, about 1 to 2 dollars more and we opened our first one! So the potential is enormous. There are several other entrants in the marketplace and they are Pasta Pomodora (owned by Wendy's, but probably not for long the way things are going at Wendy's), Pasta Pranzo (recently acquired by a franchising company that plans to grow the concept nationwide, don't worry we have their growth strategy beat) and Pasta Bravo. Mind you all these concepts are mainly based in California. The only other entrant into the market is Pizza Hut Italian Bistro. Yeah they are trying to rebrand themselves, but it's not going to work. Everyone knows what Pizza Hut is, you can't make it more contemporary or bistroesque, it's impossible.

Then comes along Pesto. The highest quality ingredients and a menu dedicated to Authentic Italian cuisine. The design is sleek modern Milan-Italian, not old, overdone, Tuscan Kitchen Italian. One price fits all, $5.95 for made-to-order pizzas, pastas, salads, and sandwiches. Not to mention our extensive offering of Authentic, all-natural, Italian gelati! Yeah just those few sentences alone should strike fear in every fast-casual Italian restaurant owner in the country. Plus I'm only 22 years old to boot, so how are they going to compete with the publicity I can drive.

So I had this concept for an Italian version of Chipotle. In the beginning it was going to be pick your pasta, pick your sauce, pick your toppings. Yeah create your own, everyone likes it, but what is innovative about it? Nothing...but for almost two years this was what Pesto was going to be. Back then the original name was Grazie, Italian for Thank you. The interior was going to be old world Italian with the Pizza Pie in the sky, that's amore, crappy music playing. There was going to be original artwork by local artists everywhere. And the business plan I created with and use to raise half a million bucks still says all this to this day.

The biz plan took me months to compile and execute. For about six months I did nothing but research restaurants in the area and my competition. I wanted to see how other restaurants ran and learn why customers would go there. Mind you I had no restaurant experience so I had to learn everything. But at the time I did have business partners on my side. They were friends of a friend. They own a local deli in town and they were going to help me get this thing off the ground. And they did help. They gave me financial projections I could use and manipulate to project the numbers we could be running. And I wrote that business plan in about two weeks. I was supposed to go to Florida for spring break but i spent just about every waking moment of spring break at home busting out the biz plan. I would win $100k if I won the competition so of course I had to go for it. I busted my ass on that plan. In the end it ended up being 55 pages long! Ridiculous...way too long! My second one amounted to about 20 pages (it was for a cell phone company).

Well I lost the competition. A company called vertebration invented an implant for spinal cord injury patients, so a restaurant couldn't really compete with that! But my friends and family said hey it's a great idea, pursue it. So I did. I contacted a local developer, campus partners. I noticed there was a significant development going in at the southern end of campus and I knew that was where I needed to launch my new restaurant concept. I knew that not only would the location be great, but the project itself had been in the works for over 10 years. I knew I would get much more press here than anywhere else b/c of the anticipation for the project and more importantly b/c of my age. When all the paper work was signed and I had signed my life over for that ten year lease I was 22 years old and about to graduate from OSU, my target marketplace.

It worked, I've probably been in over 15 different publications in a relatively short period of time. That's all without trying. I haven't even attempted to contact the media. But that will change here soon...(I am wearing a smile of mischief). So I started talks with the landlord. I told them I had a restaurant concept that I thought would be a perfect fit for their new project. I shared my business plan with them and told them that I wanted to be a part of it. The conversations went on for quite awhile. I think all in all it took about 6 months to convince them that I would be the best fit for the Italian restaurant compenent of their tenant mix. It was a roller coaster ride. At first they said they weren't quite ready. Then they said they had another potential Italian concept that was well established and had quite a track record. Then the talks stopped all together for about three and a half months. They started right before summer break, were non-existent over the summer, and started back up in the fall.

Over the summer I was working an intership at Kohl's department stores. I don't know why but for some reason I applied for a management internship with Kohl's. I guess I wanted to see what it would be like had my parents been right and I ended up managing some retail store somewhere. And I absolutely hated it. That was the worst summer of my life. It was so boring, so frustrating, and it was working for someone else. I was making someone else rich. But I didn't even get the opportunity to use my mind. They spelled everything out for the employees...which I know understand being the owner. But I had the owner mentality. I wanted to try new and different things and do them a different way. I thought the way corporate demanded things was ridiculous. And that was it. That was my stint in the working world. It sucked and I'm never going back. I hated it...it's good to remind yourself of that sometimes. No matter how tough it gets, at the end of the day I only answer to myself, and well the bank, and my investors, and etc. But it's a hell of a lot better than someone called "corporate."

So that miserable summer ended and school started back up in the fall...