How does a restaurateur who thinks of himself as a tech entrepreneur, build a $50 mil health food business?
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Hey there, freedom fighters, my name is Andrew Warner, I’m the founder of Mixergy.com, home of the ambitious upstart, and a place where as you know, we’ve done over 700 interviews with proven entrepreneurs, who come here to tell you their stories so that you can learn from them, and then hopefully you can go out there and build your own success story and do what today’s guests are doing, come back here and tell your story. So how does a restaurateur, who thinks of himself as a tech entrepreneur, build a 50 million-dollar health food business? Matthew Corrin is the founder of Freshii which offers a menu of salads, burritos, wraps, and so much more all made with high quality fresh ingredients. I invited him here to tell the story of how he built up his business. Matthew, welcome.
Matthew: Thanks for having me.
Andrew: You know what, I was looking at you as you said you think of yourself as a tech entrepreneur and I was wondering, do you agree with that? It seems like you do from the notes that I’ve got from our producer’s conversation with you.
Matthew: Listen, if I get to think of myself as a tech entrepreneur, then I should also get the evaluation bumps of a tech entrepreneur. Unfortunately, in bricks and mortar that’s simply not the case.
Andrew: No it’s not. Do you, by the way, ever look at these tech entrepreneurs and say, “This is like a 19 year-old kid built his business over one year, and suddenly he’s getting a hundred million valuation. What am I doing building this chain of stores in 50 locations, four countries?” Do you ever get any kind of envy or regret that you’re non-tech, fully?
Matthew: I try not to regret it. I think it’s important to recognize and wrap your head around the fact that it’s the really different industries and really different metrics and evaluations metrics and skill ability potential. It’s just a different way of thinking about it and if you can get there, then I think you’re fine. If you can’t wrap your head around that, then yeah, it’s a huge problem because a bricks and mortar entrepreneur is never going to get the scale of a tech entrepreneur and if they do they will be into their 50s or 60s by that time. Maybe, there’s nothing wrong with that, right?
Andrew: But, you guys are huge, you’ve got, do I have the number right, 50 million in annual sales?
Matthew: Yeah, so we’ll be opening about 80 stores at the end of the year, and double that next year. We’re a private company so we don’t disclose revenues but averaging of a billion sort of get you into that sort of range.
Andrew: OK, so here’s something the average tech entrepreneur doesn’t get. We don’t get to often see our customers. You launched a store in Los Angeles, and you got to see the kinds of people who are coming in. Can you tell the audience about some of the people who came to the Los Angeles location, and what they ended up doing?
Matthew: Yeah, well, we try to think about and leverage social media as we open the locations, and did some interesting things in our L.A. launch, with delivering some food over to KSFM where Ryan Seacrest was doing his morning show and did it in a somewhat non-traditional clever way and we got a nice tweet of our food and our logo and a re-tweet by Ashton Kutcher. So within a few minutes 7 or 8 million, this is the early days of twitter, 7 or 8 million combined, it would probably be much larger today, but were introduced to the Freshii brand by Ryan Seacrest and Ashton Kutcher.
Andrew: What’s the unique thing that got them to tweet it out and got people to care about it so much?
Matthew: Well, Ashton Kutcher is an investor in Popchips, the cool chip company. Larry King is a franchisee in the Water Bagel franchise, and so I took a picture of King’s face and put it on the bagel, had a picture of Ashton, put it on the Popchips and attached a picture of Ryan to the salad spread, you know, let him read in between the lines, but it didn’t get an investment, but it got a re-tweet which was kind of cool.
Andrew: So basically you just did that, you took a photo of it? You just tweeted it at them, and they tweeted in out?
Matthew: No, getting back to the bricks and mortar, we delivered a box lunch, and so you can’t beat physical food, you know, food in your mouth, so we delivered it over to their offices and I think they dug it, you know, hopefully he liked his lunch and thought it was worth sending out some thanks via the Twitter-sphere.
Andrew: Well cool. All right let’s go back in time to get the full story here, starting with when you were 15 years old. You had a business. What was this business that you built at 15?
Matthew: Well I grew up in the Great White North, in Canada in a city called Winnipeg, and there are more hockey arenas in Winnipeg than there are tennis courts or soccer fields or baseball diamonds. So I created a company called Rink Routes. Essentially a guide to hockey arenas around the city when I was 15 and I basically had my mom drive me around and I sold advertising to cover the cost of production and then sold these books for a tuney which in American dollars is two single dollar bills and basically sold several thousand units that following hockey season and learned a lot about business through that, you know.
Andrew: Where did you sell Rink Routes, this publication that you put together?
Matthew: I just basically walked around the arenas, to parents in the stands. Keep in mind MapQuest didn’t exist back then, and people were using these crazy fold-out maps from AAA about how to get there, or the other option which was to go drive into a gas station and ask for directions and you know, most of the dads were just driving around the circles because they don’t get out and ask for directions.
Andrew: So you’d just be in the rinks walking up to perfect stranger, saying I got this map here that I created for you that’s going to help you find the local hockey arenas.. Do you want to buy it for two bucks, and they said yes?
Matthew: Well, yeah.
Andrew: It takes some nerve, takes guts to be able to walk up to strangers and do that. Where did you get that?
Matthew: You know, it takes much more nerve and much more guts to go and try and sell the back cover of this ridiculous, you know, guide that didn’t exist for 1000 bucks.
Andrew: Good point. Right, you didn’t even have a guide, you didn’t have a track record, and you were walking to a sponsor and same to sponsor do you want to buy the back of this. How did you do that?
Matthew: I guess I knew then that the inside cover and the back cover, were the most expensive valuable pieces of real estate refining a bring this up I remember trying to create a value for the back cover in the inside cover and then half pages and then, if you wanted to do a coupon with it that would be a different cost and geez, I have. But about that, 15, 20 years down but that’s really bringing me back that’s exactly it was really interesting and I don’t remember how I quantified those placements, but do remember having my mom drive me around two local restaurants and gas stations and meet with local owner or franchisee for those lucky enough the parent company and go up into the board room and pitch this little guide to arenas and tell them that they’re going to have this may be people seeing it every day, and it would be worth investing in.
Andrew: I do have to ask you, how did she get the courage to do it? The reason I ask because I get emails all the time from people who say Andrew, I don’t how to do cold calls. I see, your interviewees talk about how they cold called, yada yada yada yada, they ended up building a business. I don’t know how to make a sales call to a person I know. Your interviewee say that they did it…you guys rush over it you guys move onto this big success and so I figured maybe there’s an opportunity right here just to pause and say how do you do it, how can they do it based on your experience?
Matthew: That’s a good question. I think, well, I think I may be formulated. This in a more formal phrase today and how sort of how I lead my existing team in my current business but I think and I probably thought back then, and I certainly believe now that talk is cheap. Execution sets you apart, and that’s to me probably the most port part of business, is just doing instead of just sitting on the sidelines talking about doing, and maybe to bring back your comment around thinking about ourselves as a tech company, we think of a lot of our stores as incubators. We like to launch fast, fail fast, iterate, and launch again. And I think, to me, there’s way more value in actually doing and in a very, very, select case testing and learning and failing quickly and iterating, very much like a dot.com, instead of trying to think of it more traditionally and saying ‘Well, we could try this, but if we do this it will happen with this and happen with this’. Why don’t we just do it and if it works great; if it doesn’t work, let’s move on to the next idea.
Andrew: I see, so it’s a perspective thing where the average person might say, “Hey, if I walk over to this potential customer and pitch them on my rink [xx] guides, on my map, and they turn me down, then I’ll know one way that it doesn’t work to sell and I’ll try a different approach. And if that doesn’t work, I’ll try a different approach still, until I land on it.” So, it’s just this curiosity about failing and figuring out the right path that kept you going, as opposed to being afraid of it.
Matthew: It’s just that. It’s learning, failing, iterating how you are going to do it the next time, failing again but getting closer and then nailing it the third time. And then once you figure it out, it’s just repeatable routines, just doing it over and over again.
Andrew: All right, and I should also say to the audience that we’ve got Matthew here today on vacation. He was away. He was enjoying his vacation, but he is doing this interview so we can hear his story. And Matthew, I got to tell you, I appreciate that you’re doing that. And that’s why we have a little bit of latency. We’re not in the ideal, best connected spot right now. We do have this story here and I really do appreciate you telling it to us. So, later on in life you moved to New York City where you worked for David Letterman. You were a marketing manager for fashion icon, Oscar de la Renta, and then you noticed something while you were surrounded by runway models that led you to launch this business. What was it that you noticed when you were working with all those models?
Matthew: I led such a glamorous life. I don’t know why I ever left it to go work in the restaurant business. It wasn’t exactly like that, but I was working in the fashion business and eating at these ma and pa, ubiquitous, delis in Manhattan, which did not have really fresh food bars and really dull service and lackluster branding. And for me, the concept was, can we take this experience of health and wellness and brand it and scale it. And do something that, quit frankly, did not really exist outside of Manhattan, ten years ago. And that was the impetus.
Andrew: I remember, I grew up in New York and back then there was a shocking thing that happened all across Manhattan. There would be these stores where you can buy salads and you can get your pick of ingredients in those salads. And you were saying, “Hey, that was great, but these are mom and pop stores. They don’t have the branding. They don’t have the consistency and they don’t have the size that you imagine, but you hadn’t”… by the way, how’s our connection going? When you look around, I want to make sure I am coming in clearly to you.
Matthew: It’s okay. It’s in and out. So hopefully it’s better on your end.
Andrew: My end is much better than it sounds like you are getting on your end. All right, so you say I am going to start building this new business. What’s the first thing that you do?
Matthew: Well, I moved to Toronto which is not where I grew up, but I had some family. And I thought, even if I know nothing about the restaurant business I might as well start somewhere where someone maybe knew somebody that knew somebody that knew somebody within the business. And that’s basically why I chose Toronto. And tried to find a location within Toronto, similar to Manhattan in density as you could find. So I picked the financial district. And then basically opened a restaurant. And the first day we opened was the first day I ever worked in the restaurant business, which in hindsight was probably a huge mistake. I probably would have valued greatly from working at Starbucks or Subway or McDonalds for six months.
Andrew: What would have you learned, do you think, if you would have worked at one of those locations for six months, instead of jumping into your own restaurant business?
Matthew: I would have learned everything. I would have learned so much because there’s no rocket science about the restaurant business, but there are literally a thousand little things that have to happen every day, from staffing, to scheduling, to food production, to food purchasing, to marketing, to guest service, everything. I would have dabbled in a thousand little things. I would have become an expert in none of them. But I would of had the experience to see what is going on and least not have been shocked and surprised when my first day half my staff walked off the line, and I was cut my staff by 50 percent and …
Andrew: First day half of them walk off?
Matthew: Yeah, well, unfortunately we opened, or I guess fortunately for me, unfortunately for the staff but we opened January 10th. Which was [??] New Years resolutions, and healthy eating was very top of mind, right? That’s…
Matthew: …one of our biggest months of the year, January, and everybody’s very focused on health and wellness. And so we had these humungous line ups and the staff just, I just hired a staff that weren’t trained well enough.
Matthew: And I take full credit for that. And they just were, the stress was too much for them. And, so in the heat of the lunch rush they were sort of like, throw their hands up in the air and say, this isn’t, we don’t need this, this isn’t for me.
Andrew: Wow. What do you do when half your staff leaves and you’re a new entrepreneur with a brand new store? And customers waiting for you, and here you are, every minute that goes by is a minute where your reputation is at risk. What do you do?
Matthew: Well, I just kept my head down and start tossing the salads, really. And that’s really, the funny thing is I had no intentions of ever working behind the line. I remember the first day of being very focused on just guest interaction, and shaking hands, and kissing babies, and that’s what entrepreneurs do. Which is so incredibly ignorant, but that’s what I thought I was going to do while the team worked hard and executed. And when half of them left, and I saw people standing around looking at their watches, tapping their foot on the floor.
Matthew: I basically said, I better get back there and just start doing stuff. And that was literally the first time I ever got behind the line and did anything. So I was working the cash register, and tossing the salads, and [??] the wraps, and washing the dishes, and running to the bank to get money because we’d ran out of float money for the cash register.
Matthew: And then, I didn’t leave for eight months, I did every position for eight months. And I probably would never have done that had the team not walked off the line, which is ironic.
Andrew: So in the end that was actually a good thing for you?
Matthew: In the end, it certainly was my quick ramp up into the restaurant business, yeah.
Andrew: So one thing that I learned about you is, that you’re a guy that loves to learn. In fact, one of the first things you did when you decided to get into the restaurant business is you Googled and you did research. And then, you also read a book, “Pour Your Heart into It”, by Howard Schultz. Let’s talk about the learning process for you. What were you Googling, what was the first thing that you said, I have to know before I actually start doing?
Matthew: Well, a couple interesting things as I reflect on the early days. I think I approached the business before we opened with a hat towards marketing and branding, and look and feel and design. Which were probably my passions and are my passions, and PR coming from the fashion industry. And I read, “Pour Your Heat into It” before we opened with a highlighter, highlighted all these interesting sections that I thought would be very relevant to my new business. And then about six months later I read the book again, and this time with a different color highlighter. And literally went through the book with complete different eyes, highlighting things that I didn’t even catch the first. And I think what happened was I had a very quick evolution from marketing and branding, to operations and through put, and culture … [??] …
Andrew: So the first time you read it you were thinking, I see how Howard Schultz is thinking about the color of the Starbucks location, about the feel of them. How going to Europe brought back a sense of design that he put into the stores. That’s what you were looking at the first time. The second time you were looking more for operation’s ideas in the way that he built Starbucks.
Matthew: That’s exactly it.
Andrew: I see. What about the things like, where do you get lettuce, how do you get the right knives? How do you figure out a way to present the store to first time visitor? Where do you learn all that stuff if you had never been in the business before?
Matthew: Well, I think that I probably did it wrong, wrong’s not the right word. I did it in a way with the first store that was not scalable. Very manageable for one [??] store, and very unscalable. Probably couldn’t gotten more than two stores the way we were doing it. And so I really had to take what I was doing in the first store and change things to be more scalable. Trying to keep as much of the authenticity as possible, but then sort of with a refocus toward a scale ability.
Andrew: Give an example of something that wasn’t scalable at first and then you made it scalable later?
Matthew: Well, you know, I’ll give you a good example. We did all of our grilling and cooking in our first store in-house, and real estate is such that unless you…we operate in small footprint locations, 1000 to 1200 square feet and usually those are old shoe stores or hair dressers or nail salons, not big full service restaurants that are going out of business, and so how do we make our business model a requisite of cooking in-house? I can tell you 90 percent of the stores reopened today we would not be in because we would not be able to do cooking in-house, so we had to change or imply change through commissaries in all the markets that we operate in and very, very close partnerships with local poultry companies and suppliers to help create our spec and deliver it fresh daily.
Andrew: Do you remember that section in Howard Troll’s book where he had requests for none hold milk and he went through like a crisis of inner questioning, are we going to be the company that gives people 2% milk, are we going to be the company that gives people something other than the experience that he saw when he was in Europe? And he had to really wrestle with them, for you was it the same thing going from cooking your own chicken to bring it in the house and if it was how do you resolve it?
Matthew: Well, I think a few things, you’re never going to please everybody is the first realization no matter how hard you try. And I think it goes back to what the mission is and our mission was not…our mission was not to you know bake our breads and grill our chicken and make all of our food from our kitchen’s every morning. Our mission is to change the way people eat around the world by offering them nutritious and delicious food that leaves them energized in an affordable and convenient way. So when we go back to what our mission is and what we’re trying to do with this big audacious plan of ours is we want to change the way people eat, we want to eliminate the excuse that people don’t eat healthy and look well because they can’t afford to or its just not convenient. But you know really the two biggest reasons why people don’t eat you know well besides the fact that unhealthy food just tastes better to some people, but the other two are important and so we wanted to make sure that we can make it scalable, convenient and affordable…[pause] How do we do that right, how do we make that?
Andrew: I see so the way that you resolved it was by just going back to your mission and your mission wasn’t to cook chicken, your mission was to give people healthy, affordable food. What about this, you told our producer Jeremy in the pre-interview that in Canada where you opened up the first store in the food court there was, lets see pretty much other people were selling things like fried foods in Styrofoam and here you are coming in with your healthy food and charging $3 more than the competition, how do you convince people who are used to fried food or used to certain kind of food to not only try healthy food but also to pay 3 bucks more?
Matthew: I think you design it in a way that they recognize that the look and feel is more conducive to a higher in product and a little expensive product, but I don’t think [bad feedback]…we won an award in Canada less than a year after opening the first store for best new retail concept in the country. And Lulu lemon was a prior winner from their committee and a great comedian success story, and I think its because what we did in Canada was never done before which was you know, we went in to food courts which are very ubiquitous in Canada cause like all the office towers you know more or less have a food court in them and we basically turned it on its head of how and what people were used to.
All these you know executives working in towers, lawyers and bankers and hedge fund guys were just sacrificing status quo which was greasy, cheap, Styrofoam food, and they weren’t eating like that when they went home and they weren’t eating like that on the weekends when they went up to their cottages or you know their ski chalets, so there had to be a paid solution for those people, and quite candidly like that did not exist in Canada even though it was fairly ubiquitous in places like Manhattan it doesn’t, it didn’t exist in Canada. And as we discovered it didn’t really exist, when we started, it didn’t really exist anywhere else in North America. That has completely changed which I have to say is really interesting because since I started the company seven years ago.
There is this huge emergence of Fast Casual, which is now this huge well known name. Which is the healthier and better quality version of quick service and fast food, right? And now there’s even a newer category which I’ve identified, that I call Health Casual, it’s really pushing the boundaries beyond just all natural and organic. And it is really now introducing people to health and wellness. And there is a clear emergence in cities all over North America that, you know, very popular one offer five or less unit companies doing sort of this Health Casual type of movement, and concept.
Andrew: I see, so basically you are noticing this need that existed in people who are eating healthy at home. But, didn’t have the same option at work, we are walking around eating fried food out of Styrofoam because that is what was available and then you fill that need. Did you do any market research thought? To let you know, yes there are enough people who are interested in healthy food already. And if I could just communicate that my food is healthy they will gravitate towards it, did you do anything like that?
Matthew: I did not, I should have.
Andrew: You did not?
Matthew: I did not.
Andrew: So, it seems like there is a lot to be said for being an entrepreneur who does not do excessive research, who just says, “Hey I have this idea, I saw it work in New York, I have this gut feeling that it is going to work in other cities that are similar to New York. I’ll just launch it and if it works, it works and if it does not I will adjust and I will learn from it.” Is that your style?
Matthew: I think when I was 22 starting the concept, that was my style.
Andrew: I see.
Matthew: I have two kids, and a wife, and a dog, and a house, and a daughter who is going to school next year. And so I can tell you that my attitude and my risk factor is certainly different than it was when I was 21.
Andrew: Which approach is better? I know that obviously the approach you had back then fit the younger you and the approach that you have now is much more research, much more considered, is better for you now. But, taking apart those outside factors, just from your experience, is it better to spend six months doing work at someone else’s store? Doing more research on how big this market is and where to launch your store, etcetera? Or is it better to just say, “Hey, I am going to put it out there and figure out what works.”
Matthew: No, I think, I don’t think it’s binary, I think both would be really great.
Matthew: Yes, I think if you have the entrepreneurial spirit, you are going to, even if you are learning on somebody else’s dime. You are going to say, instead of saying, “Oh well, I don’t like this I am not going to do it.” You are going to say, “OK, this is interesting, I have learned some good stuff and I am going to make it better.” So, I actually think both are really, really good and you can certainly do both I don’t think it has to be one or the other.
Andrew: I mentioned earlier that you are a guy who just learns, who soaks up information in lots of different places. And one source for you is looking at publicly traded restaurants to see what they release, what you can pore over. What do you learn when you look at publicly traded restaurants and study them as market research? Or competitive analyses?
Matthew: Well, what is great is you get to look at a several hundred unit, or a thousand unit chain and you get to listen to all the key metrics to measure their business. I mean, at the end of the day, we tell businesses come down to Unit Economics. And so just because we have 80 and they have 800, they cannot, they do not think about it any other way they just think of it on a much more scale. So, when we had 1 and they had 800, it is the same story. So it was really important for us to just get into the habits of learning and thinking about our business the way that the big ones do, because ultimately that is what we aspire to become, so we might as well build good habits early on.
Somebody really smart once told me, “If you do not measure it, you cannot manage it.” So, if you do not measure it you cannot manage it, and that is really critical. Especially in this business, which is a penny margin business, the restaurant industry. So we try to on a weekly basis add something new that we are going to measure, so that we can more effectively manage it and manage our P and L.
Andrew: What do you mean by unit economics? It’s what it all comes down to.
Matthew: Unit Economics is the store, so a chain, basically just has several of the same types of stores in several locations. So unit economics is a store level economics so store level profits, store level sales, store level food costs, store level labor costs.
Andrew: So should they always come back to same stores sales, they always come back to what is it cost each individual store and you do the same thing.
Matthew: Comes down to sales investment ratio, what does it cost for you to build and how good is the payback, comes down to cash and cash returns, EBIDA margins, it comes down to same store [??] and how you’re growing, [??] location. [??]
Andrew: Sorry, how long does it take for a typical publicly traded company to earn back the investment that it puts into a new store?
Matthew: It really differs. There’s no [??] but what I have learned is that there’s a lot of publicly traded companies that have sideways business models that haven’t been always sideways but kind of get that way and so that’s really important. Like, I actually get a lot more value from looking at companies that are struggling then companies that are doing credibly well because you get to learn what not to do.
Andrew: For example?
Matthew: Oh well, I think a good example is young companies who have some very exciting store economics at 50 stores and they start to open bigger stores and more expensive stores because they believe that if they do that they’re going to grow sales proportionately and inevitably what happens, maybe surprisingly to them and maybe surprisingly to others, the sales don’t grow proportionality with the investment costs. So, you’re sales to investment ratio becomes sideways. And so, [??] turning investment becomes sideways and when those things go then you’re in trouble.
Andrew: I see.
Matthew: I think it’s really important to not lose track of what are the things that maybe special in the first place and if you’re going to evolve just make sure it’s really thoughtful and so we learn a lot about that through the public markets.
Andrew: I see. Speaking of measurement, Jeremy, again, our producer, asked you about one of the lowest points for you and it was when you were shocked after 30 days and looked at your numbers. Can you talk about what you saw and what you did to avoid being equally shocked in the future? Do you know what I’m talking about?
Matthew: Yeah, we have some of our guiding principles of how we think about our business but one of them is numbers rule. Simple as that. If [??] to [??] for a second but burn rates, when it’s all about [??] acquisition, user growth and just managing your burn rate, it’s different then having be very focused on your cash flow and your cash [?] and that’s the [??] so numbers just totally rule to us and we need to be completely aware of our cash position on a very frequent basis and our sales growth and our profits and I was very surprised one month see our results because, again, I got busy and lost track and I wasn’t tracking them weekly and basically that was then moment when I said I’m never going to be surprised by the numbers again. They may not always be perfect and surely there are going to be something’s you can’t control like how the economy goes or things like that. But I’m never going to be surprised by results. Present surprised or surprises, I’m not going to be surprised. I’m going to know what’s going on at all times and I think it goes back to the whole concept of if you don’t measure it you can’t manage it and so really that’s an important part of business.
Andrew: I see, so it’s not just measuring but it’s also measuring it in a timely way so you’re not going to wait a month to get your data, you want to get it weekly. Does it even go as frequently as daily?
Matthew: We absolutely measure, we measure daily [??]. I was listening to an earnings call by somebody who’s built one of the most iconic retail branches just a week ago and there was an incredible, and I took this clip out of the earnings call because it was so amazing, with 15 or so thousand stores he said every morning at 6:00 a.m. we have a senior team meeting and all they’re talking about is sales from the prior day and that’s incredible to have 15,000 units and there doing the same fundamental right? [??] down to fundamentals, whether you have 15,000, 30,000 or 80 it just comes in to fundamentals of the units and the key metrics.
Andrew: I was at a Berkshire Hathaway Annual Meeting and in the middle of this meeting, someone interrupted Warren Buffett and just put a slip of paper in front of him. Warren Buffett looks at this piece of paper, stops paying attention to the audience of thousands that came from all over the world to see him, just focuses on this piece of paper. We’re all dying to know what’s there. He finally looks up and he says, “The furniture store (which he owns) earned more this year than last year,” and he gave the percentage increase. He was monitoring the sales of this store that was this tiny portion of this huge empire. That’s how closely, I guess, that he’s watching it and I can see you do the same thing.
But what happens when you do that then? Famously, the airlines used to do it with their costs and they would say, “Hey, if we take the olive out of the lunch that we give people, we save a million bucks a year that goes straight to the bottom line.” In your case, if you take a tomato out, if you take an olive out, if you let something sit for a little bit longer or go for cheaper ingredients, you do better. So how do you balance that quality and long-term reputation with the need to make the numbers day-to- day, month-to-month?
Matthew: That’s a good question. Well, I think, certainly in our business, we can take advantage of economies of scale. First of all, you fix costs of our head office costs, right? The CEO, the COO, and the executive team. We don’t double our salaries when we double our store count, say. It would be pretty cool, but we don’t. And we get the economies of scale of food purchasing. So the more we purchase… The more chicken we purchase, the more lettuce we purchase, the more yogurt we purchase, the more aggressively and the more competitively we can purchase it for. And so, what we do is we take some of those savings and pass it along directly to our customer. And we take the [??] savings and pass it along to the bottom line.
Andrew: So is there a rule, internally, that when it comes to the quality of the ingredients, we don’t change the product to save money, but we do look for economies of scale? Is there some way to say to someone who comes to you and says, ‘We can save money by changing the product,’ is there a way to say, ‘No, that’s not what we do.’?
Matthew: Yeah, I think we really… And now we have people who are specializing in our supply chain, and we have chefs and nutritionists on staff who think about that stuff every day.
Matthew: And so it’s very much like constant dialogue between the three of them, which is how do we make something taste delicious? How do we make sure it meets nutritional criteria that are really important to our business, right? The whole, like, we want to help people live longer. And how do we do it in a way that’s, first of all, scalable, that we can actually get into 35 cities and four or five countries around the world? And also, at a price point that becomes manageable to our profit margins.
Because either one of two things are going to happen. You’re either going to pass that cost along to your customers, so you’re going to increase the quality and increase the price point. And at this price point, it’s no longer affordable to our target customer, which we’d never want to do. Or you’re going to lower your margins. And quite frankly, we’re not in the business of being an expensive employment resource center. We are a for- profit business and so we need to think about both. And so it is a balance and we think about that all the time.
Andrew: Harry Hemsley in New York, the guy who ran the Empire State Building for years, he would decide which buildings he wanted to buy or manage by sitting in front of them, before he bought them, with a clicker and he would just count how many people walk by and that would give him an indication of how big the foot traffic could potentially be and so on. You do something similar too. You stand with a stopwatch, pen, paper… I’m looking at my notes, and you time to see where you could improve. What have you learned? What are you timing and what have you learned by doing that?
Matthew: Well, when we were looking for our very first location, that’s exactly what I did. Unfortunately, I didn’t have one of those clickers. I always had pen and paper with the little…
Andrew: Oh, so before this first location, you sat down and you said how many people were walking past. And then what do you do with that based on how many people walked past? How do you know whether it’s right or wrong for you to invest in it?
Matthew: Well, that’s the irony, right? I didn’t know, so I was counting and saying, “Wow, 600 people walked by here every 30 minutes.” And so [??] well, what does that mean?
Andrew: [laughs] I see. Today, would you know what that means? Today, would you know, “Hey, I could probably get a certain percentage of all those people who walked past?” You do.
Matthew: Well, today, we have enough locations to be able to, from a real estate strategy perspective, pretty much predict what the sales potential is. And real estate is very much art and science, and so that’s very much the science part of it, and there’s the art side of it. But, yeah, for sure.
Andrew: I see. So you didn’t necessarily have an understanding of what your revenue could be from there, but you were laying the foundations of understanding, later on, how foot traffic impacts later sales. OK. So, now when you stand by with a stop watch, pen, and paper what are you measuring, and how has it helped improve the business?
Matthew: So, there’s a really interesting story that I heard, that, the rest of the business focuses on what they call lean operations. And lean operations is how you maximize efficiency, and how you minimize [??] steps. And, so, I think, on [??] a few years ago Chipotle’s CEO talked about how they know exactly how long, to the second, it should take to cut up a box of limes, and like the way they hold the knife. And it’s, like the [??], and I’m totally going to [??] this story. But they hold their [??] with one of their hands, because it’s faster then with their other hand, right, or something, something incredible.
Andrew: This is you saying the UPS story, right. They give their people instructions on which hand to hold the key, how many steps to take, how to do everything, so that they can minimize waste.
Matthew: Yeah. So that’s totally lean operations, and we are far from perfect at it. But we try on a weekly basis to add something new that helps us shave off a few more seconds or minutes from every day.
Andrew: Wow. What else do I want to know about? Some of the issues, we talked about the people who left your store, day one, and how you recovered from it. Here’s another things that doesn’t happen in tech companies, but you have to deal with when you’re an entrepreneur at a brick and mortar, food location. Someone cut off his thumb. Can you tell people that story?
Andrew: This is something.
Matthew: …Back in the day. We did all of our cooking every morning at six a.m., getting ready for the lunch rush, and the breakfast rush. I had two chefs on staff. And I should say, they weren’t chefs, they were kids who had just graduated from culinary school. I don’t think they had actually ever worked in the restaurant business either, which was a huge mistake. But they were these chefs, and one of them was cutting apricots for the breakfast oatmeal, and on the cutting board a significant portion of his thumb was sitting, he sliced it off, and of course there was blood. This gets gory, so look away if you’re….
Andrew: I was going to bite my knuckle as you said it. Uh-huh.
Matthew: Blood splattered everywhere in the kitchen. And the only other person, the assistant kitchen manager who did the only other cooking in the restaurant. From the sight of the blood, passed out, and landed flat on his face. I’m talking from the standing position, face to the floor, broken nose, completely bloody face. And at 6:30 these two kids were carried away on stretchers. And that happened a month into the restaurant, and I thought for sure, like this will be the first day we’re dark, we’re not going to open for business. I called my wife now, girlfriend at the time, and I said, you cannot believe what just happened to me.
She actually took me to the store, and we spent the morning, you know, cutting, cutting, [??] and grilling, and the bacon, and the avocado, and chopping the lettuce. And literally the first time I had ever done any of those things. But we got through it, and I think that was a huge moment. Such an insignificant, but a significant moment in my personal business career, was it’s not rocket science, it’s just hard work. And no, I’m never going to fail from lack of hard work. And I try to [??] our team, too, but that was a huge lesson for me.
Andrew: So what do you do to keep it from happening again?
Matthew: Well, the first thing we did was take care of all the significant prep items the night before, so that we would never be affected if something happened in the morning. Because guess what, stuff happens. I don’t know if this is a PG edit or something, but really shit happens. So, you know, we prepare for that.
Andrew: Right, right. Even if someone’s thumb doesn’t get cut off, maybe they are out sick, maybe you have a couple of people who are not in, I see.
Matthew: I had employees. I had in the first store employees who couldn’t come into work, because they had parole hearings the next day. I mean, like, I was hiring criminals. I was robbed twice. I used to keep all of our money in the store overnight. Again, a huge lesson, that seems obvious to [??] night the store closes, but I thought leaving it in a filling cabinet with those little mini keys was enough. [??] to break in, and I would receive calls from the security in the office tower at three o’clock, four o’clock in the morning. And sure enough they would say, we are doing our nightly sweep, and the door was left open. And, you know, nobody is in there, but we think somebody has tampered with the filing cabinet. And I’m like, so what do you do? You’re in bed you know you’re waking up two hours later so do you go there at three o’clock in morning to see if the money’s still there or do you lie [??] for the next two hours wondering if the money is still there?
Andrew: What do you do?
Matthew: Either way when you get in the money’s not there. So, I learned that a couple times, and.
Andrew: So, you might as well get a good night’s sleep. Don’t lose sleep and money.
Andrew: So, how do you learn how to solve that? Do you have someone that you can go to? Because that’s definitely not coming up on a chipotle analyst call where they talk about where they talk about how they had this issue and how they solved it. So, where do you go to learn how to deal with these issues?
Matthew: Well, I think if you get robbed twice over night the lesson is keep your money in the restaurant. So, I like to think there are some things I can teach myself. That’s one of them.
Andrew: But is there a mentor that you go to, an advisor, who’s been through this business now who you can say what else can go wrong, help me anticipate it so we can solve it before it happens, or, you still at the point where hey you’re figuring it out yourself but you just have so much experience now that you figured out most of the big issues?
Matthew: No, I think both. There’s so many big issues that come up every year and they’re different issues relative to the size of our business but I certainly look up to like my business idols are people who have built iconic restaurant and retail brands and I’ve been fortunate to be able to meet many of them and I’m a sponge so I’ll ask not just obvious questions but really [??] questions that you would they would probably never bring up on an analyst call or talk about it in [??] form an operational perspective there so critical. So, maybe I ask some of those non-traditional questions but they’re incredibly valuable to day to day of a business.
Andrew: I see and so you just meet them and walk over and start peppering them, get to know them for a little bit, and start peppering them with questions.
Matthew: Well, you know sometimes you don’t even have time to get to know them. You have to jump right into the questions.
Andrew: Just jump right in there. One of the guys who interviewed you, Richard Branson, is known for in the early years, at least, he would have a notebook and pen and he would just constantly write down notes as he had conversations with people. Do you do stuff like that when you talk to one of your heroes?
Matthew: I do.
Andrew: You do?
Matthew: I do.
Andrew: You just whip it out, whip out the pen, and start writing down notes. So, how do you handle theft or what do you do when it takes too long to cut a tomato that kind of thing? All right. We asked you before the interview started about what big lessons you took away from this and the first of course you talked earlier is execution is key and it’s something you believed going way back to when you sold maps of hockey rinks. The other we didn’t spend so much time on which is building a killer culture. Why is building a culture so important?
Matthew: Well, I think if you’re not…I think like business is about just execution most businesses is less about the idea and more about the team who’s executing on the idea and so if you don’t have a good team to do that no matter how good the idea you’ll never get the scale and you’ll never be afforded the opportunity to actually see it to a business and it really starts with the culture. Unfortunately I went at that the hard way but again-
Andrew: How, can you tell us about that?
Matthew: Well, it was our first sort of big expensive six figures salary hire as a young company and the goal was to give him the [??] to run the operations of the business. Unfortunately all the metrics that were supposed to go up went down and all the metrics that were supposed to go down went up like [??] and staff turnover and so those were some tough lessons but it taught me a lot about how critical it was for me to be close to the business and close [??] team.
Andrew: So, I understand how that would… Sorry, the connections threw me off there. But I understand, Mathew, how that would keep you from saying hey the solution to any one of my problems is hiring an expensive person who can take it over and solve it but I don’t understand how you go from that to saying culture is going to be a better answer. How did you learn that culture would be a better answer?
Matthew: Well, when you take care of culture and you measure your business and you see a very consistent trend towards the better the culture feels, right, that just like [??] culture is not, it just, it’s not really tangible it’s something that you sort of feel and it moves and it’s not either it is or its not, right, it’s a thing that’s floating out there and it when it feels really good I tend to see in our numbers a very clear reflection of the success of our numbers and when it feels really off you tend to see that switch of the number of the key metrics that we use to measure.
Andrew: By the way, Richard Branson, I mentioned earlier interviewed you. Why did he interview you, and what happened?
Matthew: It was part of an American Express business panel.
Matthew: And, you know, Richard, he was in Toronto, and Richard loves Canada, and loves Toronto, and has a lot of business in Toronto. And sure enough every time he comes to Toronto he lands the front page of the newspaper, like he does in most cities, when he does spectacles. And so, the question that the interviewer asked me was, you know, Matthew you’ve created, with a young company, you’ve created a lot of buzz and a lot of P.R. how have you done that? And I basically said in a cheeky way, my guess is once again Richard will steal the spot light from me on this trip over. So, I doubt I’ll have any buzz from this experience, although, so Richard why don’t you take this cup of water and dump it on my head. Completely just to get a ha-ha out of the audience. And without blinking an eye, he took the cup of water, and just tossed it on me. And that’s [??] that made the front page. Which is the best part of the whole story.
Andrew: So actually, that brings me to something broader. I understand, in that case, you did something fun with a guy who knows how to get publicity, and he’s up for fun things, and it worked out really well for you. But in general, you do two things exceptionally well. You know how to draw people’s attention to the store, when frankly just walking down the street here in Washington DC, I see your stores, it catches my eye. What are you doing that catches my eye there? And from a further distance, how do you get people who are not walking by your store to notice your stores about publicity. Maybe we can start with someone who’s walking down the street. What are you doing that catches our attention? Demystify that.
Matthew: Well, we think about stores as credibly expensive billboards. They’re like quarter million dollar billboards. And so, instead of additional advertising, we use those stores as advertising, and we try to make them pop, so that you want to learn more about it, and it looks interesting enough to actually walk in. And then once you are inside the four walls we try to offer you and experience that is something enticing enough to, you know, to actually want to purchase and try. And then we hope that your experience with the product will speak for itself. And I would say, we’re far from perfect, but I think we do a pretty nice job at building trail, and building awareness.
Andrew: So what is it about the billboard that draws people in? Is it a certain color that brings them in? Is it, have you found that having leaves in the window? I have no idea actually, I just know when I get to a new city. I guess because I like eating healthy food, I pay more attention to it than the average person. But frankly, there are a lot of healthy places. I don’t pay attention to enough of them. I just don’t notice that they’re there. What are you doing, what have you found works?
Matthew: You know, it’s very interesting you’re saying that because we’re in the process of a very extensive redesign of our stores, including the store front. So I appreciate the compliment that it pops out, and that you’re aware of them as you visit different cities. And yet, we’re actually trying to push the boundaries even further, for the next hundred stores. To make sure that they are even more impactful.
Andrew: What have you found that you say, we need to do more of this, or we need to do different?
Matthew: That’s a good question, and I’ll be able to tell you in about 30 days when we have our new store front designs.
Matthew: We’re working with an award winning architect from, based in actually, Washington DC. And it will be interesting the way they thing about it. But here’s, maybe, here’s how I would put it in very plain English. Which is, and I could use a couple of references, but the design more or less to date has been created and [??] by my brain child, and now we’re sort of handing it over to the experts. And we did that very much with the menu, about a year ago, and the supply chain, about a year ago. And I think as we are growing, and I can hand more of my amateur, sort of visions, off to people who have been doing it for twenty or thirty years, but staying very close to it, so that I can keep a fine eye on the design, and the creative, and the non traditional part of our business, that I think maybe, that pairing works really well.
Andrew: All right, if we can get specifics on how you do that, maybe we can talk a little bit about that question you were asked with Richard Branson, which is, what do you do to get publicity? How do people find out about you in a world that there’s so many food options, that there’s so many things calling our attentions, why, what do you do to stand out?
Matthew: Well, I think, I would say a few things. I [??] into my days in E.R. at Oscar de la Renta. But momentum builds momentum, and so instead of focusing on 20 or 30 or 40 pieces of press every year we focus on six. Six very impactful pieces of media and awareness and information that people want to talk about. If we get the right group picking it up then from there it will spawn another 20 or 30 groups that want to then follow on that story and maybe change it slightly for their own audience. That’s how we build a lot of awareness which is focus on something very big and impactful and then let it spawn to smaller, more regional, local mediums.
Andrew: First of all, I’ve got to say that I’m especially proud that you picked this interview as one of the places that you did pay attention to and you’ve actually spent about an hour with us so far. But second, can you give me an example of how you do that? Who do you go after as one of the few outlets and what did you do that then went beyond that initial press hit?
Matthew: Here’s an interesting thing we did four or five years ago. We did a campaign called Freshii Size Me, the antithesis of the Super Size Me movie, and we fed one of our customers ate nothing but Freshii for the entire month and we had Cleveland Clinic track her progress. We took that little story and bundled it up and we shopped it around. This was when we only had stories in Canada but we bundled it up and had the biggest magazines cover it weekly and cover her progress weekly, we had every news program doing the before and after videos. That was an impactful, creative approach. We were so excited to do it again in Chicago and sure enough before we had a chance to execute it some one-off took our idea and did it and did it XXX market. It became an innovative thing for them but if we were going to do it, even though we were the inventor of the concept, it became old news. I also learned that if something works really well it’s only going to work once and then you’ve got to move onto the next.
Andrew: By the way, the places in New York that you admired allowed people to get cut vegetables that they wanted and pick their own ingredients and make it into a salad. Did you do that initially when you brought the concept to Canada?
Matthew: We did.
Andrew: Do you guys still do it today in all locations?
Matthew: Yeah, we’ve had some evolution as we’ve learned more about our business and refocused it slightly. It still comes down to the fundamentals of being able to control what you eat, control the types of ingredients that you put into your food, make sure that it’s going to meet certain nutritional criteria, if that’s important to you, and fit with your eating lifestyle.
Andrew: I want to say for anyone who’s watching…I’ve got to tell you about Mixergy Premium. I’m hesitating because I don’t know how much to talk about here. I’m just going to do a quick plug because I want to turn it right back to Matthew and this quick plug is this. Mixergy proper, what you guys are listening to right now, is interviews. Mixergy Premium, I bring back entrepreneurs and they teach one thing that they do especially well whether it’s how to do publicity, how to get traffic, how find a business idea, the whole thing. It’s almost all taught by entrepreneurs and if you’re a Mixergy Premium member it’s all available to you at mixergypremium.com. If you’re not, I hope you go to mixergypremium.com right now and sign up to get access to all those things instantly. Final question. What advice do you have for someone who is building a business?
Matthew: I’ll go back to a theme from the interview. Talk is cheap, execution will set you apart. And really, that’s it. So many people when I opened the first location came by and told me that they were going to do that exact thing, they had researched it and they had written a business plan on it and I’m like, “That sounds great. Thanks so much for supporting me.” I started thinking, ‘Well, you didn’t do it.’
Andrew: You’re right. There were years of people saying, “Someone should put a health food restaurant out there. If someone did this, I would eat. If someone did this, my friends would eat.” But Freshii actually did do it. It’s so great to have you on here. I’ve seen your restaurants for years and I’m so glad to finally get to meet you. I was really excited to do this interview with you.
Matthew: Thank you so much for the interview and for your support. I really appreciate it.
Andrew: You bet. Thank you all for watching. And, of course, go check out Freshii. Bye.