Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I do interviews with proven entrepreneurs about how they built their businesses. And I’m so excited to do this interview. I’ve got to tell you that when I was a kid, one of the first industries that got me excited was restaurants. I remember driving down the highway and seeing all these fast food restaurants and at some point, I realized there was an entrepreneur behind them. There was somebody who put all those fast food restaurants everywhere. And then I got to the Hillcrest Library in Queens, New York, and I read about some of them, and I said, “Wow, look at this.” From one idea, they blanket the country and it’s amazing.
But by the time I got to college, there was a sense that all these restaurants that could be made have been made. At that point the belief was, if you are going to start a restaurant chain, it might be like a five-restaurant chain. That was it. Especially in pizza, it was all done. Right? And then we discovered that it wasn’t.
And one of the most exciting stories that I read recently was about this pizza place called MOD Pizza. I read about how it’s the hot new thing. You can go in there, you can make your own pizza, it’s going to blanket the world, and I thought, “Wow, this is like the thing that I always imagined, but I thought was you can’t do anymore.”
I went out of my way, drove an hour in South Bay, just to go and check out at MOD Pizza to see for myself what it’s like to point at ingredients, have them put on a pizza and have the pizza made to order exactly as you wanted. And boy, it was amazing. And so when I saw that I get to interview the founder of MOD Pizza, I was as excited as that little kid growing up in Queens, New York would have been excited to meet Ray Kroc.
So excited to have today’s guest on. He is the founder of among other things MOD Pizza. His name is Scott Svenson. I invited him here to talk about his background, how he came up with the idea for MOD Pizza and how he grew it so lightning fast. And frankly, I also want to ask him about what he’s thinking about all these competitors who are jumping in.
This interview is sponsored by two companies that are huge supporters of entrepreneurship. The first will host your website right. It’s called HostGator. And the second will help you hire your next phenomenal developer. It’s called Toptal. Scott, good to have you here.
Scott: Great to be here. Thanks for having me.
Andrew: As a kid, did you also read about entrepreneurs the way other kids read about superheroes?
Scott: You know, it’s interesting. I’ve always been fascinated with business and entrepreneurship, but I was kind of a reluctant entrepreneur. When I went to college I was a Liberal Arts undergrad. When I graduated, I knew virtually nothing about business or finance or accounting. I was given the fortunate opportunity to go to work on Wall Street where I had a crash course in all of that over two years where they work you like crazy, but you learned a ton. And from New York, I ended up in London. And long story short, having done various things in private equity and then helping to run a healthcare company. My wife and I having grown up in Seattle, identified that there was a lack of a Starbuck style coffee experience in London. And . . .
Andrew: You know, let me pause it. I do want to get into that, but I’ve got to ask you a couple of things about what you just said. How does somebody who has no finance experience suddenly end up in finance and get as far as you did?
Scott: Well, so coming out of undergrad, the investment banks that are recruiting for what they call their analysts positions are looking for a range of experience, those that really understand accounting and finance but they’re also looking for liberal arts undergrads who know how to write well and speak well and can communicate, and they figured that they can train those individuals with the fundamentals of accounting and finance and vice versa. And so I was given an opportunity to go to a bank on Wall Street and, like I said, for two years working 100 to 120 hours a week.
Andrew: Studying companies and helping to do what?
Scott: Helping to raise money for them, primarily.
Andrew: Okay. What kind of companies?
Scott: Companies like Comcast and big jewelry retail chains and smaller leisure company. It was just a broad range. One of the great things about that opportunity was we were given a chance to be exposed to companies from different sectors and industries. So being a liberal arts undergrad and knew very little about the fundamentals of business, I was given an opportunity to learn not only the accounting and finance but what it looked like operating inside of a large media company versus a chemical processor versus a big food distribution company. It was an interesting kind of spot to be able to see various different industries and different size companies.
Andrew: Do you remember filing any knowledge away that now is served you as an entrepreneur?
Scott: Well, you know, the experience broadly, one of the things that I took away from it was there is a correlation between how hard you work and how far you progress. And it sounds simple, but generally speaking, I’ve seen in my career that it’s those people who are prepared to really invest in themselves and work really hard who seemingly get more lucky than the next guy. And so . . .
Andrew: Scott, how did you see that?
Scott: Well, you know, being in this environment, I was fortunate to work with a bunch of people who went on to become very successful in their own fields. But the types of people who are attracted to that start that to that industry generally are okay with this idea of sacrificing a couple years of their life to learn and to grow and to advance.
Andrew: And so literally, you would see people you worked with who said, “I’m not going to have relationships. I’m not going to do anything except for work here. And even if my health has to suffer in long term, I pay for it a little bit, it’s worth it because that’s what it’s going to take and that’s what you took away from it.”
Scott: Yeah, I mean the rhythm of our life back then was work, occasionally work out, and then occasionally go blow off steam. And that was . . .
Andrew: Doing what?
Scott: I live with five guys and most of the guys who worked were the women and the men who worked at my level lived with some friends and you would get to the office at 8:00 in the morning, you hopefully get home by 10:00, 11:00, 12:00 at night. You might go out for a beer or two because you got to have some release. You go back to the office the next morning and you kind of rinse and repeat. Hopefully, you get to work out in over the weekend. So it was a very focused life.
Andrew: But most of those guys do it for a reason. They want to frankly get rich or they want to have some personal meaning in their lives to show that they’re worth something. What was it for you?
Scott: Well, it certainly wasn’t motivated initially for me. There were a couple of motivations. I graduated from school with a bunch of student loans, so I knew whatever I did I needed to be able to pay my way and pay my loans back. That was one motivation. But more importantly, I didn’t really know what I wanted to do with my life. And I figured that if I put myself in this environment, in this industry, I was going to get a front row seat to a lot of different things, learn some skills, but hopefully identify a path that I wanted to lean into after my two-year analyst experience.
So to me, it was a means to an end. I never had any interest in making a career of investment banking. And some people do that and they make a lot of money, but it’s a hard life. For me, it was an education and a way of making a little bit of money so I can start paying my loans back and taking care of myself.
Andrew: And you seem like just a hard worker too. You are Harvard University class of ’88. You’re somebody who had a background in working hard at the things that you loved. All right. And I interrupted you earlier as you were starting to talk about where the idea came for for the business that eventually made you a celebrity in the UK. Where did that idea come from? Where did you notice?
Scott: So my wife and I moved to London in 1990/91. We lived there for five years. And during that time, we identified all the things that London was missing that we loved from home. And right at the top of the list was the Starbucks coffee experience. And so we complained about it for years, we talked to friends about it. It got to the point where my wife Ally actually called a number of the brands that we knew, Starbucks and three or four others and asked if they had any interest in coming to London and if they did, we would help them, we would be a resource. We just wanted the experience in the product in London.
Andrew: What was it that attracted you? Were you such coffee aficionados that you needed the Starbucks type of coffee? Was it the atmosphere? Was it the latte?
Scott: So it’s funny. Growing up until that age, I always enjoyed coffee, but I wouldn’t have considered myself a coffee snob at all. My wife was a little bit more into coffee. But what we found is when we landed in London, it was such a drop off. Around the world at that time, 94% of all coffee consumed was real coffee, 6% was instant. In the UK, those numbers were inverted, 94% of all coffee in the UK at the time was instant coffee. So it was just a different coffee culture.
Andrew: Even as you went into a coffee shop or a restaurant to ask for a cup of coffee. They would pour in the instant, add water and serve it?
Scott: Yeah. So there were no such thing as coffee shops.
Andrew: Okay.
Scott: They had sandwich shops that would sell you a cup of coffee. They did have particularly places like Soho and other trendy areas in central London, they have Italian style cafes, but those were few and far between and not spread across the country. And so it was just a complete dearth of the type of quality coffee experience that we would be used to. And over time, that nagged at us and we finally decided to do something about it.
Andrew: As somebody who analyzed other companies, other opportunities, how did you analyze the opportunity for a coffee shop in a way that others wouldn’t? How did you bring your experience to bear?
Scott: So there are two things. One, we have said many times that if we knew everything that we know now, we might not have ever started the business. And it was, therefore, a little bit of innocent naivety that they gave us the confidence to just jump in and do it. And we brought two things. One, I had a pretty good training in finance by that time, so I had a pretty good ability to think through the financial structure and the financial returns and how we would build a business from a financial perspective.
And secondly, my wife and I have always had a very strong point of view as to what a quality experience looks like. And we basically took that point of view and said, we’re going to create something that we would love going to and will do so with the right financial discipline. And we therefore kind of cut through a lot of conventional thinking and maybe some things that we would have maybe done differently if we had a lot of experience because, at that time, my wife and I had no coffee experience and no retail experience. But we did have a very clear point of view as to what this should look like or what it could look like.
Andrew: How much of it was it could look like this thing that we saw in Seattle?
Scott: Very much. As a matter of fact, when we decided to launch the company, we spent several months developing a name and we actually hired an outside agency.
Andrew: Wow.
Scott: They were helping us come up with a name. And we kept coming back to saying this concept needs to feel like you’re walking off the streets of Seattle into a Seattle style coffee shop. And after several months of trying to come up with names and brands that would work, the agency threw their hands up and said, “Just call it what it is Seattle Coffee Company.” And there were several people on our team that thought that was a terrible idea that that wasn’t a very succinct, clearly marketable brand. But it resonated with my wife and I and we said, “Let’s go with that,” and it turned out to be a great decision.
Andrew: I wonder why because Howard Schultz in his book, “Pour Your Heart into It” talked about how he went to Italy and that influenced his vision of a coffee shop. I wonder why you wouldn’t just say, “Let’s go to Europe which is right next door to us.” You’ve got France with these coffee shop experiences. Italy not much further along. Why go to the U.S. which was mimicking Europe instead of Europe which is right in your backyard?
Scott: That’s a great question. One of the things that we wanted to do is not only bring this amazing coffee experience to the U.K. We also wanted to bring the service culture and ethic and attitude and energy from Seattle. If you were to come visit the High Street in the U.K. in 1995, 1996 when we launched the business, you would have found something extremely different from what you find in the States generally or in Seattle. The approach to customer service was very surly and unfriendly.
And so we said, “Listen, there’s an opportunity to change that and to make it upbeat and positive.” And so that was a key part of it. So as opposed to trying to pull that nostalgia out of the European cafe which there’s a lot of great things, but the coffee experience similarly was going to be different because the way the West Coast style of coffee was a new thing and we wanted to bring that to London along with this service culture ethic that we felt kind of was grounded in Seattle.
Andrew: So that’s one of the things I wanted to ask you in this interview. I looked at my producer’s pre-interview notes on this interview. The word culture is mentioned six times in just a handful of paragraphs. It seems like a big thing for you. I wonder how you could take an American culture, bring it to the U.K. and not make it feel forced and so out of place that you’re insensitive to the local culture. How do you do that? How do you make help culture happen?
Scott: So I’ll tell you. I’m glad you brought up culture. One of the things that we’ve learned through our journey professionally is as we’re building our current business mind, the saying we use is that culture is not just an important thing, for us it is the only thing. It’s that important. And I stole that quote from Jim Sinegal from Costco. And everything emanates from the culture. Everything emanates from the beliefs and the attitudes of the people and how they make decisions.
And so we thought very long and hard when we set up our business in the U.K. about what we wanted the culture to look like and feel like and how we wanted our teams to feel. And it sounds a little callous, but as we were building the business particularly the early days, and we were hiring our teams, one of the great things about the United Kingdom which is much bigger than just Britain, it’s all of the protectorate countries, South Africa and Canada and Australia that a lot of students after they’ve graduated take a gap year and will move to London. And so we ended up hiring a lot of people from Australia and Canada and South Africa who had a naturally outgoing and positive and upbeat and service-based mentality.
And what we had to do is we would fill out a team of 20 people and we would hire 10 or 12 of people from that background or American if we could find them, and we would match them with 6 or 8 Brits. And once the Brits were surrounded by these people that were outgoing and enthusiastic and friendly and treated customers with it, they just rose to the occasion. They just needed a role model because what they’ve been raised within the U.K. was a very different ethic for customer service.
Andrew: I remember my first-night backpacking through Europe, I went to get dinner at a bar. They serve me eggs, they were so oily that I couldn’t finish them. I put the rest on my plate under a napkin. The bartender, who is so proud of his eggs, lifted the napkin looked at how much I didn’t finish, gave me a look like, not like, very clearly saying like, “This is not good.” And it’s totally acceptable to do that.
And I get what you’re saying that culturally, he’s in the right for saying that. He cares about his food. He should care about it to that degree, but that’s not what you’re going for. I wonder how much you wrote down. How much should you say, “We want people who are . . . ” Did you journal it? Did you bullet point it? Were you that deliberate or am I now being too anal about a spirit that you are just trying to go for?
Scott: Yeah. It’s a great question. I mean, one of the things that we did is as we started to build stores in the U.K. and we built our coffee business very quickly, we were very intentional about the way in which the stores came to life, the energy and the culture inside of that store. And we would spend time with that team and the combination of personalities and it’s a byproduct of not only who you have on the team, but which combination of characters are working together at the right times.
And we had a wonderful head of people at the time that she handled both hiring as well as training and we ended up discovering that what we wanted was natural extroverts who were prepared to engage and communicate. And so she ended up doing . . . She changed our recruiting process where the first stage was she would handle . . . she would hold group interviews. And we call them the pink bunny ear interviews because once you do halfway through the interview, they’d be 10 people sitting in a circle. And she was trying to find the people who were comfortable interacting in public and with other people.
Halfway through the interview, there was this pile of props on the floor, one of which was pink bunny ears, and she asked everyone to put on a prop and then to kind of play out various different things to see who was comfortable in, you know, making fun of themselves, and that was a really key part of identifying people that would be successful in our culture.
Andrew: Okay. You got to how many locations before you sold?
Scott: We ended getting up to about 86 locations in about three years. Most of those were in the U.K. but we also had partners with stores trading in South Africa, Southeast Asia and the Middle East. We were getting ready to go public when Starbucks approached us, and through a series of conversations, we ended up agreeing to sell our business to them and become their launching pad into Europe.
Andrew: Why did you decide to sell instead of going at it on your own and competing head to head with them?
Scott: Well, you know, it’s an interesting . . . It’s a very interesting question. The primary reason was, is that we grew our business and always had a huge amount of respect and admiration for Starbucks. It wasn’t like we were building it in the U.S. competing with them head to head, we develop an animosity. We said from the outset, when we launched our business that our business was inspired by them and the only reason we were doing it is because they had chosen to go to Asia first, and they were preoccupied building out their business in Asia, and we just couldn’t wait, so we opened Seattle Coffee Company, but we talked about them in a way that was very respectful. And so it was kind of a natural when they approached to us that we would partner with them. That was one thing.
The other thing was, we launched this business when there was nothing like this in the UK or, frankly, in most countries outside of the United States. And my wife had a quote at the time, which was, we did this to introduce these markets to this concept, but we didn’t do it necessarily to become a part of the coffee wars that are coming because it was going to be a category where there was going to be a lot of competition and a lot of challenging times.
And the other thing was that if we decided to stay, we were going to take the company public, my wife and I were very, very closely associated with the business, so that would have meant us committing to stay in the U.K. indefinitely, and my wife and I are both from Seattle, wanted to move back with our family. We had two boys at the time. We have four boys now. So selfishly, selling it to them would have freed us up to then have a path back to Seattle. And so for all those things put into a pot and stirred up, we decided, and they also came and made us the proverbial offer we couldn’t refuse, we decided to sell. Now . . .
Andrew: It’s the number that I have, 85 million, right?
Scott: Yeah. It was just under 100 million Sterling. And this was a business that we had invested about £5 million of equity in to. We’ve been very, very efficient in terms of how we built the business. And we did it . . . It took us about three years, but the majority of our growth took place in 22 months. And so it was a rocket ship that went very fast.
I will tell you that we had a plan developed to compete with Starbucks globally, and that was our plan B if we didn’t do something with them. And I’ll tell you there have been many times my wife and I said, “Should we have done that?” because I have no doubt we would have been very successful. And we may well have built a global business that would have been very successful and financially, far more rewarding than where we ended up. I think all things said, we made the right decisions.
Starbucks is a great company. We’ve loved being associated with them. We’ve made incredible friendships through our time working with them. And many of the people that are involved with MOD now are people we met at Starbucks. And so we really feel like that experience was part of our journey leading us to MOD, and therefore, we wouldn’t change anything.
Andrew: I’m looking at a chart from the New York Times of Starbucks growth. We think of them as this huge company. And they did have a hockey stick growth on this chart. But that hockey stick really didn’t kick into high gear until the late ’90s. So you were at a point where even in the U.S. they weren’t huge. By the time you sold, I think they had . . . What is it? Twenty-five hundred stores, somewhere around there.
Scott: Yes. 1998.
Andrew: ’98. All right. Let me take a moment to talk about my first sponsor and then get into the second thing that you did, which, frankly, shocks me because I thought you’d want to go right back to Seattle. But first, this first sponsor is a company called HostGator. Do you know HostGator?
Scott: I don’t.
Andrew: All right. I’ll tell you about them. HostGator is a company that will host your website. Now, there are tons of companies that do this, so why would anyone go with HostGator? I think there are a couple of reasons. Number one, they, like Starbucks, started out early, then there was this competition where the tons of companies were hosting. They were the big behemoth they came in and clobbered almost all the competition and then they partnered up and became one with whoever was left standing. And so they’re strong company with the ability to keep growing and maintaining things, but most people don’t care that much about it.
Here’s what they care about. When you sign up for HostGator you get a low price, and they have this unlimited domain package which means that any entrepreneur could come up with lots of different ideas, spin up a new website and not have it cost anything beyond obviously, the domain name if you want to get a new domain name for it. So you could . . . Like I did that with Mixergy. I used that Mixergy as an invitation site. This is a failure what you’re looking at. The Mixergy invitation site failed, but I had blog.mixergy.com which then became an interview program which and this. Anyway, and then I made it into the main site because I loved interviewing so much. But I could only do that because it didn’t cost me any extra to have blog.mixergy.com or interview.mixergy.com or, frankly, newsite.com.
All right. Anyone out there who wants to go host their website and, frankly, that even includes you Scott or your kids, if they’re trying to get into entrepreneurship, great hosting package, low, low price, unlimited domains, hostgator.com/mixergy. They’ll take really good care of you, especially if you use that URL. Not only will they give you a low price but they’ll know you always came from me. And if you’re not happy with them, 45-day money back guarantee. HostGator.com/mixergy.HostGator.com/mixergy.
You know, before we move on to the next thing, I saw you’re a celebrity. To this day you’re still on their website. I don’t know if you know it. I think on the homepage or one click away from the homepage of Seattle Coffee Company. You became celebrities. What’s one fun thing that happened because you are celebrities, you and your wife?
Scott: Oh, gosh. Well, I would point to two things, and they’re very different. One, after we sold . . . And you’re right. We built this little business that ended up having a big profile. And sometimes things happen that are rational and sometimes things happen that are irrational. This was a little irrational. We got far more credit than we were due. Our profile in the U.K. built up far more than it probably should have, but it was a fun time. And one of the things that happened is, as we were in that aftermath of the sale, Ally was asked to join the board of a theater in London that was being rebuilt and repositioned. And it was with an incredible cast of characters. There were 10 or 12 or 14 people on the board, but it was, you know, Kevin Spacey and Michael Bloomberg and . . .
Andrew: Wow.
Scott: Charles Saatchi and, you know, just everybody were like these amazing people. And then there was Ally, and I think she’s amazing, but she, you know, not necessarily she didn’t have the same prominence. And we went to this dinner, this board dinner and they set the stage of the theater as they built it as this amazing venue for a dinner and we were all sitting around the table and it was just one of those moments where Ally and I looked at each other and said, “What are we doing here?” as we were sitting around the table with all these really cool people.
The other experience I had, or the we had was early in the life of Seattle Coffee Company we had a young General Manager named Pete Howie who was from South Africa and he was living in London and he ended up becoming a General Manager for us. He came to us after working for us for a couple years and said, “Hey, listen, I know I’m only 22 but I was wondering if you would be interested in partnering and having me and my family take Seattle Coffee Company back to South Africa.” And we were so fond of Pete that we said, “Sure, we’ll explore that. We are entrepreneurial.”
We ended up doing a deal with his family and another family and not long Afterwards, we ended up selling to Starbucks. So they’d only built a couple of stores. Starbucks and Howard Behar, in particular, engage with them and said, “Hey, listen, we really like you guys. The chances of us going into South Africa anytime in the near future is very low. We’ll release you from the licensing agreement that you had with Seattle Coffee Company which they then acquired. And as long as you just build inside of South Africa, we’ll leave you alone.” And my wife and I, and our boys all have been back to South Africa twice in the last four years. We hadn’t been there for ages. And it turns out that in South Africa, Seattle Coffee Company now has 150 plus locations.
Andrew: Wow, whee.
Scott: And they’ve become this really cool brand. It’s maintained the same brand attributes and the same culture that we had when we were operating so many years ago. So that was an incredibly cool experience to be able to back and to see the brand’s still alive.
Andrew: That explains why when I was searching for you, seattlecoffeecompany.co.za showed up so fast. I said, “I must be typing it wrong. Maybe it’s a generic words or the different.” I see. So you guys are connected.
Scott: Yeah.
Andrew: And then your wife got a TV show too?
Scott: She did. She was asked to host one of the first reality TV shows in the U.K. She ended up not doing it but it was just one of those moments where for about four or five months as they were kind of pulling it together and she was considering it. It was one of those moments where we would occasionally look at each other and say, “Why is this happening to us? This is kind of random.” But yeah, it was a cool experience.
I mean, I think one of the biggest growing experiences we had was when we decided to pack it all up and move back to Seattle and give up this notoriety that we had in the U.K. that opened a lot of doors for us and made life very easy for us in the U.K. but we really wanted to raise our family in Seattle and we had this strange experience. As we were preparing to head back to Seattle, we got on a British Airways flight, you know, we’re flying in economy, we had our two boys and all the gear and it was just chaos. We sit down and I reach for the in-flight magazine that’s in . . . and I pull it out and on the front cover is big as the entire magazine is a picture of Ally. And we didn’t know that this was being published. And it was just this great reminder, “Here we are flying home. It’s kind of a symbolic you’re relieving this all behind.”
Andrew: So you get back home . . .
Scott: We said to ourselves, “We will know in the future whether or not we were just really lucky with what we’ve done in the U.K. or if we’re good enough to be able to recreate something else that is similarly impactful and cool in Seattle.
Andrew: And it seems like you’ve tried a few things. But before we get into the few things that led to MOD Pizza, can you tell me a little bit about Carluccio? How did that come about? It was founded before you guys got involved with it, right?
Scott: Yeah, yeah. So it was a chef and creative personality named Antonio Carluccio well known in the U.K., and he married a dynamic woman named Priscilla Conran who was the sister of a guy named Terence Conran who is a well-known restaurant tour retailer designer in the U.K. So Antonio and Priscilla, this dynamic couple, had a restaurant which was called the Neal Street Restaurant. It was ranked as one of the best Italian restaurants outside of Italy. And next to it, they built a deli because they were going to Italy regularly to source products for the restaurant and then, being as creative as they were, they said, “Well, let’s start packaging it and selling it under the Carluccio’s brand.”
Long story short, they had done that, it had become an institution. They approached us and said, “We would like to take this Carluccio’s brand that we have built and we would like to turn it into something bigger.” And they had developed an idea for a deli cafe. We work with them to refine the concept. We funded their initial launch and we partnered with them for 11 years as that business was built. It was an incredibly gratifying and enjoyable journey because they were so talented and the way that brand came to life and the experience came to life was just amazing.
There was an incredible team that was brought in to run the business. So my wife and I’s role was a little bit different. We were very engaged and we advise but we weren’t running the business day to day, but it was a brand and it was a team that we loved, and so it was a great experience. That business ended up going public in the U.K. had a very successful run. We licensed that concept to a group out of the Middle East because they wanted to grow it in the Middle East. After a couple years that group came back to us and said, “We love this brand. We want to grow into a bunch of other markets, but we prefer not to be a licensee if we’re going to grow it that way. We’d like to own the brand.” So they ended up making an offer for the company and taking it private.
Andrew: I do see it. When I was looking it up, I saw the Dubai location, I saw the photos of it. There’s this one Dubai location has 776 reviews on TripAdvisor. It’s unbelievable that that many people have opinions about this one location, but at least it gives me photos and insight into it. Before we close it out, why get involved with that? Since you were entrepreneurs already, you had a vision for your life, you didn’t need to. Was it the business opportunity? Was there something else?
Scott: Well, there’s a side story to this, which is as we were transitioning out of Seattle Coffee Company and I then spent two years helping to set up Starbucks European plan, converting the stores from Seattle Coffee Company to Starbucks and putting in place their growth plan into Europe. Ally and I spent quite a bit of time thinking about what was next for us. And we had a love affair with Italy. We went to Italy at almost every opportunity. And we were in Milan having dinner and we started talking about a concept that was a mash-up of a bunch of things we love from Italy, really inspired by, you know, the simple foods and some of the other elements that we just were inspired by. And we came up with a name for it and just a general direction and we thought, “This is something that we could see doing when we get back to Seattle.”
You know, we kind of set it aside, we had our day jobs. And then we met Antonio and Priscilla, and the concept that they wanted to build was almost identical to what we had developed in our mind’s eye. The difference was what we had done is made up a brand. They were authentic and they were the real deal. So for us, it was an easy decision. They had been out trying to find someone to back them for two years. When they met us, within 48 hours we’d agreed to fund their project. And it was just one of those things, it just resonated with us and made sense to us, we had a passion for it. We really were attracted to them as people and as partners. And I’ll tell you, it was a magical, magical journey.
Andrew: What’s Sienna Group? Another . . . You founded the Sienna Group, right? What is it?
Scott: Yeah. So when I moved back to Seattle and then we were thinking about, “What do we do next?” Initially, we thought, we’re not going to jump back into a startup business because it’s all-consuming. We had two boys, very shortly thereafter, we ended up with four boys, raising a young family. Jumping back into the startup business and giving it everything that you need to give it to be successful, we just felt that wasn’t the stage in life we were in at that point.
So instead, we set up the Sienna Group, which was a holding company intended to invest in emerging growth businesses, businesses that were established that had good teams that needed help. And I had some friends pulled some capital and I manage this business and we went out invested in businesses that we felt that we could own forever. It wasn’t like a typical fund where the idea was to buy, build, and sell. This was intended to be the type of thing where we found businesses that we could build and we’d hold on to forever.
And the reality is, what happened is through that journey, we did some really interesting things. We made some mistakes. I realized that I was a better leader, CEO than armchair quarterback. And two, this idea for MOD came along. And so MOD was initially kind of launched by Sienna and then as it started to mature, my wife and I founded it, we kind of brought it to life. But as it started to develop, we were like, “We’ve got to get behind this. We either need to get behind it full time, or we need to find someone else to do that.” And just given the opportunity, we decided to put ourselves fully behind it.
Andrew: What are the mistakes that you made that helped you understand who you were and what you’re capable of? I don’t want to give people the impression or frankly of myself, the impression that everything you touch just turns to gold because I think that’s a false perception. So what did you learn about yourself? What are the mistakes we could all learn from?
Scott: Oh, that’s a great question. So my wife and I are highly motivated to be successful. We’re competitive and want to be successful. But it’s important that you understand why you’re trying to be successful. Our society glorifies and celebrates fame and fortune, and power and prestige, and all of these things that the implication being is that those things will lead to happiness.
But the reality is, if you peel back the layers and you look at the research, there’s no correlation. Once you get beyond a certain minimum level of financial security, there’s almost no correlation between finances and happiness, and all these other things, fame and position, and prestige, very little. If you want to know where the happiness comes from, all the research points to happiness is correlated with relationships, with a sense of community and belonging and a sense of purpose or meaning in your life.
And my wife and I, we’ve studied this a lot over the years. Back then, we kind of intuitively felt this because we just felt, “What were the things that made us happy? Where did we get the most joy?” And it wasn’t from the end result, we realized, it wasn’t from the payday. It was from the journey. It was from the way in which we were able to impact the people who joined us on the journey, building our businesses.
When we shifted to the Sienna Group and we were investing more, we got disconnected from that and our ability to influence substantially the culture of these organizations was very muted because there were some other entrepreneurs who started it, and it was really his vision, which is fine, but we realized over time that if we’re going to pour ourselves into helping build something, it has to align with who we are as people and our values and our belief system.
And when we really leaned into MOD and we were able to develop MOD in a way that was consistent with that, has become crystal clear in our mind now that if I could go back, that’s the way I would have led my entire career. The little detours along the way were great learning experiences. But if I could give advice to any entrepreneur, for me . . . We’re trying to build our business today, developing sustainable competitive advantage, using two intangible things, culture and purpose. And if I could go back in time and advise my younger self, I would have done that throughout this.
Early on we were very culture-focused, but we didn’t embed this sincere purpose into our businesses because frankly, we were scared. We were scared of failing. We didn’t feel like we had enough margin for error, and therefore, we were running scared and we just needed to make sure we can pay the bills and keep the business.
Andrew: And purpose felt like another bill, another task as opposed to something that got you where you were trying to go.
Scott: Exactly.
Andrew: Let me talk about my final sponsor and then get into how you came up with the idea for MOD and how you grew it. And then I’ve got so many notes here that I want clarity on about how you’re bringing culture in, like what is life coaching that you bring into people. How are you paying salaries that are higher than some of your competitors?
All right. The sponsor is a company called Toptal, but instead of talking about Toptal, I got to tell you something that I remember reading about Instagram because wondered, why did Instagram in the early days feels so much more fun than all the other photo apps that are out there?
Well, I was on a hacker website and one of the founders of Instagram said, “Here, let me show you one thing that we do that is engineering base but still makes the app more fun.” He says, “Most of our competitors, in fact, all of them, when you take a picture, it’s on your phone. You start to add a description. The photo is still on your phone. You finish the description, you hit Submit, and then the photo goes up into their servers to get posted.” And so it feels like you have to sit there and wait especially back then when internet speeds on the phone were a little bit quirky, a little bit slow.
He said, “What we decided to do was, adjust it. As soon as you take a picture, we start uploading it to the Instagram website, you start typing in your description, while you’re typing it in thinking it through, we’re uploading it as soon as you hit Submit, it feels like we’re uploading it and we get it up to our server super-fast. And it’s not that we’re faster at getting it up into our servers, is that we do it ahead of time. And of course, if you decide not to upload it while you’re writing your text, we delete it and it’s not there.”
And I thought about that in relation to Toptal because when an entrepreneur has a task that they need, it’s very easy to go to the developer and say, “Do it this way.” As soon as somebody takes a picture is stored on their phone, then write the description, then upload it. But only an engineer who’s smart and understands the problem and understands this tools for building the solution can come up with a solution like that. And that’s why Toptal says, “We’re not going to do exactly what you entrepreneurs want. We’re going to get you a developer who could understand your problem and work with you to come up with a better solution.”
And so they’re network of top developers, highly screened. In fact, one of my past guest sold his business for I think over 100 million. He said, “I’m going to take the Toptal test.” He couldn’t get through it. It was just too intense. That’s how they want to test their people to make sure they get only the best of the best.
Anyone out there who’s trying to hire developer, including you, Scott, should go check out this special URL from Toptal where they’re going to give you 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk-trial period of up to two weeks. They know you’re going to be 100% satisfied, so they stand behind the developers they introduce you to.
You going to go to this URL, you hit the button, as soon as you do, you or whoever’s on your team who’s hiring will get to talk to a matcher at Toptal, you’ll tell them what you’re looking for, and they’ll tell you whether they can fill that need or not. And if they can, you talk to developers that they match you with. If you love them, you can often get started within days. If you don’t, you move on. You haven’t lost anything out than a phone call with a knowledgeable person who knows a lot about developers and how to hire.
So here’s the URL, top as in top of your head, tal as in talent. That’s toptal.com/mixergy. T-O-P-T-A-L.com/mixergy. And they’re giving us a special deal on that URL because it’s founded by two Mixergy fans. And congratulations to them on their success. toptal.com/mixergy.
You know, I’m kind of a matcher myself. I pick up on my guest’s vibe. And because you’ve got kind of an elegant, easy way about you, I’m elegant and more easy going about my ads. When I’m with someone who are more forceful with, the ads are like almost an infomercial.
The idea for MOD came . . . You and your wife from what I read said, “You know what? Let’s see if we could try something else. Maybe we got lucky in the food services business.” Why were you trying to prove something outside of the food service business?
Scott: Well, so, when we decided to lean into MOD, we have long conversations about whether or not we really wanted to take on another startup. We had a good life, we had made some money, we didn’t need to do it to pay the mortgage. And we had long conversations about how we wanted to invest our journey. We’re big believers that life is the journey, it’s not the destination, and so how we invest at that time is critically important to us.
Some people will go out and have success in business and then shift gears and get back involved in the community or giving back to society. And we thought about all of that. And because we’re very minded to want to get back, but what didn’t resonate with us was shifting gears and going to write checks or otherwise try to apply ourselves into an environment that we didn’t have a lot of experience, and make a big impact.
And this opportunity came to us to look at the pizza industry at a time when we were having all of these thoughts. Wind forward two or three years into our MOD journey, and what hit us was, we don’t have to decide that we’re going to have a professional chapter of our career and then a philanthropic kind of community chapter. We can combine those into one and we can dedicate ourselves to going out to build the most kick-ass successful business that we can, but we can use that business as a platform to make a positive social impact. And if we get it right, that impact will survive well beyond our tenure, and it will become kind of this perpetual motion machine. And so . . .
Andrew: What was the impact? What did you care about so much that you would have given up entrepreneurship for or infused into a business in order to carry out?
Scott: So, we could have a whole another session on kind of our views on where our society is right now, the needs of our society. There are a lot of needs. And it’s easy to get paralyzed by them. I love the Gandhi quote which is, “Be the change you want to see.” And so we were pretty good at sitting back and saying, “Gosh, there are all these intractable issues that I’m not quite sure how we’re going to get out of.”
So we said is, “Well, let’s build a business that starts and let’s focus on making a difference in the lives of our people. If our business can be built for and around and about our people and we can make a difference in their lives, then we call it spreading MODness, and the power being the ripple effect that comes from that it’s . . . Yes, it’s important that if we are able to hire somebody who might be transitioning out of jail and they really need someone to believe in them and give them a chance.
And we hire them, we pay them a living wage, we tell them right when they start, “Your past may well describe you, but it doesn’t need to define you. What matters to us is what you do next. We’ve got your back, you’re accepted here.” And basically, let them know that their past has no bearing in our minds on their role in law. And if that . . .
Andrew: This was from the beginning that . . . Is it right that right in the beginning you hired people who are . . .
Scott: So I’ll tell you, at the beginning, my wife and I said, “We want this business to go north.” And for us north meant, “We’re going to use the business as a platform to make a positive impact focused on our people, and then over time through them into our communities.”
And then we set curves. Right? One of our core values is, “Wide boulevards and high curves.” The curves were our beliefs, here’s what we believe, and here’s how we want to behave. We then invited a bunch of people to come and then join us, shared with them the direction and the curves and said, “Help us figure this out.”
The hiring of a second chance employees, somebody who came out of incarceration, was not something that my wife or I did, it was something one of our team members did. And that one step which they interpreted as part of that process of making a difference in someone’s lives, blossomed into something great because that particular employee was fabulous and then he brought in some of his cohort who were equally fabulous and grateful and culture carriers. And then somebody else hired someone transitioning out of foster care, and then that became a thing. Someone else hired someone transitioning out of rehab. Someone else hired someone who had neurological disorder.
And so all these things have blossomed, and my wife and I can take credit from none of it. Other than saying, “We’re going to build a platform that is focused on a certain mission, and then over time, we want this to be about building bridges for people where we can help them.” It’s like Maslow’s hierarchy of need. There are a bunch of people who need to get . . . they need help getting up those first few rungs of that hierarchy. They need their physiological needs addressed, food and shelter. And it sounds crazy, but in our society, there are a lot of people that need help addressing those issues. Secondly, they need a sense of belonging. They need a sense of safety, psychological, safety, financial security. And then they want to advance to being a part of a group and feeling loved and feeling accepted. Those are the things that we really excel at.
Now, we realized that over time, those people will move on to other things, but if they take some of what they’ve learned in MOD and some of the attitude and the culture, that’s where we think we can make a big impact because the ripple effect of them moving on and bringing some of that philosophy to bear on their next journey is very powerful.
Andrew: That’s why it’s a little hard to understand it as I look it up. It’s not we believe in this one thing, we believe in giving people who are incarcerated a second chance, we believe in paying a living wage. It seems like if I could understand having read your site and seeing a few other things, it seems like what you believe in is, if we . . . that we want to make a better environment for our people and then empower them to make a better environment for the community around them, we’re not going to decide what a better environment for our people is necessarily and we’re definitely not going to decide what organizations they help out.
We’re just going to say, “We will push it forward and you’ll push it forward too.” And one way to exemplify it is, you don’t donate $1, I think, for every pizza to one organization that you believe in as a company, but to one organization that the local shop believes in as a local restaurant. Right?
Scott: Yeah. So it’s a great question and we’ve had this discussion internally. We’ve been back and forth, should we really get behind one cause, one organization so we can focus our impact? And the reality is that that might be more easy to describe and easy to articulate to the outside world, but it’s not really who we are. We decided quite some time ago that we do two things well, and those are the two things we’re going to lead into. We’re a restaurant, and so we feed people.
And secondly, as a restaurant we employ people. So we decided to focus our social impact on those two things. Employing people in a way where, one, we’re giving opportunities to people who otherwise have barriers to employment. And there’s a big category of people who just need someone to believe them. They’re not productive members of society. Society is paying a tax to support these people. If we can make them productive, if we can believe in them and bring them up, that’s a big win for society. One, now you’ve got people who are contributing back into society.
We talk about the journey at MOD is about getting to gratitude. And if you come in and are accepted for who you are, it doesn’t matter where you’ve come from, what your ethnicity is, what your background or beliefs. As long as you come in with the right attitude, and then you are accepted and you were trusted, that’s another key part of our culture, which is, we don’t have a lot of rules. We trust you to make the right decisions based on our beliefs. And then you kind of progress through this journey, ultimately, you’ll get to gratitude. If you get to gratitude, what that motivates is you want to now give back to that next person. So . . .
Andrew: You know what? I saw that somewhere on your site. There it is. It’s the, “Spread the movement #spreadtheMODness.” And then right in the center in like graffiti it says, “Gratitude with attitude.” I have to be honest with you. When I saw that, I felt like everybody says that. Now that I hear you talk about it, I get the point of it. And then another question comes to my head. I’m trying to rack my brain to see how many millions of dollars you raised. I thought I saw a $50 million raise, a $40 million raise, is all coming from memory on the spot here.
Scott: Yeah.
Andrew: But regardless of the exact amount, you have a responsibility, a fiduciary responsibility to the people you raise money from. How do you then with this need to do right in the world help build this company in a way that allows them to see a return on their investment? What are you doing? That’s . . .
Scott: So there’s two sides to this journey we’re on. What motivates us, what inspires us, what brings the team together, what’s allowed us to be the fastest growing restaurant chain in the country for the past two years is our purpose. The team feels that what they’re doing matters.
Andrew: What do you mean? How does that play itself out? I have to tell you, I’m not the kind of person who’s keenly aware of the details in life. I don’t remember noticing that when I was there. I remember the pizza was good, I remember the experience was good, but how does that come from there?
Scott: So we focus on making sure that our squad understands it and that the business is being built for them and around them, and it’s about them. One of the things that we’ve been a little challenged with is we know that from a customer perspective, we’ve got to engage our customers because it’s a great product. It’s a great price. It’s consistent in a cool environment. Those are table stakes. And we think that customers really like us because of those things.
Over time we want our customers to love us, and we believe the journey for that is to introduce them into the concept and over time as they come back to slowly expose them to the real meaning and purpose behind MOD. Now, we’ve got to be careful how we do that. In today’s society, most brands over-promise and under-deliver, and we don’t want to be one of those brands. We want to be the opposite. We want to be the type of brand when you peel the layers back, you’ve got a positive surprise every time you go deeper.
But we realize that if we don’t tell our story in some fashion, people aren’t going to get it and therefore we’re not going to . . . it’s going to be the best-kept secret. So that’s something we’ve been working on, which is, how can we authentically and sincerely share with people what we’re doing without it coming across as a shameless marketing pitch. And we’re working on that. There’s a number of things we’re doing. That’s a longer conversation.
But the first part is, the purpose is a really powerful source of engagement and inspiration for the team. It is what has allowed us to grow so quickly and do so successfully. The other side, though, is we’ve got to build a kick-ass business. There is no purpose without profit.
Andrew: So let’s talk about how you did that. The first thing you did was, you created a store in Seattle, you called it your laboratory. You wanted to see, does this even make sense? What did you test and what did you learn from that laboratory?
Scott: Yeah. So initially, no one had done this fast-casual pizza thing before, and so we had to figure out how to do it. We had to figure out if customers liked it. We had to figure out if they would come back if we could do it fast if we could get our cost of goods sold into line, what the menu should be, how the stores should be laid out, what equipment we should use. There were a thousand questions we had.
Andrew: Couldn’t you just say, “There’s Chipotle out there. We’re going to do the same thing for Chipotle as pizza. Instead of a tortilla, we’re going to have dough come out.” That’s the way it seems when everyone describes you. Why wasn’t that the way it would work out?
Scott: Well, and by the way, we were big fans of and looked at Chipotle as a model, but the reality is when you’re delivering our product versus there’s, there’s so many differences in the back of house in terms of the way we prepare and deliver our product. Chipotle prepares their product and then puts it out in steamers and they just assemble it for you. We’re preparing a product in front of you and then we’re cooking it. There’s a number of significant differences. To the customer, it’s a similar experience, but the execution of it is quite different. And so we had to figure all that out. And we started with one, we then built a couple more. In our first . . .
Andrew: Forgive me. What’s one thing that you learned in that first store that wasn’t obvious? Just give me a sense of how that laboratory helped progress the idea?
Scott: Well, we didn’t know whether or not people would be comfortable eating pizza at lunch. It’s not generally at lunchtime. You know, it’s heavy, you have to sit down, it takes a long time to wait for. Would women eat pizza at lunch? There were a bunch of questions. The reality was, is that once people understood what MOD was about, 11 inches thin artisan style pizza and get whatever you want and you can load it up or you can keep it light and healthy. Once they discovered that, lunch has become a big part of our business, but prior to testing it, we didn’t know.
And there were hundreds of lessons. And I’ll tell you the first chapter of our journey was we had very mixed success. We opened four stores, two of which underperformed, one of which we ended up closing, and then one was pretty successful. So those were our first four. Not exactly the type of experience that you would think would lead to a lot of enthusiasm that continued to grow.
Andrew: Twenty-five percent hit rate for store is not huge. Why did the one that closed down close down? What did you learn not to do because of that?
Scott: It was much about real estate. Our brand wasn’t very well known. The concept wasn’t very well known. And you put all of those things, a new concept, a new brand into a market where the community was still developing, there were just a bunch of strikes against it. If we opened up in the same location today, I think we would do well here in Seattle, but it just turned out to be too early and we learned a ton.
But it’s important to know when we launched and we started growing in Seattle, we said, “We’re either going to learn enough in that initial phase where we can arm ourselves with what we need to grow fast. We’ll go slow initially so we can go fast eventually, or we will fail fast.” We didn’t have any intention of deluding ourselves into choosing low hanging fruit and feeling like we had something when we really didn’t have it. So we stressed tested it as much as we could in those early days. One of the reasons why we didn’t have screaming success in those first four sites, we then take the learnings from those sites, applied them to the next four, and four years in we had eight sites. And it was at that point when we felt like we had learned enough, we had conviction, and then we really leaned into starting to grow.
Andrew: And it’s not a franchise operation. You own the stores.
Scott: We own 80% of the stores and we do have a small group of tightly knit really high caliber franchise partners. We have nine of them, but like I said, 80% of our stores today are company owned.
Andrew: So one of the things that when our producer asked, “What are the big challenges?” you said, “It’s really hard to be in a business where people can take all your ideas, essentially.” I forget how you phrased it. Oh, here we go. Any differentiation you create can be competed away very easily. I went on Google to see, “Did Pieology started before?” No, they started two years after you. What about Blaze Pizza? Did they start before you? No, they started three years after you. So it seems like there are a handful of companies that came on after you with similar concepts. What do you do about that?
Scott: Well, listen, the reality of retail is that people . . . if you come up with a great concept, there are going to be a lot of entrepreneurs out there who are going to borrow your ideas and try to do it better. So while I can get upset about it because there was a lot of kind shameless copying of what we were doing, the reality is we have to just get beyond that and say, “That’s the nature of retail.” And to be honest, if you go back in our career, we built a coffee business in the U.K. that was inspired by Starbucks, and we were very overt about that from day one.
Andrew: But is there something you can do like, you have to get out there faster than everyone else, build a better reputation? What is your plan for competing? Even though you accept it, doesn’t mean that you won’t be railroaded by them.
Scott: Yeah. No, it’s a great point. If you’re going to build a business in retail, particularly food retail, these days, you have to be prepared for the fact that if your concept works, the news is going to get out quickly that it works and you’re going to have a lot of dynamic entrepreneurs who are going to come and try to take your business away by building a competing concept.
So how do you win in that case? I think there are two things. One, first mover advantage, getting into a market early and establishing your brand and becoming known, and there’s a maturity process that goes on of people understanding the concept and the brand. The quicker you can get up that maturity curve, you will have an advantage over your competitors. So first, mover advantage, getting out and being aggressive with your growth, which is one of the reasons why we’ve grown so fast over the last year years.
The second thing is, identifying what are the things that will differentiate you. And this is what comes back to a lot of people thought we were crazy to take this approach, but we believe that playing the long game this will be the thing that will allow us to win. We are choosing to compete based on a differentiated experience in the stores that is inspired by our purpose and our culture.
And Maya Angelou has a fabulous quote which I point to often when I try to explain our competitive strategy. And her quote is, “People will soon forget what you say or what you do, but they will not soon forget how you make them feel.” And when you come in our stores, yeah, there are all the tangible things, but ultimately, when that customer leaves the store, how do they feel?
Andrew: So even though I don’t know what made me feel that way, all of that is going into it and it’s not so overt that I noticed how it’s done, but it is clear enough that I noticed that it’s being done.
Scott: Right. I mean, if you walk in and the store is clean, it’s well designed, you get a great product, you get it just the way you want and you get it at a great price, and the team is happy and upbeat, and happy to see you, happy to be there. I’m a big believer that there are thousands of things that influence your experience in a store. You’re only conscious of some small number of them. But I’m sure you’ve had experiences where you’ve been in a retail location and you walked out and you said, “I really like that place.” And someone says, “Well, why?” “I don’t know. It’s a little this, it’s a little that, but it felt good.”
Andrew: It’s like that example that I gave of Instagram where something felt good and I didn’t even know that it was the speed. Who’s this guy, James Markham? Is he one of the co-founders of MOD?
Scott: So James was a guy early on who was a part of the team that founded MOD. He was the one guy on the team without any pizza experience. He had run some pizza by the slice restaurant concepts in the past. And he was a part of the founding team, was there through the first store opening, and then left before the second store opened.
Andrew: And then he went to work with competitors.
Scott: Yeah. And so James is an interesting guy. And we worked with him for 18, 24 months, and we were attracted to his passion and his energy, but he was a difficult partner, which is one of the reasons why he ended up leaving. And he ended up going in launching Pieology which was a mirror image of MOD at the time. The concepts have diverged since then. And he then fell out with his partner there and went on to found another concept called Project Pie. Coincidentally, when we were launching MOD to begin with, we called it Project Pie as kind of the working title, and we had three brands that we were going to potentially use to launch the business. MOD won out. But one of the brands that we had developed was Pieology. So, there’s a lot of history in this . . .
Andrew: And he was the one who was brand identity, and responsible for brand identity, as I understand.
Scott: Pardon me?
Andrew: He was responsible for brand identity too, so it was . . .
Scott: No, no. He wasn’t.
Andrew: Oh, he wasn’t. Okay.
Scott: Not at all. That was very much . . . When he joined the team and he had the pizza experience, he did help us substantially think through how we could develop a crust and so forth to be able to build this concept, but he had no real experience building a brand, building a business. And those are the things that the rest of the team really took the lead on.
Andrew: You guys are everywhere. When we go into a MOD location, the first thing we’re going to notice is if we hadn’t had this experience before that we can actually pick whatever we want. The second thing we should pay attention to that most people won’t notice is what? What will give us a sense of why the business works so well that we might not notice if our eyes hadn’t been open to look for it? What should I look for next time I go in?
Scott: For me, the most important thing is to engage with the MOD Squad.
Andrew: The team. That as I talk to the people who work there, I’ll get a sense of what they’re . . .
Scott: Talk to them. Ask them what it’s like to work in MOD and what their impression of MOD is and what MOD means to them, and I’d be intrigued to hear what you hear. I think, generally speaking, you’ll get a completely different level of insight when you talk to the team. And by the way, we’re a people business. We employ over 7,500 people. Not every single one of them is going to be a raving fan. So by asking you to do that, I’m inherently taking a risk, but I believe fundamentally that there are so many people out there where MOD has made a difference in their lives and they care deeply about MOD that you will generally speaking, get a really interesting and positive insight into who we are, what we stand for by just talking to the team.
As a matter of fact, back to your previous point of how does a customer know that we are what we are? We’ve started to not put messaging in the store that tells you what we’re doing because I think customers are cynical of what brands say. What they want to know is what will you do. And so, we just put some provocative statements in. We’ll put a statement in now sometimes hanging on a wall that says, “This is not a pizza place.” Or we have kind of the saying that we try to embed in all of our new stores which is, “At MOD, we make pizza to serve people. We call it spreading MODness. Welcome to MOD.”
And the reality is, that doesn’t tell you very much, but it tells you enough to potentially go up to one of the MOD squaders and say, “What the hell does that mean?” and hopefully have a conversation, and then you get the real story from the people. You don’t get a “canned” story from the marketing department.
Andrew: Well, one of my challenges is that you are all around San Francisco, but not yet in San Francisco. And I get it. I feel like San Francisco is a tough place to crack. You don’t even see a lot of Starbucks locations here, I think because there’s a cynicism here. But it’s . . .
Scott: You also have development restrictions where if you’re a brand that has over 15 locations, you have to go and get special approval. So whereas typically to go into a new site, it might take you two or three months of permitting. In San Francisco, it can take you 12 months.
Andrew: And that’s true for the whole city of San Francisco?
Scott: Yes. The city. Not the outlying markets but in the city.
Andrew: Right. You’re all around. I mean, you’re in what’s considered officially Silicon Valley. You guys are all over there.
Scott: Yeah.
Andrew: Yeah.
Scott: And we love the Bay Area. It’s a difficult market to trade in because it’s expensive, but we think long term it’s going to be a fabulous market. We’d love to be in San Francisco, but we’ve got to find a way to do that in a way that frankly the community embraces us and they want us to be there and make that permitting, that special permitting easier.
Andrew: That’s where I think this social mission will go a long way. But for now, anytime anyone is down in Mountain View, Palo Alto, you’re not exactly in Palo Alto, but just near there in all over the Bay Area and now more . . . How many locations total?
Scott: Three hundred and thirty-five today.
Andrew: Oh, and I forgot to ask the first question that I usually ask which is the revenue. I saw on Inc. Magazine, the 2016, they had two different numbers. I don’t know if you read it. One of them was $131 million, and then at the end of the article, they said, 2016, 150 million. Maybe I misread it, but where was it?
Scott: So I can give you an update. We do publish two numbers, and in the restaurant industry like ours, that’s pretty typical. Systemwide sales, which is our sales plus the total sales of our franchises, and then net sales, which is the net sales of our company, which for our franchisees, we just take a royalty. We don’t consolidate all . . .
Andrew: So it would be sales in your own restaurants plus franchise fees.
Scott: Yes, exactly.
Andrew: Okay.
Scott: So our system-wide sales for 2017, we’re north of 270 million.
Andrew: Wow. This is unbelievable. Three huge hits, and frankly, not inventing a new app or inventing a new piece of hardware. Just taking the thing that we’ve seen around us and bringing it to us in a new way. Man, I’m telling you, I’m so excited to have you on here.
Scott: Thank you.
Andrew: I read so much about you before I even knew we had a chance to interview you, and now that I interview you, I like you more and I can’t wait to go back into a MOD and experience again the pizza now and the whole atmosphere based on what I’ve learned. And MOD, of course, is Made On Demand is the name, but also MOD as in modified, modifiable pizza. It’s really cool to be able to pick out what you want on your own pizza.
For anyone who wants to go check them out, frankly, just go check out MOD Pizza. I won’t even give you the URL. You don’t need to go see the website. Go look them up on Google Maps or Yelp or whatever, you’ll see a lot of positive ratings too. And my two sponsors I want to thank them for making this happen. The first will host your website right, remember them, the gator, hostgator.com/mixergy. And the second will help you hire phenomenal smart developers, toptal.com/mixergy. Thank you so much for being here. Thanks.
Scott: Thank you for having me. It’s been my pleasure.
Andrew: Thank you. Thank you all for watching. Bye.
