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Hello and welcome to the advice line on how I built this lab.
I'm Guy Raz.
This is the place where we help try to solve your business challenges.
Each week, I'm joined by a legendary founder, a former guest on the show, who will help me.
Try to help you.
And if you're building something and you need advice, give us a call and you just might be the next guest on the show.
Our number is 1-800-433-1298.
Leave us a one-minute message that tells us about your business and the issues or questions that you'd like help with.
All right, let's get to it.
Joining me today is Todd Graves, founder of Raising Cane's.
Todd, welcome back to the show.
Hey, Guy.
How you been?
Great.
Great to have you back.
You were first...
On the show a few years ago, in 2022, a lot of people asked me what's your favorite episode of the show?
And I don't have one because I love all my kids.
But I do cite yours often because it was so funny and fun.
And I think you remember that.
Do you hear from people about that episode now and again?
Oh, I do.
All the time.
Yeah.
Of course, it was so funny.
And if you guys haven't heard that episode, go back and listen to it.
It's so good.
And we'll put a link to it in the show notes.
A story about how you had this dream of starting a fried chicken joint in Baton Rouge, where you grew up, and you couldn't get a loan.
So you worked in oil refineries and in commercial salmon in Alaska.
And you basically saved enough money to open the first restaurant.
And then You know, it took a while, but of course today it's just an unbelievable story.
I think I read that this past summer of 2025, Cane's surpassed Kentucky Fried Chicken as the third largest chicken quick service restaurant in the US.
Yeah.
You know, I grew up with KFC.
Right.
Chicken.
Buckets of chicken.
And the Colonel and the red and white striped buckets.
And you're just all of a sudden you're like, wow.
You know, it just blows you away.
You're bigger than the Colonel.
Yeah.
It's also really interesting to our unit count.
You know we only have a thousand restaurants and looking at the average unit volumes it's kind of a different way to grow, right?
We just not have these mass volumes.
But having the highest of the highest average unit volumes per restaurant, that really adds up.
So, uh, Anyway, sometimes that stuff hits you, and I told the team, let's enjoy it.
Let's enjoy it for a minute.
I bet.
I mean, one of the things I think that you guys have done well and smartly is you've got kind of a hybrid model.
You're not a – I think mainly corporate-owned locations, but you do have some franchises and I think overseas – they're mainly franchises.
That's harder because you've got this quality standard, right?
It's easier in a corporate owned store, but when you've got a franchisee it's a different ball game.
So what are the ways you're able to, or you guys, focus on maintaining those standards when it's not you guys who are directly controlling it?
Yeah.
Number one is picking a good partner, obviously, right?
If you're going to have a You're going to have a franchisee.
You're basically, you know you're licensing the brand package.
You know the know-how, the training, the product knowledge, all those things.
But it's their business and they're running it.
So picking the best franchisee is so clutch, so clutch.
So let me give you an example.
Muhammad Alshaya, the Alshaya Company in the Middle East.
That's my partner.
Been a partner now for over 10 years.
Yep.
I courted, we talked, Muhammad and I talked for two years before we did something.
We got to know each other.
We mystery shopped our, each other's brands, right?
Look, I spent weeks at a time over in the Middle East and the different regions seeing all the brands that that his, his team ran.
And I saw the same thing I do at Canes.
You know happy, happy people giving good customer service, selling a good product.
Uh, integrity brand standards were handled well.
And then the, yeah.
I have been in business now with this franchisee over 10 years, and we've had no problems.
Now it doesn't mean we haven't made mistakes, but we can work together to make them better, because they were the right partner.
Yeah.
One of the things.
I'm sure you're asked this all the time and we are too.
As a show, it's like well, how are you going to change?
What are the radical things you're going to do?
And it's a common question.
It's a good question people often ask.
And one thing that I think a lot of people fail to recognize is consistency especially when you've got a strong brand is critical, right.
It's actually oftentimes better to double down on what you do well.
And I know you cited In-N-Out in our interview.
In-N-Out was an inspiration for you because they did a very simple thing.
They've been doing the same thing for whatever 50 plus years.
Very minor modifications like the Double-Double, but it's like a menu with three things hamburger cheeseburger, Double-Double.
Right.
And you walk into a Cane's.
It's got the one love.
It's got the lemonade and the soda fountain.
And it's got a very simple menu.
So when people say to you, hey, Todd, how are you going to what are you going to do next?
You're going to introduce tacos, you know, chicken tacos and stuff.
And you guys going to do like, you know, chicken cheese dip things.
What do you say?
Yeah, I mean look, I don't get it as much as I used to.
But man, just from starting out and going through, even though our sales were of the highest unit volumes it was literally us and Chick-fil-A we blew away.
Everybody's suggestions still kept coming in.
Knowing from my core and having seen restaurants that do very well off that craveable product and staying true to that has had so much to do with our success right.
Because The so-called experts will tell you too, in the food industry, you're going to have to change.
You're going to have to add spicy.
Spicy chicken.
Right.
They'll say, oh, people are going to get tired of this.
And you're going to have to.
Tired of it.
You're going to get a veto vote.
You don't have the variety.
And then look when the success of Nashville hot chicken like in Dave's chicken, you know going all over the country and the world.
Yeah.
Even bankers would be like, well, are you considering a spicy alternative?
I'm like no, we're not considering a spicy alternative, because our concept is quality food quality, craveable food, served with fast food, speed and convenience.
For speed, if you add choices and you add people thinking in their head, oh, no, you know what?
I do want spicier.
I do want this.
It's going to add.
A second or two.
A second or two adds up and it adds up to a lot of profitability because as many cars you can get through, they're on low margins and high volumes, which you do.
Now, let's also think about quality.
I have a cook-to-order process, just like In-N-Out Burger, right?
You walk into In-N-Out Burger, you see that grill's filled with those burger patties and they're selling that product.
Now, if it's slow during the day, you might actually see them put that raw beef down and start cooking.
Same at Cain's, right?
If you're the first one in the day, you're going to wait your five minutes.
But when we pick up volume, we're at the cooked order process.
We don't have heat lamps.
We're selling that food.
It's going out hot and fresh, right?
If you added the spicy and I got two things to cook, you would start doing what the other quick service do.
They start. cooking food, holding it in warming bins and assembling it to order is what they do.
So my quality and my speed would go down.
So knowing I don't want to be all things to all people, because if you try to be all things to all people you're not really going to serve any of them very well.
Knowing that and staying disciplined to that is what's important.
I think that's right.
I think in a world where there's infinite choices, having fewer great choices is actually an advantage.
You think of Trader Joe's?
You know they have 3000 products compared to a Walmart which has 200000 products in their grocery.
And I think people see a Trader Joe's peanut butter and it's like creamy or crunchy.
They don't need like 15 different kinds.
They know that the vetting's been done for them and that's why they're doing 16 billion in revenue a year.
Agreed.
It's a natural human... conditioned to want to keep changing, evolution, and growing.
It's just in us.
If you're doing something really well, it's, ooh, you know what would make it even better?
I mean, look, it's just for young entrepreneurs, staying focused is so clutch.
It's so key.
Knowing what you're good at and doing that and focusing your efforts on that is what will make you successful.
So let me just tell you me specifically, is not having all these different LTOs, limited time offers right?
I've certainly saved menu for 29 years now, almost 30 years.
If I had LTOs, which might spike business for a tiny bit right something new at Canes my managers would have to like then be putting up point of purchase materials, getting training everybody on how you cook this one thing during this small period of time.
And it would wear them all out.
Then my customer service would go down because the crew members are a little bit frustrated.
Yeah.
And we wouldn't be doing what we do great every day consistently by adding different things to that.
So we know same menu served for 30 years.
Good, craveable food and good customer service.
I love that, and it's so counterintuitive today because – and we've done awesome brands that do drops okay.
It's gimmicky.
It's like that's a thing that marketers and social media people – you've got to do these drops.
You've got to be on social media and Instagram.
Hey, this week we're going to do Raising Cane's, you know, whatever, chicken rolled in Doritos.
But the thing is you're right.
It's like that might get you hype for a couple weeks, but it's not – it doesn't necessarily – bring in the repeat customers.
That's what matters.
Right.
Actually, that kind of would be great.
Rolling in Doritos, crispy Doritos.
If you do that, I want my name on that product, Todd.
You won't have to worry about that.
Anyway, you ready to take some calls?
Yeah, it'd be fun.
All right, let's bring in our first caller.
Welcome to the Advice Line Caller.
Tell us your name, where you're calling from, and a little bit about your business.
Hey, guy.
Hey, Todd.
It's Evan Sledge here.
I'm out here in Toler, Texas, and I'm the owner of Whiskey Morning Coffee.
Evan.
Yes, sir.
Evan, how you doing, man?
Doing good.
Yeah, tell us a little bit about the business, just a line.
Yeah, so pretty much we're a flavored coffee company that uses non-traditional ways to flavor, such as bourbon barrels, barbecue smokers, things like that.
I love that.
Welcome to the show, Evan.
Thanks for calling in.
All right.
So do you know, many years ago, we had Howard Schultz on the show.
And then I went out to Seattle to the roastery there with him.
And he gave me this is like 10 years ago, he gave me a whiskey flavored Starbucks coffee.
It was so good.
I still remember it now.
So I love this idea.
How did you get into this business?
So I'll be honest, we grew up like drinking Folgers in community.
So the last thing we thought we'd be doing is coffee.
Folgers at the church, like through the big coffee, whatever, percolators.
Yes, sir.
But my granddad, he's an old moonshiner.
So we have a family distillery.
So we grew up making whiskey and bourbon, still do that.
And I had to start a business in college at TCU and said I could get a hold of some bourbon barrels.
And another kid said he knew how to get a hold of coffee beans.
And we just started aging it in our apartments and roasting it out in the parking lot.
So how did a guy like you who grew up on Folgers Crystals or whatever in kind of small town Texas get into... Did you get into... Were you into coffee?
Oh, no.
We didn't know nothing about it.
We drank it every day.
That's for sure.
But yeah, we'd made our first coffee roasters, got some barbecue pits from Tractor Supplies and welded up a drum and definitely just learned by by failure.
That's for sure.
How did you know that whiskey barrels was going to make coffee taste delicious?
We didn't.
Um, we heard from a guy that if they keep the coffee in the bar lap too long, it'll start to taste like bar lap.
So that was the only research we had really done.
And uh Yeah, we had 320 bucks as a group from the class and we bought green beans off of Amazon and aged it and luckily, people around school bought it.
How long ago was that?
That would have been 2018.
Senior year.
Wow.
Okay.
So tell me where the business is now.
Do you guys have a store?
Do you guys have a shop?
Are you in Toler, Texas, you said?
Yes, sir.
So really right now we're mostly online e-commerce, direct-to-consumer.
We do a lot of events and trade shows, as well as roast for other coffee companies or coffee shops.
Now,
Last year, it's still me and three buddies.
So there's four of us on the team full time.
Last year, we did about 924,000, which is crazy.
Wow, that's amazing.
So what percentage of your business is roasting and what percentage of your business is selling beans?
So we're about 60 direct to consumer from the website, whether it be subscription or just one-time purchases.
The remaining 40.
That's either what they consider total roasting for other people or coffee shops or events.
That's a great business.
You've got a nice diversified business.
Okay, before we dive in more, what's your question for us?
So my question is, we seem to be staling at growth and we kind of looked at what we're good at.
And it's definitely the customer service, small town deal, word of mouth.
And what we're starting to do is build these mini drive-thru coffee shops in small towns that you know your seven brewing Dutch brothers aren't going to.
You haven't done this yet.
This is your idea.
We're building out our first one right now that'll open in March.
In Toler, Texas?
In Granbury, which is same town pretty much.
Okay.
I'm looking at the map.
I see it.
So you guys are like an hour or a half hour out of Fort Worth?
Yeah.
So it's going to be different because you know for us to build our stands it's going to cost about 150 grand for all the equipment and buildings.
It's going to be ran by one to two people.
And we're trying to figure out as we start to grow.
Is there an advantage to franchising and partnering with other influential people in these small towns?
Or should we look to grow kind of as our own and grow slowly?
Yeah.
Oh, man, you've come to the right place with Todd Graves.
Todd, I want to bring you in.
Do you have any questions for Evan or thoughts?
Yeah, Evan, so when you just said $150,000, that's all in.
That's building equipment, everything you need to open up.
Yes, sir.
Besides the land.
Got it.
And so maybe you're ground leasing the land?
Yes, sir.
The first one, we purchased it.
Okay.
So we're going to own that.
And you're building a facility.
You're actually building a drive-thru location.
Yes, sir.
They're kind of like these modular buildings you're seeing popped up, but a lot smaller scale.
So it's going to be about 16 by 20.
Okay.
Okay.
And it's drive-thru only.
And espresso drinks too, or just like more like Dutch Brothers?
So it's going to be espresso drinks and it's going to be Tex-Mex.
So the only food is going to be tamales.
Oh.
Okay.
Food, too.
All right.
All right.
Something different.
It's actually kind of funky.
I kind of like it.
It's our espresso drinks and some tamales.
For you, what are you estimating your sales will be at this first unit?
So at the location we're hoping to do about, I think we're going to try to get about 1500 to 2000 a day in revenue.
And we're basing that off of other coffee shops worldwide that we supply beans for in similar locations.
That seems a little high to me, Todd.
It is.
But he's basing it off of other drive-through sales with other coffee shops that they're selling to.
It sounds like there are a lot of coffee drinkers in your part of Texas, man.
Yes, sir.
They do early in the morning.
And then throughout the day.
And are you basing your sales off the tamale sales too or no?
Yes, sir.
We sell tamales at the distillery.
So that's kind of taking information from ourselves at the distillery and Christmas orders, things like that.
Okay.
Well look, it sounds a little high to me too guy, but I think you know look, a normal Starbucks would be doing a lot higher than that every day, Dutch Brothers, et cetera.
So I think that could be achievable.
And then just real quick on your margins.
Last thing I'll ask you do you have financial projections and what your cost of goods sold margins will be and what you think you'll make on the bottom line?
So i don't have all of that figured out.
I've got um, the coffee market's kind of crazy right now.
So uh yeah, oh yeah, so that part's changing every day.
Yeah, it'd be good to do some financial projections.
Right, you can get those models, just look at google it.
But i would look at that and your, your labor, your things.
Like that is for opening, because you'll know what, where you're tied about and where you need to.
What you need to work on to be profitable because that's the first thing you have to do is man you got to cash flow because the quickest thing out there.
If You bought this property.
You got $150,000 in that.
I don't know if you're paying cash or you're financing that, but you're going to have payroll.
You're going to have vendors to pay.
You're going to have all those things, and those payments don't stop, right?
So being profitable right out of the gates is very, very important.
I made $30 my first month, which was pretty funny, right?
But what that meant is I could pay everybody, and I wasn't going further in the hole.
And then Guy, I don't know if you want to answer the franchising question on this perspective of this.
I have some thoughts, but I know I'd love to hear your thoughts on it.
I mean, you've done this.
Yeah.
I mean, Evan, there's different ways to grow your business, right?
And the first way to grow it is at your mothership, which I call the first raising canes, right?
You're opening your mothership and learning the business inside and out while you do that.
That will be your plan.
And then if it's something that's profitable, can be replicated, then you got to look at growth.
And you can grow three different models.
You could grow all company restaurants, you could grow all franchise restaurants or you could do a mix of both.
Now, I wanted to do a mix of both when I started.
So I liked running my restaurants.
I felt like I could run my restaurants very well.
I like hiring people, bringing them to have new jobs.
I like teaching them how to become managers and lead and earn people's money.
It's a calling for me.
And then when I'm doing that, I wanted to grow quicker.
And I couldn't grow quicker without using franchisees in my mind because one I couldn't have that much access to capital.
There's only a certain amount of money I could borrow from the banks.
These franchisees had their own money to grow.
And it wasn't for me about being debt averse.
I'm not.
I would take all the debt on I could.
I just didn't have the capacity.
So franchisees served, they could grow.
And the second thing was I thought that the franchisees when I got picked really good restaurant people that they would actually be better in their community, being right down the road of all the restaurants, than I would.
And so I went that route, and I had exceptional franchisees.
And we grew company restaurants as quickly as we could, as much money as we can get lent.
But over time, I saw that the franchisees didn't run their restaurants as good as I did.
OK, and so we'll say 100 point scale.
If we're running our restaurants at a 95, which is like just you got to care so much to do that.
Our franchisees were about 85, which is exceptional in the franchise world because most of them in quick service food run about a 65, 70.
Wow.
And so we should be very thrilled about our franchise partners.
And I appreciated them because they did care.
But that 85, the 95 just drove me crazy, man.
I mean, like it was just like, oh, if you just do this, your customer service will get better.
Or if you just did this, the quality would get better.
Now, an advantage about company is you can control that.
Second thing that I thought was inefficient about franchising is we needed to change something that we were doing.
Right.
Like here's a better operational procedure.
There was so much time you had to talk in these franchisees because it's their business and they're like well, we don't agree with that.
We think it should be this.
And but that wasted time to me that when we have company restaurants we can roll something out three months later.
It's adopted and we roll the efficiency goes away.
So that's there.
Another advantage of having your own restaurants company restaurants is that your valuations are way higher, right.
So your sales, your profitability, your EBITDA that goes through as you grow company restaurants, just the company's worth so much more, man.
Because, if you think about it, if you were taking a franchise system and would say you were charging them 6 of sales, right?
But that's what you're making.
Then you have your GA.
That's going to the constant support systems, branding processes, et cetera, et cetera.
You're just not going to be worth nearly as much.
So if I were you, I would think about some things and questions about, am I debt adverse?
Because if you are company, restaurant model is not going to be a great model for you to grow, because you're going to grow and you're going to take on more debt and grow.
You can do that with other franchisees.
How much is this a baby?
And you'll see that in that first year you're opening your mother's ship down the road.
If this is something where you're just like, you don't even leave your ship if things aren't right, even though you had a great date planned that night.
You're not going to feel good with franchisees don't might have that same type of passion as yours.
So I just would figure out if there's no good or bad to it.
It's just a personality thing and really see where you're at.
I totally agree.
And I would say in your case again Evan, it's not – I don't know if you can make that decision now.
You have to first prove the model, right?
You've got to take that store one and just instrument it like crazy.
It's just everything is data in that store.
And once you figure out how to make that work, then you open two or three more stores.
And you write everything down because to make it successful as a franchise model it has to be – you've got to have repeatable unit economics.
You've got a training system.
There's got to be a brand voice.
You've got to have quality control.
You've got to have a solid menu, operational simplicity, all of these things.
If, and only if, it works after three to five corporate owned stores, then you can start thinking about whether it makes sense.
So I think it's a multi-step process.
And step one is you've got this great laboratory now in Granbury.
And then you can answer the question if and when you get to a point where it does tick all these boxes.
Does that make sense?
Yes, sir.
That makes total sense.
Yeah.
And I think both of y'all just hit it right on the head because, like what you were saying Todd, with the baby part in 95 and 85 we run everything at 105 miles an hour.
And if it falls short, that's cool.
But as long as you're all out.
And I think the franchise model, like you said, people aren't going to do that.
And that would probably frustrate us.
And this really helped a lot.
And I appreciate it.
Awesome.
The brand is called Whiskey Morning Coffee, Evan Sledge.
Thanks for calling in, man.
Congrats.
Good luck.
Thank you, guys.
Good luck, Evan.
Yes, sir.
That's awesome.
I have been – I've done some work with a huge quick service restaurant a couple years ago and I went to their annual convention.
And, man, the franchisees, they have the power.
It's not corporate.
You've got a guy who's got 200 franchise locations of this quick service restaurant.
Like he's the guy that everybody's got to talk to, not the CEO of the company.
That is right, which is the way it should be.
Yeah.
But of course, it can be like Dave's Hot Chicken as an example.
They went franchise right away.
And that's one of the ways they scaled so quickly.
And it worked out for them, right?
I mean, eventually they sold the business, but that was a model that worked for them.
It is, right?
And they wanted to expand rapidly.
They want to do it with people that had other concepts and knew how to do it and roll through it.
And then ultimately-
But you nailed it in the head right there.
The ultimate thing is they sold the business, right?
So what's the quickest to get to a scale to sell, right?
And so for me, as I'm not selling the business, I love the business.
I want it to be a generational business and to keep rolling.
And the best way to have something I'd be proud of for me personally was to own them.
Company restaurants.
We're going to take a quick break.
But when we come back, another caller, another question, and another round of advice.
I'm Guy Raz.
Stick around.
You're listening to The Advice Line on How I Built This.
Welcome back to The Advice Line on how I built this lab.
I'm Guy Raz.
My guest today is the legendary Todd Graves, founder of Raising Canes, and we're taking your calls.
Todd, you ready for the next call?
Yeah, let's go.
Awesome.
All right, let's bring in our next caller.
Welcome to The Advice Line.
Tell us your name, where you're calling from, and just a line or two about your business, please.
Thank you.
I'm David Burmeister calling from St.
Louis.
I have Midwest Pasta Company and I manufacture fresh pasta and frozen pasta for restaurants and grocery stores and farmers markets and the like.
Awesome.
Welcome to the show, David.
I just went to a delicious restaurant in Nashville and had fresh pasta.
So there are restaurants that will sell fresh pasta, but you guys basically are the white label.
You make you make it for them.
Right.
I make fresh pasta for about 80 different restaurants, about 130 different grocery stores, food distribution hotels, farmers markets.
So with the exception of farmers markets, you're B2B, basically.
Yes.
Tell me a little bit about how you got into this business.
Have you been in food your whole career?
Yeah.
Yeah.
Well, I grew up in restaurants.
And when I was 25, I had a thousand dollars in idea.
And me and some friends bought a restaurant in South St.
Louis and had a small pasta making component there.
Fast forward 10 years, I had a four-year-old.
And at that point, it went from being 40 seats to 120 seats, three o'clock bar.
And so we sold the restaurant and I took the pasta component with me.
And then I had some help along the way.
And it's been about 13 years since then.
And give me a sense of what you guys are doing in terms of sales a year.
Sure.
We're going to be pushing 800 grand this year.
I hope to be pushing a million by the end of next year.
And how big is your facility?
3,000 square feet.
Okay, awesome.
All right, before we dive in further, tell us your question.
Sure.
So scaling up is something that I'm about ready to do.
And I don't have access to traditional capital streams.
So I'm trying to figure out how do I finance and how do I get access to capital without sacrificing my equity.
Okay, before we answer the question, tell us why you don't have access to traditional finance.
Sure.
Well, part of the sale of the restaurant had to do with some tax liability and default on an SBA loan.
So I've been blacklisted by the SBA and I had to take a personal bankruptcy in that transaction.
So I don't have bad credit, but I don't have any credit.
Right.
So you can't get a traditional loan because of this default.
And listen, restaurant's tough business, even as it's growing, margins are small.
And so Well, we were also hit by the recession.
Got it.
Okay.
So I want to bring in Todd Graves.
Todd, pasta business, 95% of his business is to food services, restaurants.
He's looking to expand.
Thoughts, questions, concerns?
Yeah.
So, David, it sounds like you're doing pretty good, my man.
I mean, something to be really proud of, 800,000 in sales right now.
And you're saying by the end of next year, you're looking to do 1 million.
That's 20 growth right there.
That you're just doing organically right now is fantastic, especially at 3000 square foot.
Can I ask you, when you say you want to expand, what does that mean?
How much capital do you need to do that growth plan?
I've got two different plans.
The initial plan is about 1.4 million.
The further plan is more like five and a half.
What that would do is gain me capacity.
So freezer space, for instance, is something that is a premium.
I could expand my capacity.
I could expand my offerings.
I could improve equipment.
The industry is very equipment reliant.
Most of my gear has been on for years.
I've been rebuilding and repairing, but a lot of my expenses are caught up in keeping that equipment going and producing.
So new equipment, better facilities and also more marketing.
I could hire someone to handle more front-end things.
My focus is on the creation and the production and the quality of the product and managing my team.
Not as much focus as I could have on outward sales, internet presence, these kinds of front-of-the-house tasks.
Quick question for you.
Does the current demand, David, outstrip your capacity?
There is more demand than I have the ability to touch.
I've actually been approached by national players asking to do co-packing.
Wow.
And I just couldn't, I just don't have the capacity to hold what they wanted.
They were talking about 20000 pounds a week, which with a larger facility that's, you know, big players in this industry, that's nothing.
But for me, that's more than I could take.
So for the 14 million or the five and a half million I mean, just right off the bat, my gut says, go the lower amount because of the exposure right.
Get good traction and roll.
So, and David, have you run through those numbers?
14 million gets me X amount of more freezer space, this equipment, and that's going to relate to X amount of sales, which means bottom line.
I make this so you can measure that return.
You've done that?
Yes.
Great.
Your challenge is is that you can't get conventional financing, which would be ideal obviously, right.
Right now you've got a proven business model and you need to go get.
You know equity types of investments but you don't want to give up equity.
Well, I don't want to lose control.
Yeah, that's what I did with the restaurant.
And I ended up with a small slice of big pie where currently I have my own, my very own whole small pie.
Yeah, so there's lots of different ways to finance a business.
It depends on what your appetite for debt is, right?
What your appetite is for how much equity you want to sell.
And obviously, it's already non-negotiable for you.
You don't want to lose controlling interest of the business, which I highly recommend.
This is your baby.
You started it. you're making a success.
Now, there's other ways that you can do things.
There's angel investor networks.
And these are the people that love your pasta.
They're very passionate about this.
And there are people that have enough money put away that they can do investments just to be a part of something right.
Be a part of something special.
And these are generally... more favorable.
That's why I call them angels, right?
And so I got angel investors to help me as I grew the business, because I did not want to give up equity.
I didn't want to give up control.
I didn't even want having other equity shareholders just to have that in my head.
Am I doing a good job for them?
Because it took me off my focus of what I knew was the right thing to do for our business.
And so generally it's higher interest rate things.
So what I had was angel investors that I would do a 15% interest rate subordinated debt.
OK, it was a one pager and I personally endorsed these.
I mean, if I personally signed on to it, they knew anything I had in the world.
Which is all just tied up the business anyway.
Back then that I was going to be 100 percent into this.
And but there was no equity being done, but it was a 15 percent interest rate.
But my cash flow could pay for that.
So that's why I was asking you about that.
You run your numbers in that million four and you feel real solid for that.
I was able to do a higher interest rate, but they were a part of it.
I made them feel a part of the business.
They got canes gear all the time.
They came to restaurant openings and, you know, their family was thrilled.
And we went and we put together photo albums of look look look, how great this Homa Louisiana new restaurant is and how much the community loves it.
And then they made a 15 percent return. which actually was really good.
But as soon as I could pay that thing off, I did.
And that wasn't convertible debt.
It was just a straight up loan.
Straight up loan.
And look, banking back then was a lot more lenient.
I could actually take that subordinated debt and actually use that as equity to get loans, traditional loans.
But for a million four.
If you had five to 10 angel investors that really want to be a part of this and everybody could break off, put in 100000 and Put in 200000.
There's plenty of people in St.
Louis that do have that kind of money.
But subordinated debt, they have no voting rights, no anything.
They're just like, hey, look, here's this.
I hope you can pay me back my interest rate and do that.
It's an idea.
Look at anything from a 10% to up to a 20% type of like that, up to mezzanine type lenders.
That's a route you could go.
Yeah.
There are a couple of options for you.
So as Todd mentioned, there are going to be local angel investors who are focused entirely on St.
Louis makers.
And you can find them on LinkedIn.
They may have Facebook groups, a little sleuthing on the Internet.
You'll find those groups if you don't already know where they are.
They're probably even some agricultural or food production grants available in the state of Missouri.
I bet these are ways to support businesses in the state that employ people in the state.
And there are probably even some food investment groups.
So those are all really interesting paths where you can do what Todd did with loans, or you could basically give away some equity, or you could take some convertible debt.
The other idea which I don't know if you've explored, is you mentioned some of these big producers on the coast want to do co-packing with you.
Have you explored –
Some kind of strategic financing from them where they basically they do a minimum volume contract, or you know, or like they commit to a certain amount every month and they prepay it, or you do some kind of joint venture with them for just one line.
Right.
So then on your company, but they co-own one like production line or even financing some of the equipment through those equipment manufacturers, or they're even equipment lenders.
So I think that there are a couple of interesting options for you that don't necessarily rely on traditional financing.
Yeah, absolutely.
And actually one of the companies that I was talking to is owned by a private equity firm.
When I did a little digging although I have a sense that I'm too small to even sit at that table
I know that venture capital, when I looked into that, it was way higher.
The floor for that kind of a transaction was way higher than anywhere close to where I'm at.
You're too small for that.
Yeah.
But you're not too small for, especially for passionate, committed local.
I mean, Todd, Baton Rouge has groups of people who are committed to investing in Baton Rouge, right?
I mean, you are probably one of those people today.
That's right.
They want to see St.
Louis exceed.
They want to see them do better.
And so the community people will invest.
I love it, Guy.
You said there's plenty of government resources to go into looking at what are grants, what are any of those things going on that you're creating jobs and doing well?
You're a proven hardworking person.
And equipment leasing companies.
Since you have a successful company look, it's going to be higher interest than if you went in and You finance it traditionally.
But that's how restauranteurs like us grow man.
You can go in and get it.
It'll be a higher interest rate, but the equipment lending is another really big one.
I love the idea of talking to these companies.
I want you to come in and do all this pasta for them and just saying, look, here's where I'm at.
You're an honest guy, so you're going to tell them, here's where I'm at.
I can do this, but I need this.
Would you be interested in helping me do that?
These are all just creative ways to where you don't have to give up equity.
That's right.
There's a lot of creativity that you can build into those conversations.
Yeah, great.
I don't think you've got a capital problem.
I actually think it's more of an opportunity for you to identify those places where you can get the cash from.
And it may work out ultimately in your favor.
Right, right.
And look at the restaurants you currently sell to now.
I'm sure they're thrilled with your product.
I'm sure they love you because you give them good product.
Those are those angel investors.
You know, they're doing well and just saying, hey, look, I want to grow.
I'd like you to make a good return.
Are you interested in this?
I'm asking for smaller increments.
I want to put together a group of this many people.
And look, they start talking.
They know each other.
They start talking.
Hey, this is exciting.
This is, you know, have them come out to your plant.
And look, this is what I'm going to do.
And they feel a part of something.
Mm-hmm.
And you can do good for St.
Louis.
I think those restaurant owners you're selling to right now are a good place to go look.
100%.
Agree.
Yeah.
David Burmeister, Midwest Pasta Company.
Thanks for calling in.
Good luck.
Thank you.
Wow.
It's interesting because a lot of people think that once you default or something like, you're finished.
But it's actually.
There are all kinds of ways to find.
It's not easy.
There's no question about it, but there are all kinds of ways to find to find that cash.
Absolutely.
And that was a good advice, Scott.
That was some good stuff.
Stay with us because after the break we'll talk to another founder working to take their business to the next level.
That's after the break.
I'm Guy Raz, and you're listening to The Advice Line right here on How I Built This.
Welcome back to the advice line on how I built this lab.
I'm Guy Raz.
And today I'm taking calls with Todd Graves of Raising Canes.
And let's bring in our next caller.
Yeah, I'm ready.
This is fun.
Hi, Todd.
And hi, Guy.
I'm Shane Lyons, longtime listener, first-time caller.
I'm the co-founder of Vesti in Los Angeles, California.
We specialize in delivering chef-crafted snacks and signature sandwiches made on homemade focaccia to retail partners, offices and corporate campuses, and direct-to-consumers via web orders all over LA and Orange County.
Awesome.
Vesti, so you make sandwich, focaccia bread sandwiches.
You're in L.A.
Tell me a little bit about where you're like, where are you selling your stuff?
Sure.
So we've been on quite the journey.
My partners and I were just about three years in.
And we have 45 retail partners that we work with.
So Alfred Coffee being one of our most notable.
They've got, I believe, 22 locations in Los Angeles.
And we service 18 of them with sandwiches, as well as gourmet grocers and other coffee shops.
So you make the sandwiches like a central kitchen and deliver them fresh every day to these different places.
That's right.
Yeah, we call it like a chef-driven factory model.
Because we're all chefs my partners and I long-time fine dining chefs, boys and girls and we love great food.
We also wanted to make a really scalable, profitable business.
So we're trying to find the balance of the two and we landed on sandwiches.
And the sandwiches we design actually believe it or not, get better as they sit because of how we've designed them.
They're low moisture, relatively high fat due to the nice olive oil that we use.
And so they have a shelf life up to, we say, three days, but in actuality it's four days where you really see almost no degradation in the product.
And just really quick, you guys are profitable and what's roughly, what are your sales?
Sure.
Yeah.
We had our first months of profit in June and July.
We are targeting just under a million in sales this year.
Nice.
And you mentioned you were a fine dining chef.
Tell me a little bit about your background.
I can imagine why you left that world, but why did you leave that world?
Sure.
Yeah.
I've actually had dual careers my whole life.
When I was a kid, I was a kid actor on Nickelodeon and Disney for many years.
And then that train stopped.
And at 16, I went to culinary school.
I went to the CIA, Culinary Institute of America.
My mom's also a graduate from there.
So sort of in the blood.
And then I worked with some really fantastic chefs, David Chang and Daniel Boulud.
And then I had the opportunity to open up a restaurant in New York City with my cousin Nicchio Vicchini and legendary restaurateur Drew Niepont.
We did that for about eight years and eventually sold the lease to other restaurateurs.
So after that, I was sort of beat on, you know, done with restaurants.
I was working six, seven days a week back to back lunch dinner into brunch, all that sort of good stuff that chefs do.
And I was burnt out and then found myself working in film and TV again.
And during COVID and like many people during COVID, you know, I was going one direction.
Then I was given a COVID diagnosis.
I was supposed to actually star in a TV show and they recast immediately.
Wow.
And so I had to regroup.
And I really spent a lot of time thinking about the background of being a chef and as well as an actor, and the things I liked and the things I didn't like from the cultures that I was in.
I was just dedicated to doing something with my friends.
So it sounds like you got your weekends back, basically.
I do have my weekends and I've seen what a Friday night not at a restaurant looks like and it's really nice.
Tell us what your question is before we dive in a little more.
So our question relates to brick and mortar.
Should we invest in a brick and mortar, and if so, when?
It comes up often in conversation.
We have internal debates about it.
We have some active debates. investor interests, and then constant guest inquiries.
And our model right now as a chef-driven factory allows us to excel at high volume, high quality food production.
But it's not currently set up for on-demand single sandwich orders which, as you can imagine, leaves some of our guests really frustrated and potentially turned off from the brand entirely.
But, given that our model is low fixed costs and high margins, what are the compelling reasons that we should be exploring and investing in a traditional bricks and sticks location?
Okay, great.
Todd, I want to bring you in.
Former Michelin star chefs and making focaccia bread sandwiches to offices and coffee shops, but they're thinking about opening a brick and mortar.
Mm-hmm.
Shane, I'll give you a few things just from my experience.
What happens is, when you start to have success, you have other influences that come in and say hey, you're doing great doing this, but you know what?
Maybe you should go do this.
And that's where I think this brick and mortar is coming.
People are like, your products are incredible.
Then why don't you go do this?
And what's worked in my passion, my career, doing Raising Cane's, It's been being staying focused, right?
Focused on, I know what I'm good at.
I know what I can do to successfully make money, which you have to continue to make money.
So for me, the whole thought of brick and mortar and I'm not saying it's a bad one, but as you know, it's a completely different business
You're still selling your product, but now...
Now you're the one doing all the front of house, back of house with people.
You're taking on substantial debt doing that.
And to me it's a distraction away from building your current business, business that's doing very well.
You can take that 45 retail partners and you can make a goal to say, we want 90 retail partners.
And this is how we're going to go out and do this and double your sales.
So my advice would be go for the goals to keep doing great what you're doing right now.
Focus on that, make it better.
And I would table that brick and mortar thought until after you get that next goal let's say it's 90 retail partners say hey, do we really want to do that now and change our focus right now?
Because this little guy, todd graves in baton rouge louisiana, had a chicken finger dream and stuck with it.
And now i got a thousand brick and mortars and we're playing on the next thousand.
You know what i mean.
But if i try to get into retail line, you know grocery stores want canes frozen in the, in the in the grocery stores retail.
They want our sauce bottle.
They want all these different lines.
If i look at all those different product lines it's going to take my focus away from doing what i'm really good at.
Yeah, I know.
It's so interesting.
A couple questions for you, Shane.
I mean, the first is, do you guys do pop ups?
And it's full on six days a week.
And it's reminded me of, you know, I really like my core business.
As much fun as it is to interact with guests, we're in hospitality for a reason.
We love people.
We love to make them feel great.
We love delivering on the promise of providing a fantasy, which I think is what restaurants are ultimately there for is to provide fantasy to some degree and fulfill on that promise.
So it's been really nice to kind of be in a restaurant for this period.
But then we'll be exiting.
Yeah.
I mean.
To me that's a brand building exercise, which is important because a lot of chefs go into catering.
It's just more efficient.
It's more profitable, better margins.
And by doing these pop-ups, you're exposing more and more consumers to what you offer.
And really, it's the lunchtimes.
It's 500 sandwiches or 200 sandwiches for the lunchtime offices.
That's really going to be your bread and butter.
What's interesting to me about brick and mortar is...
And I totally agree with Todd.
It's like, do you want to get back into that restaurant lifestyle that you walked away from?
I think there's a kind of a happy middle there, which is is there a world where, down the road, it may not happen right away?
You basically open up a commissary kitchen that is like an embassy, right.
But really it's just about putting your brand out there and just building more awareness, but also having a kitchen, your own kitchen, where you're making the product.
I think that's right.
It makes total sense.
And we've talked around ideas like that.
And we really love the hub and spoke model.
We've kind of reversed engineered it.
A lot of restaurants move into catering because their a la carte sales are lagging.
And instead, we've started exclusively catering.
And now there's demand for a la carte.
So trying to find that hybridization of the two is really what we're looking at now.
And we do know that we would like to expand across at least North America.
And there's the internal conversation of well, can you have a brand that can leave LA and go somewhere else and not have a brick and mortar presence?
Is it even possible?
And we don't know.
As far as expanding, right, now you'll have some aspiring goals.
It's a dream.
You want to expand across the country.
When using retail partners, they need good products, right?
And I like what Guy's saying.
Some of your product having its own brand.
It's a pop-up in the new area, right?
You set up that hub and spoke model.
You're going to set up your commissary there and do it great.
Some pop-ups where people go man, that's the best focaccia sandwich I've ever had.
Using influencers to where people know it's your brand but but i don't think you need to have the brick and mortar.
You also run the risk of that brick and mortar not hitting the way you wanted it to hit and the retail partners are like hey, you know what you didn't, you weren't that successful in your brick and mortar.
I don't want to get your product.
You have something that's working very well right now and i would focus you and your team all that energy on that and growing that side of your business.
Yeah Yeah, we've been sort of like a slow-growing indie band in LA, but the word's getting out.
And we can see that the opportunities are sort of everywhere now.
And I'm very afraid of the shiny objects.
I've been around enough to say most of them are a distraction.
And so it's a little challenging to navigate all the different feedbacks.
You know, we have three lines of CPG goods.
I've never had anything on a shelf before, but I'm learning that I really like selling potato chips and I love the margins on them and people really love our potato chips.
So I guess this is really helpful.
And what I'm hearing is to stay focused and go back to the core product, which is making sure that taste, texture and temperature on all of the things that we create are deliver on that promise, because that's what we can control.
Yeah.
Todd, they do a muffaletta.
Oh.
They're doing a New Orleans sandwich.
Man, that's not easy to do that right.
Oh, we'll take the Pepsi challenge, Todd.
We'll take the challenge.
I can't wait to try it.
Awesome.
Shane Lyons, the brand is called Vesti Sandwiches and Snacks in LA.
Congrats.
Good luck, man.
Thanks, guys.
Good luck, Shane.
Such a pleasure.
Thank you.
Yeah, I mean it's interesting because do you guys – I mean, do you do?
– is catering a significant business for you.
I mean, your stores are so packed, so I don't know.
Yeah, it's really not.
It could be up to like maybe 3% of total sales, right?
So we actually even looked at like when we could – different times and experimented like going out and taking catering to places and it didn't – you have the extra manpower to go.
Get that done.
It's a lot, yeah.
Makes sense.
So now we just make it easily packageable.
You can pick it up at the restaurant.
But for us it's just like stay at our model, because if you're going after three percent and putting muscle behind that, you're losing focus.
You're distracting.
Just like with Shane, like him, like we said that, too.
He said something interesting.
He's like, then I make the great potato chips to go with that.
That's still in that same vein.
That's a great add on your margins, even better on potato chips.
But you start doing two different businesses, which it is in that deal.
He loses focus.
He screws up something that's really working well right now.
It happens to all success, right?
You're doing great, but you can also do this.
And when you lose the focus, you mess up with what really is your concept.
At the end of the day, I call it God, faith, whatever, Buddha, divine intervention.
What's supposed to happen is going to happen.
I think about Stacy's pita chips.
It started out as a pita wrap sandwich place.
But people wanted the pita chips, and then it turned into a different business.
And you never know.
Potato chips, that might become the business.
You're right, man.
It's cool.
Todd, before I let you go, a quick question for you.
If you go back to the guy that was working at the oil refinery on the ship and starting the first canes right down the street from Louisiana State, what advice would you have given him?
That would have been helpful.
You know, I think number one would be concentrate more on progress rather than perfection.
And, you know, entrepreneurs, when you start something, it's your baby, right?
You just, everything's into it.
It's about an expression of yourself.
And so I want everything to be perfect, right?
So we'd be starting a new training program.
But I wouldn't release it because it wasn't perfect yet.
Well, give me a couple more weeks.
You're like, Todd, we need this program.
Two more weeks, I'll get it right.
I missed out on a lot of progress just trying to make it perfect.
And then some older mentors, they taught me, look, Todd, nothing's ever going to be perfect.
And progress is way more important than perfection.
So get that training program out.
But it's version one.
And you can get to your version 100 that you're going to do and get better.
I still use that today, you know here, 30 years into the business, because I will literally want something to be so perfect and what a new marketing campaign.
A new thing is.
And then I'm like, I can't stop progression in our business.
Progress, progress, progress.
Yeah, that's right.
Todd, thanks so much for coming back on the show, man.
Really great having you.
Thanks for having me on.
That's Todd Graves, founder of Raising Cane's.
And by the way, if you haven't heard that episode, it's so good.
I swear to God, if you don't like it, send me a letter.
I'll send you a dollar.
And if you do like it, you can send me a dollar.
Go back, check it out.
It's just so good.
We're going to put a link to it in the show notes.
And here's one of my favorite moments from that episode.
You know, back then we thought you could actually this is being naive you could actually go to a bank, bring a business plan and they'd lend you money.
Yeah.
Here's my plan.
I need $100,000.
Yeah, and I thought they'd give it to you.
Isn't this a great plan?
Isn't this a great idea?
And so did you do that?
Yeah, yeah, yeah.
Look, we bought a couple of cheap suits and went to Office Depot and bought boxy briefcases with the brass combination locks.
You remember those?
Yep, yep.
We went and we went and saw every bank in town.
I had a briefcase, Craig had a briefcase, and we would put it on their desk, sitting across from them in our chairs, and we would open the brass combination lock, like somebody was going to steal our chicken finger.
Business plan.
And I'll see you next time.
You can send us a voice memo at hibtid.wondery.com or call us at 1-800-433-1298.
Leave a message there and make sure to tell us how to reach you.
And we'll put all of this information in the podcast description as well.
This episode was produced by Alex Chung with music composed by Ramteen Arablui.
It was edited by Andrea Bruce.
Our audio engineer was Jimmy Keeley.
Our production staff also includes Chris Messini, J.C.
Howard Casey, Herman Sam Paulson, Carrie Thompson, Catherine Seifer, Ramel Wood, Neva Grant and Elaine Coates.
I'm Guy Raz, and you've been listening to The Advice Line, right here on How I Built This Lab.
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