Speaker 1: 0:08

Today I'm joined by Giles, who's a co-owner of Blue Pan Pizza, which is a, in my opinion, the best Detroit style pizza place in Denver. He's got three locations. He's been working hard with his, his team to develop and see thriving over the last 10 or so years and Giles is just an extraordinary leader, very well in tune with the community in Denver, what's happening, very involved in Eat Denver and just an advocate for restaurants doing really, really well in the state of Colorado. We are going to talk today about how to manage risk and he's going to really identify eight key areas around how he manages risk. Before he opens a restaurant, he looks at the financial risk, the employee risk, the food cost risk, the liability when it comes to food safety and slips and falls or employee accidents, the workman's comp risk right. The reputational risk, which is a very, very interesting part of this conversation. The location risk, the product consistency risk as you scale. And competition and his view on competition, which is very, very interesting. So tons of great advice and insights from this episode. I really hope that you get a lot of value out of this and if you know somebody that is getting ready to open a restaurant or is thinking about opening a restaurant. This episode is a really great resource for them of how to really sit down and put pen to paper and think about all the ways that they need to manage risk before they even sign on the dotted line of that lease or buy a building. Hope you enjoy this conversation.

Speaker 1: 1:55

Welcome to the Restaurant Leadership Podcast, the show where restaurant leaders learn tools, tactics and habits from the world's greatest operators. I'm your host, kristen Marvin, with Solutions by Kristen. I've spent the last two decades in the restaurant industry and now partner with restaurant owners to develop their leaders and scale their businesses through powerful one-on-one coaching, group coaching and leadership workshops. This show is complete with episodes around coaching, leadership development and interviews with powerful industry leaders. You can now engage with me on the show and share topics you'd like to hear about, leadership lessons you want to learn and any feedback you have. Simply click the link at the top of the show notes and I will give you a shout out on a future episode. Thanks, so the show notes and I will give you a shout out on a future episode. Thanks so much for listening and I look forward to connecting.

Speaker 1: 2:54

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Speaker 1: 4:29

Ready to see why? Over 45,000 restaurants, from small independence to large multi-unit concepts, trust restaurant technologies? Visit rti-inccom to learn more dash inccom to learn more Giles. Thank you so much for joining me today. I'm super excited to talk about how you are defining risk, and the last time we were together we were going kind of deep down the rabbit hole of the risk of running restaurants in Denver, where it is today higher than ever, riskier than ever, and where it's been over the years. So I'd love to just kind of jump in here and have you talk about how you are defining risk when it comes to business and personal life.

Speaker 2: 5:16

Well, thank you for having me on. I'm really excited to talk about the subject. There is a lot going on in Denver to talk about, in particular, within the restaurant scene. Feel free to interrupt me at any time. I tend to maybe talk a little too much sometimes, so definitely don't hesitate to interrupt.

Speaker 2: 5:33

Risk Managing risk is one of the top components, if you will, of opening and running a business whereby you own it, whereby you are self-employed, and there are many different kinds of risk. I think a lot of times people strictly associate risk with money, and that is a very big component of how I define risk. What's the risk of me not getting money back? What's the risk of an investor we don't have investors but, speaking generally, them not getting their money back? What's the risk of me and my team being able to create a profit margin so we can sustain a business over the long period of time? So that is a very basic component when we're looking at a new location. We run financial models and we stress test them pretty, pretty, pretty hard and almost to a point where people will say we're too conservative. But the trade-off is is being self-employed, my business partner and I have to take on an incredibly large amount of risk in order to secure and open a location, Risk that's so high that if there's a failure, you could very well be filing for bankruptcy. Why do I say that?

Speaker 2: 6:53

I think the general population let's just talk about leasing for a minute I really think the general population generally thinks that if you lease a space, you open a restaurant, and it doesn't do well, that you just go sorry, John, not working out here your key's back, Good luck. And that's not the case. Most leases require a personal guarantee from the owners to personally fulfill the revenue stream. Obviously the rents right, and most of us are in long deals, ie seven to 10 years. So let's just say the total rent over 10 years is a million dollars. My business partner, business partner I have to guarantee that money comes in and it can really, really play a big role in our decision-making. So just financial risk, right. If this thing doesn't work, what type of financial obligations are outstanding that would need to be unwound to move forward? One of them leasing, guaranteeing leases.

Speaker 1: 7:51

Yeah, guy, let me double down on this real quick before you continue on. Are you able to write in your lease agreements in Denver a clause that if it's not working, you can get out, or is that not an option?

Speaker 2: 8:07

It's definitely an option and I think that's an option that has really reared its head over the past two years because of the challenging circumstances. But I will say the industry norm is very much tenants guaranteeing a portion of or most of a lease. A lot of times I shouldn't say a lot sometimes you get landlords who have no mortgage and their financial circumstances are very different. They can afford to wait it out for the right tenant. Some landlords need to get people in right away and if the tenant's savvy enough and understands what they're signing, yeah, negotiating some type of buyout or just a flat out notice is something that can be very much negotiated. A lot of times what comes with that?

Speaker 2: 8:54

Regardless, if you're guaranteeing the lease, are the improvements right? A lot of times, not a lot. Most of the time the tenant's paying for the majority of the construction and build out and if tenant fails, that all becomes property of landlord. Landlord has an improved space at mostly our expense, right, we do get some TI, but there's a big value capture there for a landlord in theory, whereby they can release that space as turnkey and a new tenant can open up at a very low cost. But, yes, negotiating, you know, limited or non-personal guarantees. Right now is a converse. It's part of the conversation that's that is happening with with a lot of landlords and tenants.

Speaker 1: 9:37

Hi everybody, we're taking a quick break to offer you an exciting opportunity. If you're a restaurant owner or manager looking to enhance your leadership skills, I invite you to join my 12-day leadership challenge. In just 12 days, you'll receive a guided packet with actionable strategies to transform your leadership in less than five minutes a day. Join the challenge and the community and grab your copy at kristinmarvincom. Slash 12 days. Now let's get back to the show. When you create you and your partner, create this, your forecast, your profit model for the business, you said you'd stress test it, stress test it. How do you do that business?

Speaker 2: 10:25

You said you'd stress test it. Stress test it. How do you do that? We have very everything from sales projections to cost increases across the board, to property taxes being reassessed at very high rates in every two years, insurance. All those things have little variables, little cells where I can up, where I can up, upper or up or lower the variable. So it's more about you know, taking the most conservative position in the worst case scenario um, in sales, and then the worst case position on the cost side Um. But we are fortunate to have two restaurants that have been up for quite some time. So we do have data, um.

Speaker 2: 11:03

But it's really more of a financial modeling aspect of you know at what point what has to happen for the business to break even, what has to happen for the business to reach its profitability goals and what has to happen if God forbid. You know we don't meet either. So it's a very financial-related Excel model that we use and we play with primarily our cost structure to see if costs go up to a certain amount. How does it impact us? Minimum wage in Denver that goes up every year forever, that does not sunset. So that's kind of easy to model, you know, not easier because I can make a reasonable guess as to what CPI might be, you know, year over year. But it's a lot of just punching in numbers to see what happens in a worst case scenario, whether it's sales or expenses.

Speaker 1: 11:52

Got it. How else are you defining risk outside of finances?

Speaker 2: 11:57

So you have employment risk, right? What's the risk of, you know, an employee not lasting as long as you'd like them to, which creates turnover costs? While we're on that topic, you know we have promoted from within a lot in our company. I mean, I mean a lot. So when you promote somebody to a management position, in this case, with very limited managerial or even sometimes no managerial experience, right? What's the risk of being able to teach and train that team member to become a successful manager in a reasonable amount of time? So you know employment risk. What's the chances of our turnover being higher than we want it to be?

Speaker 2: 12:42

That's another big, really big component. And then food costs as well. What's the risk of our cheese, and in particular our cheese, you know, going up or down based on the market? So that's, we look at employment risk. We just look at general liability risk. People are going to slip and fall and all those types of things that's going to happen. That's why you have workman's comp insurance. Reputational risk, our reputation. We have worked day and night for almost 10 years to build our reputation and we're very cognizant of the fact that it can take 10 years to build it and one day to destroy it. So if we're partnering with somebody to do a tap takeover, or another vendor to introduce a new topping or a special pizza of the month, those are all things that you know play large parts in risk analysis outside of the financial component.

Speaker 1: 13:37

So I've heard you mention partnerships when it comes to building your reputation, but what other things have you thought about and done over the last 10 years to develop a good reputation?

Speaker 2: 13:46

Um, a lot of stuff. You know. Trying to hire people who understand our culture and our company vision and goals is the start. It is also very difficult to talk to somebody for one to two hours, 30 to 60 minutes and understand how they're going to react under pressure and things like that. Um so uh, reputation is key and it starts with with good hiring um patients. You gotta be patient with people when you're training them, because you do want good people to stick around, but you want them to be able to build your product consistently and well. You know a hundred out of a hundred um procedures. You know people crave consistency. People want the same. When people enjoy something. They want that experience to be the same the next time they go back. So having the appropriate build models to make sure that happens is huge in building our reputation.

Speaker 2: 14:45

And then just the hospitality component of how we treat people. We are in the hospitality world and we are going to deal with people who are sometimes not happy. They might not be happy when they come into your restaurant. Something might have happened earlier in the day they're taking it out on you or they might not be happy with this experience you provided.

Speaker 2: 15:05

I provide insane amounts of leeway for my staff to make judgment calls on correcting mistakes and how we correct them if we make them. In regards of comps and give certificates and things like that, I have often found that how you respond to a mistake or respond to a challenge really plays a large definition in our reputation, because you have a choice. You can either make it right, go above and beyond when you do make a mistake, or you can choose to ignore it and not deal with it. We are very much the former and a lot of times people think we make mistakes and we don't, and we don't argue we capitulate. We make them happy, we do whatever we can to make sure we don't lose that customer and they come back. So you know, being accountable is huge in building a reputation Accountability for things going not only good but bad and how you make a decision to correct the situation.

Speaker 2: 16:02

Reputations take so long to build.

Speaker 1: 16:04

It's huge and I've never really thought of it in terms of calculating risk for a restaurant before. It makes so much sense. But I don't think that this is a conversation that I've ever engaged in. We should do a panel on this. Just think bigger. It's great.

Speaker 2: 16:17

Yeah, and I'm in the pizza world so I'm not a steakhouse, right Steakhouse. I probably want you slash. Need you to come back two, maybe three times a year. In the pizza world we really need people to come back, you know, hopefully weekly. You really need repeat business in this space to survive and grow. It's critical in the pizza world that you are able to develop that reputation so people frequent you and support you and help bring in new people as well.

Speaker 1: 16:47

Absolutely so. You've talked about the financial risk. You've talked about the employee aspect, food costs, some historical data and kind of keeping an eye on trends that are coming up in the future. You've talked about liability and reputation Any other areas of risk that you think about and manage risk that you think about and manage.

Speaker 2: 17:14

I think you know that kind of sums up the big pillars of risk, at least in my mind right now, and you know what some of those things intertwine with each other too. You know, I would say food safety is always something we're managing through checklists and daily procedures. There's a risk that you might make a mistake and God forbid there's a bad outcome with a customer from a food standpoint. But food safety is huge as well. But no, I think those all kind of are the big pillars of risk that we are currently managing.

Speaker 1: 17:45

How did you develop the skill to learn how to manage risk? How did you develop?

Speaker 2: 17:49

the skill to learn how to manage risk Through lots of mistakes, honestly, and I've been self-employed nearly my entire career. I graduated college in 1999, december. So, honestly, being an entrepreneur, I was a minority partner in a real estate firm when I got out of college, so learned a lot about risk there from the real estate construction, in the real estate finance world. But, to be honest with you, it's a lot of it is just understanding what you are agreeing to do when you decide, in this case, to open a restaurant, and just thoughtful and open. You know dialogues with your partners and yourself about. You know what decisions do we have to make in order to make this work.

Speaker 2: 18:37

But, you know, I wish there was more of a book on it. You know, and some things you can define very, very clearly. But, in all honesty, learning how to manage it really comes from you know experience. It comes from just being aware. It comes from talking to other people of more experience than you and, honestly, some of it's common sense. You know when you release it says you're going to guarantee this cashflow for 10 years and if you blow out, you know we can take your house. You know there's no textbook for that. You have to decide if that's something you're willing to do or not to do. But I would say a lot of mistakes, a lot of just learning on the fly and also a lot of talking to other people who are willing to talk to me, especially in the early days.

Speaker 1: 19:24

Yeah, hey there. Podcast friends, I hope you're enjoying these impactful conversations and leadership insights I'm bringing you each week. Before we dive back into today's episode, I want to take a moment and reach out and ask a small favor. That would go a long way in supporting the show. If you've been loving the content I'm providing, please take a moment to leave a rating and review. Wherever you listen to your podcasts, Not only does it make my day, but it also plays a pivotal role in helping the show grow. Your reviews boost my visibility, attract new listeners and encourage exciting guests to join me on the mic. So if you want to be part of my show's growth journey, hit that review button and let me know what you think. Thanks a million for being awesome listeners. So let's talk about you've got three locations. Now let's talk a little bit about how risk differed with each location. What was it like for you with location one?

Speaker 2: 20:24

Location one was, you know, really interesting. So we leased a very small spot in the West Highland neighborhood of Denver, about 950 square feet. One of the ways we managed risk in that scenario was the previous tenant was a pizzeria, so there was a lot of infrastructure in there that was already in place, not maintained well, so the cost to open that was much lower than it would have been if we would have started just from scratch, from a shell. And at that point in time when we opened, I had a full-time job with the city of Denver, so I was working seven days a week, about 15, 16 hours a day, um going to work and then coming to the restaurant. We didn't have any money to pay a salary or even hourly for myself and my partner. Um, you know it was a lot of sweat.

Speaker 2: 21:21

Um, on the finance side, we took a $50,000 loan Um and the bank made both of us put our homes up as collateral right For for a $50,000 loan. Um, you know that's always scary, but it was necessary in order to get those funds. Um, it again turnkey. We did do some, some work, but to to brand it to our own space, but the fact that it was turnkey and a lot of the construction a lot of the major infrastructure was already there and in good working order was huge. And startup costs Startup costs at our first location was small, mostly because costs were crazy back then. This is 2016. So we felt like our downside was limited, with the exception of putting your home. You know putting your home up as collateral. So really, you know low startup costs and having the right equipment is key. You know it's really easy to cheap out on things and we can't do that. We have very specific equipment to get the results that we need to ensure quality and it was just a lot of sweat, a lot of sweat.

Speaker 1: 22:29

Did you, because that current space was a former pizzeria? Did you have a relationship with the former tenant? Did you have an idea of what sales looked like in that area? No idea.

Speaker 2: 22:41

No idea, no idea. And on top of that, you know that that's a good question. You know we were. We opened a Detroit style pizzeria, which didn't exist in Denver at that time, and not only did it not exist, because of our quality and how we make our pizza, we were the most expensive pizzeria in town. So not only were we bringing a product to the market that most people had never had or heard of, our price point was high, so there was definitely some risk taking there. Now there are several pizzerias. There are several pizzerias and restaurants that serve Detroit style pizza that are more expensive than us by 10% or more. But no, it did not have a previous relationship with a previous tenant.

Speaker 1: 23:25

Got it, so let's talk about risk with location number two.

Speaker 2: 23:30

Location number two was similar. The numbers were just bigger. So we had to take a $400,000 loan to open that location and put in some cash that we had managed to save. Same scenario with a loan that large. We got an SBA loan. So the interest rate's high and the points on the loan to close are very high because if we fail, the federal government the SBA, you know pays back the bank 80% of what we do not pay back again if we failed.

Speaker 2: 24:02

So add some zeros, had to do the same thing, had to put up our house as collateral, and then just the first, you know the main challenge of being able to make our product at another location the same way. The consistency was huge, right that's. You know, kitchens aren't the same in terms of environment when it comes to making dough. Heat, humidity, all sorts of things play large impacts in how dough is made. So, from a financial standpoint, more zeros. From an employee standpoint, our team over doubled. So many more people to manage right, many more personalities to work with, many more opportunities to build a team right, which, you know, sometimes you hit the nail, sometimes you miss, but you know. And then also we opened that two years after we opened our first location, so it was quick. It was quick Um you know.

Speaker 1: 24:55

so you knew you had a good reputation, you knew you had a brand that was established, that was doing well, right, so I'm sure that came into play with number two. But I mean taking a $50,000 loan and going to an established pizzeria and then opening a concept two years later and taking a four hundred thousand dollar loan. I mean what? What was the? I mean, obviously you crunched the numbers and you kind of just ran us through what you're looking at, but what was it that made you say, like you and your partner, like we feel comfortable with this amount of money in this investment.

Speaker 2: 25:26

Great question. I have to pick one answer to that. It's location. Locations are huge. I mean, I'm not telling you and probably your audience anything, they don't know, but choice of location is a giant component of our risk analysis. I probably should have mentioned that actually Giant giant. And we are in those two.

Speaker 2: 25:54

Our first and our second location are embedded in very dense residential areas in Denver and there are very few commercial corridors in Denver that are immediately surrounded by very dense, you know, single family, mostly single family homes and a couple of multi-unit apartment buildings. I'm from Chicago originally, michigan originally, but moved here from Chicago. Chicago has 50 neighborhoods with booming commercial corridors and retail and foot traffic and cultural events and activities and density and all those things. Denver does not have a huge amount of commercial districts like that. So the second one the location was phenomenal and you know, and it was slightly bigger.

Speaker 2: 26:35

We wanted more seats, right, but we didn't, you know, want to go overboard and I should probably touch on that for a minute. Another thing about our first location was how small it was right and I remember saying to my partner look, if this thing ends up, you know, going down in flames, you and I can essentially run this place with a small group of people in a worst case scenario, right. So you know we're maintaining less space, we're building out less space, et cetera. Our second location we doubled in size to about 45 seats, but still on the small side seats, but still on the small side. You know you get these really big spaces that are really expensive to maintain, to fill up, to heat, to cool. So location and size were critical in our decision-making process and evaluating risk when it came to choosing our first and second location.

Speaker 1: 27:25

How do you know what a good location is for your concept?

Speaker 2: 27:29

You know, I mean you have your textbook data right, you have your demographics data and things like that um that you look at initially, but I don't want to say a lot of it's gut Cause it's not um, we are a family style pizzeria and we are model and our brand is very much family oriented, which some people honestly don't like. So there are people out there that don't want to go to a restaurant that have what they perceive as a large amount of children in there. Right, we are very, very, very family forward and so when we're looking at a neighborhood, we're looking at not only the demographic data as it relates to density and household income, but we're looking at, you know, the family unit. You know. An example would be Rhino.

Speaker 2: 28:14

We've had several opportunities to go into the Rhino neighborhood in Denver. We've turned them all down. One of the main reasons we've turned them down is because it's a very apartment heavy community, which means you have a lot of transient residency right, very, very small home ownership in Rhino. So these apartment buildings that are that, these giant buildings, while they create density, a certain percentage every year leaves and new people come in and then you have to remarket to those new people right and try to get them into your restaurant. When you're in a family, when you're in a residential area where you have families and high percentage percentages of home ownership, um, those two things are critical in making our decision when it comes to to to a new location.

Speaker 1: 28:58

Got it. So what was special about location three for you?

Speaker 2: 29:02

You know, location three. Honestly, we kind of we strayed away a little bit from everything I just said. Um, uh, the big thing was when we were going to do our third location was we essentially had to own the real estate, which is difficult because real estate is expensive, building out restaurants are expensive but we really wanted to own the real estate.

Speaker 1: 29:24

What was important to you about owning it this time, Giles?

Speaker 2: 29:28

All sorts of things right. The first thing is paying our own mortgage. I mean real estate is you know. I mean real estate is, is, is is owning your own real estate and paying your own mortgage is huge, like I've always told my partner. The one rent check I've always kind of been excited to write was the one for golden, because we're paying our own mortgage, right, and rents are so high, right, that you know there are many situations where the acquisition of the real estate, if financed properly and under certain conditions, will equal what you would pay in rent. So, first off, paying our own mortgage is huge, paying down our own mortgage is huge.

Speaker 2: 30:17

In addition to that, the Golden Property is about an acre and it's on a pretty busy corridor street, not like a highway or anything like that, but a two-lane street, 30 miles an hour and it's almost an acre. So in this and it's where we are single tenant, meaning it's only us. So in this aspect, 10, 20 years down the road there's, there's probably a real estate development opportunity on a site that large Right. So so you know, can the site be redeveloped in the future? Possibly Are there any ways to add value through a redevelopment or through a repositioning of the asset.

Speaker 2: 30:56

But owning that real estate and paying our own rent is just. It's a dream come true. It comes with a lot of responsibility and added risk. Right, you're taking a mortgage, you're definitely guaranteeing a mortgage with the bank mortgage, you're definitely guaranteeing a mortgage with the bank. But and then you know just, you know just having that real estate in the event that, god forbid, something happens to the restaurant, you know, seeing restaurants that you know just for 10 years they don't renew their lease, right, and they're just out, and what's left is what's in your bank account and they're just out, and what's left is what's in your bank account and that sucks.

Speaker 1: 31:48

So having another asset underlying the restaurant asset for us was a really, really big deal, for not only financial considerations for the restaurant but also just for building wealth management as well. And Golden's going through this extraordinary redevelopment as a city. Did you know that before you came in?

Speaker 2: 31:58

Good question. I've been out here for 13 years, yeah, so that played a huge role. Actually, I should have mentioned that I've been out here for 13 years and our restaurant scene in Golden is pretty stagnant, and that is not in a bad way, right. What do I mean by stagnant? There are not a lot of restaurant failures in downtown Golden. A lot of the restaurants have been there for years, if not decades, so there's very little turnover, right. Additionally, it's a very family centric community and the options for family style dining or family dining at a kind of an elevated food level are minimal, are minimal out here. So we really, really, really get a lot of work.

Speaker 2: 32:41

I really believe we are filling a needed gap out here in the hospitality and dining scene in Golden. And then, you know, we're doing like a little kids play area that no other restaurant in Golden's doing. But the demographic, family makeup, the density, things like that, the lack of choice in Golden because restaurants usually don't fail all those kind of went into the bucket and we concluded that, hey, you know, this market has some depth to it, it has some unfulfilled demand and there's nobody else doing what we are doing food-wise. So you know, we found this property off-market and were able to acquire it, and the timing was great and then we were able to open a little over a year ago.

Speaker 1: 33:24

How do you factor in competition when you're looking at new locations?

Speaker 2: 33:32

in competition when you're looking at new locations. You know this is going to sound really stupid. We really don't. To be honest with you, does that mean we are not aware of the pizza choices within a proximity of our restaurant? Absolutely not. We're always aware of what's around us, right? But we just believe that our model is very unique, in particular from the customer service and hospitality side, and our product is so unique as well.

Speaker 2: 34:03

We've seen several pizzerias add Detroit style pizza. Since we've opened, we've seen a pizzeria or two add Detroit style pizza very, very close to our first location. Um, you know, but we were first to market with that particular product. Um, so, while we do, we were very aware of our surroundings and who we're competing with. What we have found is that our product is very unique and not really offered in a lot of places around Denver. When we opened our first location, for example, there were one, two, three, four pizzerias within a mile and a half, all of them existing, with reputations, right, pizzeria, locale, hops and Pie who at that time, who has an incredible reputation. They had been open for a long time. But I mean, and I remember our landlord saying do you guys really think you can make it with all this pizza. And I said absolutely what we are doing. Nobody else is doing.

Speaker 2: 35:06

So, while we are aware of our competition, we are really, really focused also on demographics and just the food scene in general in the immediate vicinity of where we choose a location we really focus on. You know Jeff Bezos says it really well. You know we really, really obsess and focus on our customers, not our competitors, if that makes sense. We want to be aware of what they're doing, we want to see what they're doing, we want to see what the public thinks is really important, right, but you know we don't spend an inordinate amount of time, you know, obsessing and analyzing competitors when making a location decision. Obviously, if there's a Detroit-style pizzeria 20 yards away, we're probably going to take a pass. But you know, knowing the makeup of not only the pizzerias around us but the food scene in general, are two very big boxes we look at.

Speaker 1: 36:06

So things have changed so much in Denver over the last five to 10 years as you move forward in the next five to 10 in the city. How do you make the numbers work these days?

Speaker 2: 36:26

It's very difficult and think about this. There is so much out of our control on the cost side that not only has it increased risk, but you know it's just gotten harder and harder to have a business in this space and you know, candidly, make enough money to not only survive but to justify the risk and sacrifice. Um and Sorry, I forgot the question. Shit, I'm sorry. No, you're good.

Speaker 1: 36:59

Just thinking about how you make the numbers work, sorry, no, no, you're good. Is there a stronger push? And we talk about this a lot with clients and in my network. It feels like you've got to be really good at marketing these days. It feels like you've got to have a really good tech stack. You've got to be involved in delivery, online ordering, the takeout side of things. The marketing's got to be really strong. The employee retention piece has to be strong. I mean really firing on all cylinders. Do you think that's true?

Speaker 2: 37:32

Absolutely, and we have limited tools right. We have our pricing right. We can increase prices. We've increased prices three times in 10 years, right, so we have not increased our prices very much historically, especially if you compare it to the increased cost, the percentage of how much costs have gone up.

Speaker 2: 37:57

Operational efficiency is one way, you know, we make the numbers work, but you're only going to squeeze so much juice out of that orange, um, you know, it's really difficult to be honest with you. To be honest with you, and we've come to the point where we very much kind of understand that if we want to continue to be in this space, we're going to make less money unless we can, you know, start charging New York prices. Right, so you have to be incredibly efficient on operations. You have to be incredibly efficient on waste. We've we re-bid out a lot of our paper products recently, right, so we just redesigned our boxes and went with a new company about six months ago and we, the company we were using, we were just getting killed on pricing. Um, we found a new company and they got our box price down by about 46%, which is huge. Um, we spent over well over $100,000 a year on boxes, just boxes. So those little unicorns per se help.

Speaker 2: 39:07

We also go line item by line item on all of our ingredients. But the thing about our ingredients is we won't change most of what we do. Honestly, we will not change our cheese, we haven't changed anything. But we always look at those line items to see what the costs are. I had another really good thought about managing costs Pricing back of house fee. We have a 3% back of house fee. I know there's a lot of debate about that. We pass through 100% of that revenue to the hourly rates of our kitchen. None of it is retained for benefits. None of it is retained for paid time off. None of it is retained to buy a new oven. One for one goes right to our kitchen. So that helps make the numbers work from time to time as well.

Speaker 1: 40:00

Giles, can I ask a question on that? I know there's talk of Denver getting rid of service fees. Would that categorize as a service fee? And if you were forced to get rid of that, would you just take price to offset?

Speaker 2: 40:13

Great question. I believe it would be a service fee and yes, if that comes off, we yeah, our prices go up.

Speaker 1: 40:23

Do you? Also do the 18 or 20% fee, like some other restaurants who are just the 3% Okay.

Speaker 2: 40:29

Yeah, no, no, no, no, no. But that would be a huge hit, right? Because my team members are, you know, getting, you know, money. You know their hourly rate is higher because of the fee. The more they work, the more they get, um, you know. So, if that goes away, yeah, we would have no choice um to but to increase prices. Um, recipes is another thing. We make so much from scratch. I mean so much, and you know, our salad dressings, with the exception of Caesar, made from scratch, all of our appetizers, except one made from scratch, all of our sauces made from scratch. We blend cheese at certain ratios and at certain shred thicknesses. Do all that by hand. So you know, we have looked at a couple items and said look, you know, could we buy marinara, rightara, instead of spending five hours twice a week to make it at each location? If we did buy it, how good, bad or ugly is it? For the first time, looking at some of our recipes and wondering if there's a pre-made solution, that's another way.

Speaker 2: 41:38

Yeah, yeah, but that's very hard because there can be a quality compromise there which we aren't willing to take. Going back to fees a little bit, one of the things I really am looking at and candidly I'm a very big proponent of are credit card fees. Right, the credit card companies, straight up, have monopoly on what they charge us. It's not a secret. You can talk to anybody on any part of the political spectrum and if they read, they'll know that credit card fees, that area is very, very monopolized. What about passing that fee to the guest? And hey, if you want to pay in cash, I'm going to take 3% off the tip or off the total.

Speaker 1: 42:20

Yeah, a lot of restaurants do that in Tucson A lot of businesses do that.

Speaker 2: 42:25

I mean, I don't. If I told you what our credit card fees were monthly, your jaw would hit the ground. But let's put it this way Um, our rent our credit card fees monthly are higher than our rent. Um, they are higher than our monthly health insurance premium costs that we pay for our employees. It's like the third highest expense buying food and labor.

Speaker 1: 42:51

And it's usually food, labor, rent. Yep, I was on a COGS panel this week, or attended, and we were having this conversation. Are you, have you gone back and tried to negotiate those fees and if so, what have you been told?

Speaker 2: 43:06

Yes, I mean yes and no. So here's one of the challenges we deal with. We use a point of sale system called Hunger Rush and if we have to use WorldPay as a credit card processor, we have to, and, honestly, most point of sale systems work that way. Right, toast? Yes, my understanding is that they will let you bid it out, but they're very favorable to a particular company.

Speaker 2: 43:32

There was a point of sale system that I won't name that we looked at switching to but ultimately decided not to due to the experience we had. They did a bait and switch. I said you know what about credit card processors? Oh, giles, you know you can use anybody. Okay, great, but here's who we recommend Signed up with. The recommended one wasn't happy, called them up, said we're going to switch to WorldPay. Oh, okay, you can definitely switch to WorldPay, but if you read the fine print of your service contract, we can't provide you any services, support services as it relates to credit cards. So if your credit card this or that happens, don't call us. And that was actually that relationship. So I mean yeah. So, yeah, that's a very long way of saying yes, but there are very limited options and the point of sale company really, really puts in place, you know, bumpers that kind of forced you to use a credit card processor, but even if it's, even if they don't Kristen, there's only two or three.

Speaker 1: 44:30

Yeah.

Speaker 2: 44:31

You know, that's an industry I don't want to get off on a tangent, but like that is an industry that I cannot figure out why it has not been reinvented in the past 10 years, why nobody's been able to disrupt that industry. Is, is, is. I can't, I can't understand it with all the technology I mean. You know, I don't, you know, I don't understand how a tech entrepreneur, or just an entrepreneur, finance entrepreneur, has not come up with a credit card processing system that's cheaper but profitable.

Speaker 1: 44:59

Yeah, if anybody listening, I'm stumped on this too, so if you know anything, you can text me from the show, but give us, give me some info. I'd be happy to share it with Giles and and, uh, anybody else that's interested in this. I think that's a. It's a huge conversation, it's, um, it's a big issue.

Speaker 2: 45:15

For sure, something else we could definitely dive into, um, and I'll say the person or people who eventually figure that out, you know are probably going to end up, you know, being on the beach in Maui. It's just it's, you know, in retiring. If you mean, if you could figure, if someone could figure that out and compete with the big boys and girls for less and provide same service, you mean that's a huge disruptor. I think On the flip side, maybe the regulatory legal environment, maybe the government has restrictions in place that make it hard to do that. I don't know. But I honestly cannot believe that it's just processing it's computers. I cannot believe it hasn't been reinvented.

Speaker 1: 45:58

Yeah, no, it's a really great point. It's computers. I cannot believe it hasn't been reinvented. Yeah, no, it's a really great point. Unlock the skills to transform your leadership with the Hospitality Leaders Roadmap. Move from ordinary to extraordinary, packed with practical strategies to lead with confidence and create lasting impact in your restaurant. Visit kristinmarvincom. Slash audio to download your free audio book today. What's one area of your business Like if you looked at one department? If it's marketing operations, the financial aspect what's one area that you would really like to improve in?

Speaker 2: 46:50

like to improve in? That's a hard question. One area, one area that I would like to improve in is customer service. No matter how good of an experience a customer has with Blue Pan, no matter how many compliments we get. You know this sounds cliche, but every flippin' day we're looking to provide a better guest experience. And it could be, and it happens so many ways.

Speaker 2: 47:14

There's a big, big restaurant gentleman in the Denver metro area. His name is Frank Day and he's big and he's been here for 50 years and the guy is remarkable restaurant owner operator, just remarkable for all sorts of reasons. Why do I bring up him? Pre-covid, he came into Blue Pan, had lunch, you know, I met him there blah, blah, blah, and he said you know, hey, can I get a cup of coffee? We don't serve coffee, um. So I said can you, can you? Are you in a rush? He said no. I said give me a minute, ran across the street and I asked him you know, what kind of coffee do you like? Oh, just medium. You don't give me sugar, no, black's cool. Went across the street, bought a cup of coffee and brought it back. It was that was just instinct, by the way, it was just uh, yeah, that wasn't like you know. I wasn't doing it cause it was Frank Um, but no joke. Customer service, customer service. Customer service. 10 out of 10.

Speaker 1: 48:13

I love it. There's a that takes me back to working at the Broadmoor. For five years we were, we were told to never say no, so there were oftentimes we would be running across the lake to go get a bottle of wine that the guests had enjoyed last night, that we didn't have on the list, or a cigar that we didn't have available, or an ingredient, and it's all about getting your team to really understand how to provide service outside of their four walls, and you have surrounded yourself with businesses and are in areas where there's a lot of things that you can access outside of just what is on your menu, and that's an extraordinary thing I think a lot of people aren't thinking about today.

Speaker 2: 48:51

Absolutely right. And you know, like I said earlier, I don't leeway can have a negative connotation, but the leeway that my business partner and I give to our management slash supervisory staff is very large, for lack of a better term. So why did I bring that up? When we have, if we have, a regular come in, you know, if I have a piece of BFD right, just make sure that when you hit comp you put the reason right. You have a lot of flexibility to provide customer service at the highest level possible. You know, at all times and I like that never say no. That's a really, really, in my opinion, three powerful words. I like that a lot, a lot.

Speaker 2: 49:37

But I think, if I'm being honest, I think customer service in our industry, at least in Denver, is I hate to say it like that, but for me personally it has been a challenge sometimes just to get some good customer service. When you go out and candid candidly, you know, like if I'm going to spend my time and hard-earned money going out to eat is like our favorite thing to do. Besides, you know whatever going on vacation, I guess, but even then eating out is our favorite thing to do, you know, and I think a lot of people maybe might be a little burnt out, might be a little. You know PSTD from COVID but customer service right now can be. Finding good customer service can be a bit of a challenge.

Speaker 1: 50:24

Well, and we were having conversations about this when I was still in Denver and on the Denver board year I mean 10, 15 years ago, talking about the service was in trouble and since the pandemic, I mean the workforce has completely changed. No-transcript more that goes into it these days, and so it puts so much pressure on training and and hiring. It all starts with hiring, like you said, and hiring to your core values and your vision, which is incredible. So good for you.

Speaker 2: 51:22

You're exactly right. It starts with the hiring. I like to use the word unteachables a lot when I'm trying to hire somebody. Do they have the unteachables? Do they have a positive attitude? Can they stay positive under pressure? Do they work hard? Will they go above and beyond? Will they put the guest or even another team member ahead of their own needs? Like those are unteachables we are looking at when hiring. I can teach you how to make a pizza. I can teach you our company philosophies, our vision, mission. I can teach those things. I can't teach you to be nice. In my opinion, I can't teach you to work hard. I can't teach you to be nice. In my opinion, I can't teach you to work hard. I can't teach you to care. You either have it or you don't. And you're trying to evaluate those, those variables, in a very short period of time. So you know, like an hour interview. So yeah, it starts with hiring, to your point.

Speaker 1: 52:15

Do you stage we?

Speaker 2: 52:16

do sometimes, you know, Um, we do sometimes um, you know, yeah, yes, we do, we do.

Speaker 1: 52:22

Yeah, we do.

Speaker 2: 52:23

We do.

Speaker 1: 52:24

Love it Well yeah it's. It's important. I think it's. It's a great way we were. We were talking about this last week too. It's so nice to just, yes, you could. You can have a nice conversation with someone, but to actually see their instincts and to see if they've got those that visual can get those visual cues from people of needing something or where their eyes are looking or are they looking for something to do and keep themselves busy. That's a really difficult thing to pull out of an interview.

Speaker 2: 52:52

Yep, totally right.

Speaker 1: 52:54

Thank you so much for being here. I, you know, obviously we've been, you know, a huge fan of yours since opening and we consider you the the best Detroit-style pizzeria in Denver. And I'll tell you traveling the world and traveling in the nation. We love pizza and we're always trying different Detroit style, and it just never measures up to the product that you serve.

Speaker 2: 53:22

That means more than you know. You know, cause we do work very, very hard at trying to accomplish that goal. Um, you know our dough process for our Detroit style pizza is very long. It's very labor intensive, um, and it's pro our process is probably why most I don't know if anybody else in Denver that that does the same process we do, um, so you know there is a lot of love, care and energy put into every single pizza, um, and all this love care and energy in the process. You know, when everything's synced, our quality is, is is acceptable. Um, you know, and if it's not, we got to fix it. You know, um got to fix it right away and make sure the guest is taken care of.

Speaker 1: 54:03

I love it.

Speaker 2: 54:04

So you know, and like, you'll never hear us say we're the best, but that's, that's another important thing. Um, you know it's part of actually our culture. You know we don't go around town saying we are the best, we are the best at actually. I actually tell my social media guy like I don't even want to use those hashtags, right, and that's probably a stupid decision. That's pizza Denver, I mean, that's a great hashtag, right, but part of our core beliefs has to do with humility, and you will not see us running around town saying we're the best ever and if we are, we need to be smacked because it's all. Customers are the only people, in my opinion, who are qualified to make that judgment.

Speaker 1: 54:48

Yeah, it's interesting, I think sometimes people position themselves as the best or they kind of enter that mindset and then they stop growing from there. They think they've got it all figured out. And I love your humility because, just because you're all you know, just knowing you, you're always learning, you're so curious, you're involved, you're committed and you're always you're just very thoughtful and intentional about everything that you do and you worry about it in a really good way, in a healthy way, which is just you know. Those are just incredible characteristics of ownership. So you bet.

Speaker 2: 55:18

And, and you know, that kind of ties back to risk, right, we're managing risk and how do we manage it, whether it's financial or reputational, and what you just said and how we think and how we believe and how we act and the decisions we make about blue pan, um, you know, hopefully you know. You know um help us address the risk of you know, of not doing well. Hopefully we do better because of all those things.

Speaker 1: 55:41

Yeah, absolutely. Well, really appreciate the conversation and the time and I can't wait. Can't wait to get back there and get some Brooklyn Bridge. Hopefully it's still in the venue.

Speaker 2: 55:50

It's my favorite. We are here for you. We'd love to see you, as always.

Speaker 1: 55:55

Anybody, for if you're listening, please go to any of the Blue Pan locations, check out their product. Go back once or twice a week. It's just incredible stuff. Giles and the team have something really special, so that's going to do it for us this week, you bet. Thank you, and please share this episode with anyone in the industry that you think could benefit. We all need to stick together, share ideas, share stories, gain insights from each other and build this community. So we will talk to you. Thank you, we'll talk to you all next week.

Speaker 2: 56:25

Thank you so much for having me. I appreciate you.

Speaker 1: 56:27

Thank you, bye-bye.