Finding the Right Model and Brand

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The importance of organic, local foods

Why was your main focus organic local foods?

Yeah. You know, 15 years ago I had no, no experience in restaurants at all. I'd never actually even worked in a restaurant. It was very mission based. I went to a health. I was working in software and virtual reality software design, and I went to a health retreat called Hippocrates Health Institute.

One of my family members or my sister's brother-in-law actually was a doctor and he got cancer and passed away sadly. And my entire family went to this health retreat, which served all organic raw foods, a very, very sort of holistic diet. And after three weeks there, I was sort of blown away, quite honestly by the effects of eating healthy.

Not just eating healthy, but eating really healthy. So eliminating all the bad foods and replacing them with all really, really good healing foods. My parents were there and I met several people that had overcome. terminal cancers and things like that. So it seemed miraculous and I came back to my tech job and I thought it really more people needed to be aware of, of this.

I was quite healthy at the time, like very healthy person, but it really reset the bar and reset what I knew. or what I understood to be possible about people's health. Yeah. And so I, I approached the, the chairman of the board of the software company I worked with, and I asked if he wanted to invest with me and he said yes.

He started eating this way with me. And so we opened our first restaurant. End of 2005 and the concept was everything had to be a hundred percent organic. Partially because that way you know what's not in your food because in America and Canada and a lot of Europe, but there's a lot of stuff in your food that shouldn't be, that shouldn't be allowed, and yet it is.

And so started with that and then trying to offer healthy food and some meat, low carbon footprint. That's organic and well raised to people that wanted it. So that's sort of how we started or how I started.

Raising investment

What is the process of raising investment? Why did you approach it this way instead of bootstrapping it?

 Well let's see. That's a good question. So you know, when I, when I first started it, it was an idea that I was very passionate about.

And so I started talking to people and I was lucky in the sense that the person that I raised money from, got interested in this kind of concept and this diet, and he got much healthier. And so he was, he was interested. So the initial raise was pretty easy or I was just lucky.

That said, we grew from one restaurant to three at one point, and then the idea was we wanted to proliferate this concept throughout. The country because the mission really is to provide access to clean and ethically sourced food to as many people as possible. So it wasn't just, I wanted to have a restaurant and that was it. So it was always a, a concept that I wanted to grow. And so there was a stage where, we were very popular and we, we had people approaching us investment companies approaching us. And our plan was once we got to three locations, we would grow. But that would, we would grow with outside investment. And so we got to a place where we were speaking with different investors or potential investors, one of them we spent almost a year with, and they were prepared to invest about 5 million with us to grow from, go from three to five, et cetera, et cetera. But at the end of a year, speaking with them, we turned them down at the last minute and that actually hurt us because we had started to grow with the idea that we would use this, this capital.

But the reason we turned them down at the last minute, and this is maybe a good thing for people to hear and to know - is at the very last minute they changed the terms. And they did that thinking, well, you have no choice. We had actually signed a lease for the fourth location on the basis that we would have this capital.

But they changed the terms, and they wanted more voting rights than their investment really represented. And they also wanted veto rights in the boardroom. And it really, quite honestly, it really hurt. We took a big hit by not taking that investment. But, you know, we're a mission-based company.

And so I really didn't want to be in a situation where I lost control of what we were doing. Cuz you know, theoretically they could change anything. And so we walked away and we are bootstrapped, I mean, just the two of us, me and my business partner at this point.

What have you learned from growing from one to five locations that helped you in opening each of the successive next locations?

Our first location was fast casual, sort of quick service cafe. So you go to the counter customer orders and then the food is brought to your table, but you don't have servers.

So we started with a fast casual. Our second location was a full service, full bar, full dining, very fancy. And then the third location was a downtown financial district, Monday-to-Friday, 7:00 AM to 3:00 PM. So we kind of tested the neighborhood, kind of fast casual model, the full service model, and then the downtown financial district, Monday-to-Friday model.

And what we found doing that was that the full-service model is much more d. Requires much more staffing and much more attention to detail. And I had to be there quite a lot. As opposed to being, just having, you know, a manager of each location and then visiting and making sure everything was okay for the full service.

I had to be there to make sure everything was on point. And so eventually we sold that full service and we realized that the fast casual was a much better model again, because our mission is really to get that kind of clean, ethical food to the public. It's not just to open restaurants and be fancy. So that's something we learned.

Also learned that the more staff you have, the more, this is an obvious statement, but the, you know, the more personnel management is required. And that's maybe one of the most difficult parts of the job, I think is, is managing people. You get really great staff and sometimes you don't get great staff and then we sort of moved on to franchising.

So we have one franchise franchisee in the airport, San Francisco Terminal two, which is great. They pay a royalty. And we found that by franchising and licensing our brand, we can get it to more consumers with less liability because startup costs are quite expensive. So I'll just go on one tangent for a moment.

And now we get offered spaces all the time. We just got offered a space by Ghost Kitchens in San Jose, and I turned them down because frankly, one, we had to close some locations due to the pandemic, right? Like really great locations. The financial district, it's just a, it's a dead zone there. Even still, it's very quiet in San Francisco and also it's just, it's expensive.

You know, you, you have to build out the restaurant. You have to, you know, design it, build it out staff. and then it takes a certain amount of time, depending on the build out costs, et cetera, to sort of earn back that investment. So we are sort of moving into the direction more of licensing, so using the brand and more fixed costs. -Stable, fixed costs and expanding that way. Also in San Francisco, if you have more than a hundred employees, it's quite a bit more expensive. And so that's the direction we've taken.

Establishing a strong brand

You’ve tried the franchising models, and more of the licensing for promoting and expanding. What are good options for other restaurants to explore?

 Well, I, I think the first, the first part of that is, is establishing a strong brand. And in that sense, like what differentiates you, what makes you special, and you need that initially in order to, to kind of license or franchise because you have to be different from everybody else. So once you've got a kind of a strong brand idea and, and hopefully recognition through doing business.

You know, one thing we've done is there's a company that opened up in the last year or two called local Kitchens, and they're essentially kind of like a food court in one space. So it's a restaurant that licenses four or five or six different recognized brands, and so a customer can come into that location and get.

Something from one of these five or six brands. And so we are in three locations of this place called local kitchens. And so our salad menu is licensed to them. So they don't have our entire menu. They have our salad menu because that's part of what they needed to salad, so they have burgers and other things.

So we've been doing that. And then the other, the other part, which is actually pretty relevant these days, especially even during covid, it's, it's really taken off is is the concept of virtual brands. Yeah, and so that's something I've been working on. Again, as I mentioned, fixed costs. So before the pandemic came along, one thing we had already realized is as we were expanding, we thought, okay, have smaller footprints, so smaller locations, and do more takeout, because that was kind of the way the industry was going with these third party deliveries.

People were doing more takeout. So you have a smaller location, you're paying less rent. And yet you can, you don't need a huge location to have a takeout. So we thought, okay, as we expand, we're gonna get smaller locations and hopefully you get locations where there's outdoor seating that you don't pay square footage on.

That's always helpful as well. And then really push the takeout. Then the pandemic occurred. and takeout exploded even more as it already was, but it really went even further. And so virtual brands that's something that I'm working on right now. In fact, I'm just about to launch one in January, which is gonna be called Vegan Smash.

And essentially what we've done is have taken menu items that we already have and just massage them a little, change them up a little. and created a vegan only menu because obviously that's good for the environment and it's also kind of a popular concept right now as people wanna eat plant-based foods cuz it's healthier, it's better for the environment, et cetera.

So utilizing your preexisting kitchen and your staff, because there's always gonna be slow times. And your fixed costs. And then creating more brands that are virtual only. So they're takeout only. And I think that's something that can kind of bring your sales up 20 or 30%, which is huge in the restaurant business. You need everything you get.

You created a virtual brand, how did you promote it? That brand doesn’t have a storefront, but people can order either delivery or pickup?

Yeah, that's correct. You know, and I, I, I'm gonna set it so it's just delivery, because otherwise if it's, if, if it's pickup, it can maybe confuse the customer. They'll come and, yeah, wait, it doesn't say this on the front of your restaurant, you know, it doesn't say vegan smash, so it'll be take takeout only.

I'd say honestly, about 30% of our. Maybe, maybe a little bit more are takeout. So essentially what we're doing is first it'll go live on DoorDash, right? And then it'll go live on Uber Eats. And then there's other third party services. One in San Francisco is called Forcable, and they basically, it's they provide lunches and meals to.

Corporate organizations, you know, so they work with Google and Yahoo and who whatnot, and all kinds of, you know, pharma companies, et cetera, et cetera. So, so essentially it'll just go to third party delivery and third party pickup services. And then of course we, we sort of have an Instagram and newsletters and such, that kind of thing.

And so yeah, it's, it's the, the, there's something called virtual brands and there's also ghost kitchens, and they're almost identical. The only difference is Ghost kitchens are, Someone opens up a kitchen that's only for delivery, and virtual brands are the same thing, except they're, it's utilizing your preexisting kitchen, so your restaurant and you open up another brand.

I was at a restaurant conference called Create in Denver a few months ago, and I was on a. Another sort of panel discussion and talking to another restaurant owner that owns 80 restaurants, and I think they have actually three or four that they're, that are self owned, but the rest are franchises.

And he had gone, he had opened three or four virtual brands. And said it's done great. And so when he franchises and which is what we're gonna plan to do, you can franchise the existing concept. So for us to be the Plant, but you also get to franchise the virtual brands.

So someone could franchise one of your virtual brands, but not the main brand. Is that the way you’ll be set it up, or will that be unique to the main brand?

Yeah, so you can add on on mostly because the virtual brands are sort of subsets of the main brand menu. And the main brand is, is, is 15 years proven. So we can, you know, if, if I'm gonna franchise anything, I can say, Hey look, here's the metrics for this brand.

And, and then it's a, you know, check the box. You want to, you want to do these ones as well, you can, it's. I see. And, and here's the, the data behind these other brands which we'll capture over, over time, you know, 2023, we'll see what the sales are and how well, well they do. The third virtual brand I'm gonna do is it's a burger concept basically, where you can build your own burger. So again, it's utilizing a preexisting menu items and shuffling them.

Creating something a restaurant owner can have as a separate brand, a virtual brand, to increase revenue is going to be important for other restaurant owners to be able to do.

Right. And because especially the way that the industry has been going the last few years it's a lot about, its, its searchability. So someone might want to, you know, eat organic food and they find us the plant cafe organic, but they might not find us cuz they're searching, they don't know about us. But if they type in vegan, they find us that way, you know?

Customer loyalty

What have you done to create a loyal customer base for the Plant Café over the past 15 years? Is this going to be a third party focus, or are you thinking of a first-party platform you can collect & grow these loyal customers, especially for these virtual brands?

 You know I, that's, that's yet to be determined because we'll have to see how they do, but I think.

The way we grew, the customer loyalty for the plant cafe was really simple, and I think the main word is transparency. So part of the reason that we exist is. We've all heard the term greenwashing. So people, you know, you, you, if you want to eat organic food, for example or you ethically sourced food, you go and you, you look at a menu and quite often it menus will say organic, wherever possible, or it'll have some things that are organic, some that are not.

And so we are a hundred percent everything is right. And that's part of the thing is, is that we. Are very transparent about what's in your food. And so people know that. And I think that in itself has grown real customer loyalty because over time there's quality, which is really important. And our ingredients are so great, they’re excellent. You know, The, the best you can get. I mean, if you go to a four-star restaurant, it's the same kind of thing from local organic farms. So I think, I think quality, obviously service is important, but quality of product and trying to keep things fresh and on point to your mission is probably the best thing.

We, we didn't ever spent a lot of money on market. Simply because we didn't have it. We grew, no pun intended. We grew it kind of organically and, and so we didn't really have a big marketing budget but over time, we just became known. I mean, we've, we've won quite a few awards over time that we didn't apply for.

They just, people came across us. We were, we were awarded the Most Sustainable Restaurant in the entire Bay Area by the Nature Conservancy. We're the first in, in America to get the Platinum Award by a, a nonprofit called Eat Real. Which is basically tests your sustainability and health related menu items and how you cook things, et cetera, et cetera.

So I think just as they say in life, you know, if you do what you're passionate about, people will come to understand that and realize it and, and recognize it. And so that sort of worked for us. One thing I, I should mention, sort of aside from this is we did something in order to survive during the pandemic that might be helpful for other restaurant owners to consider.

Which is we were having a really tough time staffing during the pandemic. It's even before the pandemic, especially in San Francisco, getting staff was very difficult. So sometimes we'd have, we'd have somebody working for us that wasn't great and we would keep them because we didn't have a replace.

And that always would bite you, because that person ends up, something goes wrong and you have to lose them anyway. But you, you know, you have to keep the lights on. You have to keep the food coming. So at one point during the pandemic, our excellent chef, our night chef passed away sadly, quite unexpectedly.

It was a sort of a shock to everybody, and we then had to replace him. And it was very difficult. We would get replacements and they didn't work out. The poor work ethic – wouldn’t show up. And during the pandemic and now as well still it's really difficult to find people. And so we found a restaurant that was closing.

We hired the entire staff, which was about seven people, and brought them into our location, and we took their concept and put it under the same roof. So , we now have two concepts. It's a smaller concept, but it's still operating and that, and it, it bumps the revenue up a little bit, but it also gave us staff and it saved people's jobs and it was kind of a win-win. It was a kind of a creative solution. During a difficult time.

Flexibility and technology

You source directly from farms around San Francisco; do you ever run into problems with availability when it comes to sourcing from local farms?

Well, so we work with local farms some that we work directly with, but mostly we work with distributors that work with the local farms simply because not all the local farms deliver. So one company we work with it's called Veritable Vegetables, and they are a woman owned organic vegetable dis.

And so they work with a lot of local farms around here and they pick up and they deliver. So that's one of the ways we do run into food shortages during the pandemic especially. But because we have a couple different distributors and we work with several different farms, we can usually fill that gap fairly well.

But the reality is, is occasionally there are things that we have to 86 from the menu. It's pretty rare actually. More of an issue is. I had a first virtual concept that I created and launched maybe almost a year ago, was an organic barbecue, and it had no beef because beef has pretty high carbon footprint, but it was, you know, poultry, seafood et cetera.

And I closed that down because organic meat became so expensive that I just closed it down. I would've had to charge the customer so much money that it just didn't make any. Yeah. So I think right now it's really less about availability and more about price. And we use software that basically tracks ingredient prices and so that we can really got our finger on the pulse of that. Right now Romaine's really expensive, so we'll raise prices slightly, but you've gotta do that.

So what software are you using to do that?

It's called Extra Chef. That's what we use. And so you scan the invoices, get scanned in, and it automatically picks up, you know, the price versus the, the quantity.

And it alerts you. There's quite a bit of work to get it set up, not too much. The, the biggest part of the work was really programming the recipes, right? Because you have a recipe that feeds 30 people and then you have to have the yield for one person. So that was what the most time-consuming part was.

But once we were, it's great because you really need to be price sensitive these days, especially now. Especially with third parties, because third party deliveries take generally 28%.

In fact, in San Francisco that's going up now above 20.

How would you try to improve that side of the like delivery with third parties?

Yeah, so one thing we do is we, we raise the prices, however, I say no to a lot of third-party delivery sort of services that say, no, you can't raise the prices.

It has to be the. A lot say that quite honestly, and then I just say no, because why do you want to work your staff to make no money? It doesn't make sense. Yeah. It's kind of a strange thing. I mean, most restaurants that I know of, they don't make 20% margin. So if you're giving away 20%. I think a lot of restaurants do it because they need the sales.

But I know also restaurants that don't work with any third party, so I only work with third parties where we can raise the prices a little bit. Otherwise it's not worth it.