October 13, 2025 • 42 mins
In this episode of the Restaurant Technology Guides podcast, host Jeremy Julian dives into the intricacies of restaurant profitability with special guest Chip Klose, a bestselling author and host of the Restaurant Strategy Podcast. Chip shares his journey from theater to fine dining and emphasizes that profitability is the key measure of success in the restaurant business. He discusses the biggest challenges in achieving profitability, including managing revenue, cost of goods sold, and labor—all moving targets. Chip provides practical insights into operational strategies, marketing techniques, and customer retention methods to help restaurant owners enhance their profit margins. Listeners will learn how to implement effective systems, evaluate menu items, and ensure repeat business to drive overall growth and stability in their restaurants.
00:00 Restaurant Strategy
01:05 Introduction and Guest Background
01:53 The P3 Mastermind Program
04:13 Ideal Audience for P3 Mastermind
07:15 Challenges in Restaurant Profitability
13:53 Understanding Revenue Growth
18:22 Marketing Strategies for Restaurants
22:22 Engaging Customers from the Start
23:23 Creating Repeat Customers
24:16 Data Acquisition Importance
26:21 Personal Touch in Hospitality
30:43 Managing Prime Costs
34:29 Optimizing Menu and Labor
37:56 Final Thoughts and Free Gift
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker (00:02):
This is the Restaurant Technology Guides podcast,
helping you run your restaurantbetter.
Have you ever wondered whatreally goes on behind the scenes
of restaurant profitability andsuccess?
Today, we're pulling back thecurtain and revealing the untold
stories, surprising insights andgame-changing moments that you
(00:24):
don't wanna miss.
Today's guest is none other thana bestselling author, chip,
close.
Chip has been in the restaurantbusiness for quite some time and
has an incredible insight toreally be able to drive.
Profitability, which in hisopinion, and he talks about it
on the show, is the only measureof success within the restaurant
(00:45):
business.
Please stick around until theend where he shares some really
great insights on howrestaurants need to be thinking
about these things.
If you don't know me, my name isJeremy Julian, I'm the Chief
Revenue Officer for CBS NorthStar.
We wrote the North Star point ofsale solution for multi-units,
and now onto the episode.
Jeremy Julian (01:06):
Welcome back to the Restaurant Technology Guys.
thank you everyone out there forjoining.
As I say, each and every time, Iknow you guys have got lots of
choices, so thanks for hangingout today.
I am joined by an industryexpert.
I would say, and I know he'sgonna probably be like, ah,
yeah.
But, but I've been following,his stuff and kind of the
content that chip's been puttingout.
So I'm gonna let him introduce alittle bit about, his
background, a little bit, wherehe came from, and then we'll
(01:27):
talk a little bit about one ofthe big things that, a lot of
people open restaurants for,but.
Few seem to have, have masteredas profitability.
And so why don't you get, getour audience a little bit of a
primer as to who you are beforewe jump into why they should
listen to you.
And I hang out for 30 minutes.
Chip Klose (01:40):
I appreciate it.
first things first, thanks forhaving me on the show.
you're a big deal.
This show's kind of a big deal.
I appreciate the opportunity tocome and chat with the audience.
I imagine there's probably afair amount of overlap.
people who listen to both mypodcast and yours.
so I'm the host of theRestaurant Strategy Podcast.
the founder of something calledthe P three Mastermind.
I've been in this industry for25 years, my first job was in
(02:02):
restaurants.
My second job was in, my thirdjob was in restaurants, and,
everything in between.
I took the side door into theindustry though because I was,
going to school for theater.
I came to New York, to be anoutta work actor.
And what do you do as an outtawork actor?
You get a job in restaurantsand, after about, I don't know.
Eight or 10 years.
I realized my, my theater resumewas okay.
but my restaurant resume waspretty good.
(02:23):
certainly much better.
I had a, I dunno, a dozenMichelin stars in the resume.
At that point.
I had worked with threedifferent James Beard Award
winners, so I really started onthe operational side, so I was a
busser.
I folded pizza boxes, I washdishes.
I was a host, I was a server.
I moved up to captain, I gotinto fine dining.
I managed, and that's what I didthrough the heart of my career.
(02:44):
20 years in New York City,mostly in fine dining, opening
restaurants, runningrestaurants.
I worked a lot as a Matre d so Iwas the front of the restaurant.
I was responsible for drivingrevenue, filling butts in seats.
at a certain point I got reallyinterested in marketing, so I
started doing marketing forrestaurants.
I was always an amateurphotographer.
segued that into being aprofessional photographer.
So did a lot of content captureboth.
(03:04):
photo, video, all of thatstarted doing marketing for
restaurants.
'cause I looked around and Isaid, Hey, restaurants, really
either don't do marketing orthey're not good at marketing.
And I think there's a gap I didthat, that led me to go back to
school.
I got my MBA at the age of 42,during the pandemic.
That's what I did.
And really over the last manyyears, I parlayed all that
operational experience, all thatmarketing experience, into
(03:27):
coaching.
So I run that coaching programcalled the P three Mastermind.
So currently I have scaled thatprogram up to four unique
groups.
We have over 150 peoplecurrently enrolled in the
program, and we are laserfocused on profitability.
Because I think independentowners and operators, get into
it for all the right reasons andthey get out of it for all the
wrong reasons.
So I don't teach anybody how tocreate a great experience or to
(03:50):
provide hospitality or how tocook or whatever.
They got all that covered, but Ishow them how to do it
profitably.
How to actually make a living,provide some stability, build
legacy for themselves, theirfamilies, the people who work
for them.
that's the program I run, the Pthree.
mastermind is laser focused onprofitability, which is what I
spend a great deal of timetalking about.
Jeremy Julian (04:12):
I love it.
and talk to me, who is the idealaudience for the P three
mastermind?
Is it, is it multi-units?
Is it single unit operators?
super high volume, super lowvolume.
Talk to me a little bit aboutthose people, because I think,
when people get done with this,they're gonna be like, I gotta
figure out how to get more ofwhat he's, putting down.
And I'd love to, to, just takeit off at the onset.
What are those things?
Who are the right people ifthey're sitting there listening?
(04:33):
when we're going through ourconversation about the things
that you've learned.
Chip Klose (04:35):
I appreciate, it's a great question.
For the most part, we say yougotta be open at least a year.
'cause I don't wanna be workingwith any new restaurants.
I opened a ton of restaurantsduring my operational career and
that's a whole other beast.
So you gotta be open at least ayear.
We like to say you gotta bedoing at least a million dollars
in revenue.
And there's a couple of reasonsfor that as that it's an
investment of time and aninvestment in money to work with
me and my team.
and we wanna make sure that therestaurants are doing enough
(04:58):
revenue to really see the impactof the work that we're going to
do.
The other thing is that I'd saymost of the members in the group
are between 1,000,005 million AUV, and I would say they're like
six locations or less.
More than half of our people aremulti-unit owners, and there's a
(05:19):
sweet spot right there.
And the people that I loveworking with are the people who
are doing something right.
They're growing, they've gotmultiple locations, but they
don't yet have those systems inplace.
And I've had the great fortuneof working with some very
accomplished people and workingwith much bigger groups.
And so all I do is I help bringsome of the systems that I
(05:39):
learned from.
Other groups and bring them tothe independent owners and
operators.
What happens is when you get 10,20, 30 locations, you've got
directors of operation in place,you have regional managers.
You have A CFO, you have a CTO.
You have people in place who canhelp you navigate this.
But where I think there's a hugeneed is that two to 10.
(06:01):
Two to 10 locations, man, I knowwhat I'm doing.
This town loves it.
The next town over loves it.
I'm gonna put it in the nexttown.
I'm gonna put in the block over,I'm gonna put it at the
university.
I'm gonna.
But they don't necessarily havethe systems in place to be able
to step back from the operationthe way that they should be able
to do, to focus on furtherdevelopment, things like that.
So we teach them the systems,give them the tools so that
(06:25):
their teams at the unit levelcan do what needs to be done to
make sure every unit isprofitable.
That helps you grow and scale,more consistently.
It helps you get access to,cheaper capital, better terms.
It helps you.
Be able to have that franchisingconversation, if that's a
direction you want to go, thatwe find that, NOI, that
operating profit, if we canreally focus on that, making
(06:48):
sure that every location isprofiting, consistently and at
the level they're supposed tobe, then there's a lot that
follows after that.
Jeremy Julian (06:58):
Yeah, I love that.
There's a leadership speakerthat I talked to that says I
have to, he goes through once ortwice a year to evaluate what's
working so that he knows how toreplicate it.
And I think all too oftenrestaurants get to that five or
six and go, I dunno, I figuredit out and I got five or six,
but now when I wanna get to mysixth or seventh or eighth, they
can't.
you said something on the introof just why do restaurant owners
hospitality.
(07:19):
People get into the businessoftentimes.
I'd love your take on thatbefore we dig into kind of what
you guys did do to dig out whythey're not growing profitably
at consistent levels.
But what are you finding whenyou interview your clients where
people, talk to our listenersout that are like, that's me.
They get into the business'causethey want to serve, they want to
help, they want to build uppeople.
(07:39):
But what are some common thingsthat you see people.
That want to get into the space?
What are they trying to get intothe space for and what is it
this lack of profitabilitypreventing them from doing?
Chip Klose (07:49):
you know when you're a kid, right?
When you ask a kid, Hey, do you,what do you wanna be when you
grow up?
And what do they always say?
They say, I'm gonna be afirefighter, a police officer, a
teacher.
I'm gonna be an astronaut.
I'm gonna be.
A chef there.
There are things that they say,because those are things that
they see.
Most kids don't ever see anarchitect.
They don't see an engineer, theydon't see, there's tons of jobs
(08:10):
that they don't see.
But the things that are visibleare the, as my son would say,
the community helpers.
The people that we see.
So I think what happens, samething is true in our industry.
You see a restaurant.
And you say, oh, I know whatthat is.
We make food, we give'em a menu,they pick, here's all the stuff
I can make for you today.
Pick what you're in the mood forand I'll make it for you, and
(08:32):
then we'll make sure you have agreat time while you're here.
That's, I think, why people getinto it.
That's what I get.
That's why I get into thisindustry.
'cause you get to have thegreatest stuff on this planet.
Great flavors and food andcombinations and wine and
spirits and beer.
All the coolest things and youget to be a host and we come to
restaurants to entertain andcelebrate and mark occasions
(08:52):
like, that's incredible.
So I think most people get intothis because they're good at
something, because they lovethis.
They want to provide and servepeople and all that.
And what happens is, I think, isthat most people either ignore
or are unaware of the rules.
Let's be clear, the rules arealways changing.
The rules in the seventies aredifferent than the nineties are
(09:14):
different than today.
So what are the rules?
The rules of profitability,meaning you can't spend more
than you're bringing in.
And so it's easier said thandone.
I think we, we have a job andthat determines what house we
buy, what car we buy, whatapartment we rent.
We say, this is how much I make,and so I wanna make sure that I
don't go over budget because Ican only afford a certain
(09:37):
amount.
The same is true in restaurants,and yet it's more complicated.
So when I went back to school,when I went back to get my MBA,
so I went to St.
Joe's.
St.
Joe's has the only program likeit that I've ever seen.
It's an MBA in food marketing.
It was literally made for me,
Jeremy Julian (09:50):
that even existed.
Chip Klose (09:51):
Oh, it's incredible.
But I was around people who werein CPG retail, massive, like
broadliners, big boxsupermarkets and food service,
right?
So I got to see all thesethings, and one of the big
questions that I wanted answeredwas this question.
Our restaurants are full everynight.
They're packed.
People are spending money onwine and beer and drinks and
(10:13):
food, and we got tomahawks goingout and all this.
Why aren't they profitable?
It's funny, I was paired up on aproject with a guy, in my very
first semester and he was a foodscientist at Campbell's.
So St.
Joe's in Philadelphia, rightacross the river is a Campbell
Soup Company and they have areally great leadership program
and they will help pay for youto go back to school and become
(10:36):
part of the leadership.
So all these people were tryingto get their.
Business school paid for.
And it was funny.
And I said, why are you doingthis?
You're a food scientist.
Why go into business school?
And he gave me his answers andhe said, what about you?
I said, I've spent my entirelife in restaurants and I don't
understand why they're notprofitable.
I don't understand why it's sohard to make money.
And without even skipping abeat, he goes, oh, that's easy.
(11:00):
I said, what's so easy?
And he says, it's because youguys have three moving targets.
I said, what do you mean?
He says, you have three movingtargets that at Campbell Soup,
we pretty much don't have.
And he said revenue is a movingtarget.
So at Campbell's, we havesalespeople who are selling our
soups a quarter ahead of time.
He said, so revenue is not aquestion, but at the
(11:20):
restaurants, you can't tellwho's coming in, how many people
are coming in, what they'regoing to buy, right?
So you can't be sure how manycovers you're gonna do and what
your average, guest is gonnaspend.
Jeremy Julian (11:32):
Yeah, and how many tomahawks do you need to
cut versus how many salmons doyou need to cut?
Chip Klose (11:35):
So because revenue is a moving target, therefore,
to your point, cost of goodssold is a moving target.
If I buy too much, I'll havewaste, and that'll cut in my
profitability if I don't.
Bring in enough.
I'm gonna have 86, I'm gonna runout of food, I'm gonna piss
people off.
They're gonna say, I don't wannago back there.
They ran outta half the menu.
So revenue is a moving target,therefore COGS is a moving
(11:55):
target, obviously.
Then labor is the other bigmoving target.
I think there's days gonna bebusy, so I staff up, but let's
say.
You know right when the concertwas gonna get out across the
street, it starts raining.
So everybody just runs to thesubway, runs to their cars, and
they don't come out afterwards.
So I think it's gonna be busy,but it ended up being slow and
that directly cuts into mybusiness.
He said at Campbell's, again, wehave salespeople who sell months
(12:17):
in advance.
So revenue's not a moving targetbecause we know how many sales
we have.
We know how much product to buy,so how many cans, how much
ingredients to fulfill thenumber of orders that we have.
We also.
Know how many people it takes torun the line, to put that many,
to get that many cans off theline, so to speak, since a
revenue cogs in labor.
(12:39):
Aren't our moving targets.
Now we have other movingtargets, right?
They lock in, deals for productsmonths ahead of time, years
ahead of time.
And there are other challengesthey have, he said.
But the three that you havespecific to your industry, we
don't have, and that's whatmakes it so hard.
It was like.
I was three months into theprogram and I was like, holy
crap.
(13:00):
It just gave me such clarity onit, and so we spend a lot of
time talking about the threemoving targets and how important
it is to wrangle that, right?
Obviously cogs and labor, that'sprime cost.
Most people listening to this.
Podcast will understand howimportant it is to manage prime,
and then revenue has to do withgrowth.
So can you manage your keyexpenses in relation to revenue,
(13:22):
and then what are the levers youcan pull to actually grow
revenue?
That's, I think, why it's sodifficult, and I didn't get
that.
At least I couldn't articulateit as clearly as that guy
articulated, and now I lovinglysteal it and I tell everybody.
Jeremy Julian (13:38):
Yeah, this is my 30th year in this industry and
I've never heard it articulatednearly that, that, that
succinctly.
So thank you for that.
I likely will be stealing someversion of that same thing
because I never really hadthought about those three
pillars being so critical.
So let's double click on, useone of those corporate terms.
Let's double click a little biton kind of the revenue side of
things.
You did take, some marketingstuff.
You were in marketing.
(13:59):
how do you guys even think aboutdriving revenue?
Because I think certain placeshave a revenue problem in the
off hours, in the shoulderhours.
Certain people have the qualityof the revenue that's coming in
and it's getting eaten in awayby certain things.
So I'd love to have you walk ourlisteners through the different
revenue levers that you guys canpull when you're talking with
people in your mastermind andthrough the things that you guys
(14:19):
are doing.
Chip Klose (14:20):
Totally.
It's a great question.
So in the Mastermind we spend alot of time talking about
profit.
So it's about locking in,managing our expenses, primarily
cogs and labor in, in relation.
To our revenue, and then wefocus on growth, right?
So it's profit and growth reallyhas to do how do we grow revenue
when we grow revenue, right?
It's on the operation side andon the marketing side.
(14:42):
And I think some things, happenthat people get wrong.
Number one, there are only acouple of ways that we can
actually grow revenue, right?
So when we talk about revenue,revenue growth, we can sell more
of the product.
We can sell, that product formore money.
Or we can sell a variety ofdifferent products so we can
sell more of the product that'smore butts in seats, right?
(15:05):
We can increase covers.
number two, we can sell therevenue, we can, increase the
price of the product.
So literally we can increaseprices, or we can find a way to
increase PPA, the per personaverage, right?
So that each
Jeremy Julian (15:18):
Selling more products to the same guests.
That's already butts in the
Chip Klose (15:20):
correct.
So there's.
Those are the two ways.
And then the third way really isa variety of different products.
So different day parts aredifferent products.
The kind of person who comes infor lunch is looking for a
different solution than they'relooking for dinner.
Private dining is anotherproduct.
Catering is another product,merchandise, cookbooks, those
are all different products.
Jeremy Julian (15:38):
nights, beer nights, all of those kind of
things.
Chip Klose (15:40):
so what I'm really, what I'm really interested in
doing is not giving people theanswers, but giving them a
different frame.
For thinking about the question.
So when we talk about revenuegrowth, let's make sure we're
understanding what we're talkingabout.
'cause usually when we say, Ineed to grow revenue
immediately, people are justtalking about getting more butts
in seats, right?
So from an operationalperspective, I'm gonna say, what
(16:04):
are we doing to increase checkaverage?
Thereby, we have to understandwhat point A is, where's our
check average?
Now, on average, what does eachperson spend when we, when they
walk through the door, we shouldsee like a little number over
their head.
I know that's$36.
$36.
$36, and what.
Is my team, right?
What's the menu?
What's the layout?
What's the team currently doingto generate that$36 per person?
(16:27):
And are there additional thingsthat we could do to grow that?
From 36 to 39, a$3 increase perperson, when you look at the
thousands of people that youtake care of every month,$3
times, thousands of covers endsup being a really meaningful.
growth in revenue.
So the first thing we do from anoperational perspective is what
are the levers we can pull toincrease PPA?
(16:50):
That's a whole man.
We could do a whole podcast juston that.
On the other side of theoperation is what are we selling
our people?
are we maximizing all of ourrevenue streams?
Breakfast, lunch, dinner, happyhour, late night.
Catering, private dining,personal chefs, merchandise,
cookbooks.
what are all the things we cansell to people and are we doing
(17:11):
a good job?
A great example, I spent eightyears at Gotham, so Gotham Bar
and Grill was, one Michelin starfor, years and years before they
closed.
And I was there at, in, in theheight of what?
when they were popular and oneof the things that we were
trying to determine, and thisreally stemmed from our managing
partner, said, we can only getso many covers in.
We can only charge so muchbefore we meet that threshold.
(17:33):
And they say, man, it's reallytoo expensive to go there.
So he was really intent onfinding other things to sell
people.
We basically had a GothamSelections program where we had
catered pantry products, spiceblends, olive oils, balsamic.
Quality ingredients that he wassourcing, that we were curating
for people.
It was another product we couldsell.
We started the chocolatesprogram, right?
(17:53):
These were high-end bean to barchocolates that we could, it was
an additional thing we couldsell to people.
It was all revenue through theregister, but it wasn't
increasing the price of themeal.
It was just finding additionalthings to sell people.
So we could sell them at the endof the meal.
We could sell them via the, thewebsite.
We could sell them via email,right?
Operated as a, as an e-commercebrand for a while, and we were
(18:14):
got really good at findingadditional products to sell our
people.
So have you exhausted all ofyour revenue streams?
So on the operation side, thoseare the pieces on the marketing
side.
Then again, we have to simplifyfurther rather than buts in
seats, right?
'cause butts and seats usuallymean how do we get new people in
the front door?
And I think most restaurants doa particularly bad job.
(18:36):
At retention.
So when we talk about marketing,I wrote about this in my book.
I wrote a book called TheRestaurant Marketing Mindset,
and in it I talk about atriangle.
I said, at the end of the day,there's really only three things
a restaurant needs to do tomarket itself.
Number one, it has to focus oncustomer acquisition.
I call that attraction.
What are you doing to raiseawareness and convince people to
come try you for the first time?
(18:58):
There are things you can do tomake that happen.
Number two, customer retentionspecifically, what are you doing
to get those first timers backand what are you doing to
increase the frequency ofvisits?
Airlines are really good atthis.
Hotels are really good at this.
Restaurants are particularly badat this, right?
And again, there are greatexamples.
We can look at what Delta does.
We can look at what Ritz Carltondoes.
(19:20):
We can look at what Starbucks.
Does they do it better than wedo, but what are we doing to get
new people in the front door?
What are we doing to increasethe frequency of visits?
And then the third piece to thetriangle is what I call
evangelism, which is word ofmouth.
What are we doing right?
If we know word of mouth is sopowerful for our industry, which
I think we'd all agree, it'slike the most powerful marketing
tool out there, then we gottaput our thumb on the scale.
(19:43):
What are we gonna do?
What can we do to make sure ithappens?
More often or that it happensevery single time.
When I ask people, I'll, go totrade shows and I'll say, what's
the best marketing tool we have?
And everyone says, word ofmouth.
I say, you're right.
I say, sir, what's your word ofmouth plan?
And they look at me, I say,miss, what?
What's your word of mouth?
I, what do you do in yourrestaurant?
(20:03):
And there's always some guy inthe back, he raises his hand,
he's that's not really how wordof mouth happens.
I said, oh, tell me how ithappens.
He said, somebody comes in, theyhave a great meal.
We take care of them.
And then they go tell theircolleagues.
They go tell their mom.
They go tell their, I said, Itotally agree, but if that
action is so powerful.
Wouldn't we wanna manufactureit?
Wouldn't we wanna do more thingsto make sure that everybody goes
(20:26):
to tell everybody about it?
That's what a great church does.
There's a reason I call itevangelism.
A restaurant grows the same waya church grows.
Church doesn't grow by thepastor.
Shaking enough hands, churchgrows.
When people in the congregationare moved and they can't help,
they're compelled to go speakabout it.
man, I was at church yesterdayand I heard this thing.
(20:47):
And it really resonated with me.
And somebody says, wow, thatsounds great.
That sounds like the kind ofplace that I'd love.
You should come with me nextSunday.
Maybe we will.
That's how the church growsnaturally.
It's the same way a restaurantgrows.
So when we think aboutoperations, it's about
compartmentalizing.
And when we think aboutmarketing, I think we also have
to compartmentalize so thateverything we do, every action,
every tool, right?
(21:08):
Whether it's Google Ads orFacebook ads, or web or whatever
it is.
That we know what it's trying toaccomplish.
So we can measure, this is whatI did to accomplish this goal.
Did it do it or did it not?
If it did it, let's do more ofit.
If it didn't do it, let's scrapit and go back to the drawing
board.
Jeremy Julian (21:24):
I'd love to have you just,'cause I had a guest on
recently that talked about someexecutive that they were talking
about, and they were like, wealready have 20,000 people in
our database.
We think we've exhausted thiswhole town that's coming and.
his marketing person would sayto him, you realize that people
are moving every day.
People are not coming back.
So you've gotta constantly be onthat growth trajectory and
(21:46):
adding new names to your list.
'cause people are passing away,people are moving outta town.
People are, something ishappening that you're going to,
by the nature of everythingthat's going on, you're going to
lose customers.
And so you have to ensure thatyou're constantly adding to that
database.
And so I find all too often, wehave enough, we place an ad or
we send an email and people comeand so we're in a good spot.
(22:06):
But I would encourage all of ourlisteners out there to always be
adding to that list and alwaysbe communicating.
Chip Klose (22:12):
do you know the two big things?
just to go a little bit deeperthere, when we talk about
marketing, I'm a, I approachmarketing from an operator's
perspective.
There are a couple of simplethings we can do that, that make
this tangible.
So let me share those.
Number one, we should be askingevery single person, every
single table.
(22:33):
Whether they've been here beforeand it sounds tired, it's
cliche.
Hey folks, how you doing?
My name's Chip.
I'll be taking care of you.
You've dined with us before.
We've heard it done badly,
Jeremy Julian (22:43):
Yep.
Chip Klose (22:44):
but when it's done we come over and say, hi,
welcome.
Glad to have you tonight.
My name is Chip.
Or don't say your name.
I come from fine dining.
We never say your name, I'm gladto have you tell me.
Have you guys dined with usbefore?
And when they say no, we saythat's incredible.
Can I ask you a question?
What?
What made you come in today?
They'll tell you.
Say, oh, you know what?
I work with this woman, she's inthe next cubicle, she's in the
(23:06):
next office.
Or, my brother was raving aboutthis.
Oh, my mom loves this place.
You'll find, you'll figure outwhat of your marketing is
working, right?
So number one, you get answersto your questions.
Number two, then you say, okay,whatever we did.
some of our marketing worked andthey got'em in here.
And it's like John Taffer talkedabout this with 12 years ago.
The goal is not to get'em in.
(23:27):
The goal is to get them back.
'cause if you can drive towardsrepeat visits, then you got'em
for life.
So you make it your point, Ialways say you jam something in
their hand.
We will definitely get themback.
So rather than saying, sousually what you say is, Hey,
have you been here before?
And they say, no, it's our firsttime.
Usually what you get is just abig smile, Oh.
amazing.
Welcome.
I'm gonna take really good careof you, and you should do that.
(23:49):
You should say, oh my God,that's amazing.
I'm gonna point out thesignatures.
I'm gonna point out some of myfavorites.
I'm gonna show you the best wayto experience this place.
That should happen.
But then at some point in themeal.
We should do something that willget them back.
So that's a way tooperationalize.
That's a simple bounce backprogram.
You put a postcard, a businesscard, a poker chip, something in
(24:09):
their hands that says, Hey, comeback and you get X next time you
come back.
The other thing you can do, verysimple.
I used to do this.
So when you work at a restaurantand if you take reservations,
you've got a computer system.
If you have a restaurant and youjust have a wait list, it's
walkin only.
You still need a computer systembecause customer acquisition
without data acquisition, as myfriend Rev CIO always says,
(24:32):
customer acquisition withoutdata acquisition is an absolute
waste.
It's like going to the bar,buying somebody a drink.
And they say, Hey, can I buy youa drink?
And they say, sure.
And you buy him a drink and yousay, great.
And you just walk away.
And they walk back to theirfriends.
You walk back to your friends,you buy them a drink for a
couple of minutes ofconversation and maybe a phone
number, right?
If you don't take advantage ofthat thing.
I used to do this all the timeand I used to do it, and people
(24:54):
used to think I'm crazy becausepeople would walk in and say,
Hey, do you have a table fortwo?
It's an empty dining room behindme.
It's easy to say, yeah,absolutely.
Follow me.
But if you just stop and say,yeah, I think we could do that.
My name's Chip, what's yourname?
And they say, oh, it's Ted.
Ted.
What's your last name?
Oh, Ted Smith.
Ted Smith.
You in our system.
And I'm already typing on thecomputer and I say, oh, do I
(25:15):
have you in here?
Is this your phone number?
Or if you're not, I say, oh.
It looks like I don't have youin here.
What's your phone number thisway for the next time?
And you put it in there and say,great.
What's the best email address?
If you do that, 50% of thepeople would say, I'd rather not
give you my information.
Fine, but the other 50% willgive it to you.
What happens is it's a 32ndspeed bump that when you say,
and they come in and say, Hey,do you have a table for two?
(25:36):
Let's be real.
People say, yeah, I think we cando that.
My name's Chip.
What's your name?
You'd be amazed.
And how people light up and theysay, oh yeah, that's right.
It's not just transactional orit doesn't have to be.
If we wanna pretend like we'rein hospitality, let's actually
be in hospitality.
Let's introduce ourselves, let'sget to know people.
If you can get their name, theirphone number, their email
address, it'll take you all of30 seconds.
(25:57):
And that's if they, people haveto think deeply about it, but
otherwise say, great, now you'rein our system.
Follow.
And then you follow the sametrack, but now you've got them.
There's so much you can do withthat.
once you have that, those aretwo easy ways to operationalize
marketing.
That's marketing.
Jeremy Julian (26:14):
Yeah, and people think it's Facebook ads and
Google AdWords and all of thosekind of things, but at the end
of the day it's creating amemorable experience.
Recently I celebrated myanniversary with my wife.
We went to Carbon in Dallas.
They did exactly what you said.
I had been for a businessdinner.
Now I was taking my wife there.
They created an.
Unbelievable experience.
We've now told bunches ofpeople, the manager has reached
(26:36):
out to me post to say, Hey, I'mso glad that you had such a
great, they asked for a Googlereview'cause they knew I'd had a
great experience.
I've gotten comments now on thatGoogle Review that's marketing
that creates this word of mouththat's in an industrial area in
downtown Dallas.
carbon, I'm sure because ofbeing, you know where you're at.
But it was one of those thingsthat I think, but it really
requires.
(26:56):
Thoughtful and intentional waysof going about it.
Chip, and I'd love for you to,and you have to train your staff
to do these things and so
Chip Klose (27:02):
You have to be aware of
Jeremy Julian (27:03):
that idea.
You have to be aware.
You have to evaluate what you'redoing and go what is not
working, and then get them intothat place to be able to do it a
little bit differently becausethat difference, just, that
difference in the way that youtook the 30 seconds at the onset
versus the way that you normallydo it can create double digits
increase in profit if you do itproperly.
is that something you'relearning and,
Chip Klose (27:22):
hundred percent.
and anybody listening to this,I'm sure you've never been to a
restaurant that did it.
Most times you walk in and say,Hey, do you have a table for
four?
Yeah, right This way, just bydoing it, you win.
You beat out 99% of everyoneelse in your market simply
because you're aware of it.
(27:42):
There are these little moves.
So yeah, while Google ads work,and I think you should do them
while meta ads work, and I thinkyou should do them not before
you do some of this basicblocking and tackling where you
say, data acquisition isabsolutely crucial to the
success and growth of ourbusiness.
And what are all the ways we'regonna do that?
So don't just do a plug andplay.
Oh, my POS my POS system offersloyalty programs.
(28:05):
We'll do it.
You should do that, but don'trest on your laurels thinking
that's enough.
Find all the different ways.
So when I used to do this, whenI used to get people's
information, I would mark it inmy old days as MHD, I'd mark
them on the sheet, and at theend of my night I was done.
I'd go upstairs, I'm doing myclosing report, I'm sitting, I
loosen my tie.
(28:25):
And what I would do is I wouldtext.
I would text people and I'd say,Hey, I just wanted to thank you
again.
This, my name is Chip.
I'm the maitre d at thisrestaurant.
You just came in.
I hope you had a great meal.
If you ever need anything in thefuture, just let me know.
Or I would ask a question like Imeant to ask you, and I would do
this purposely.
Sometimes I would stop by thetable, but I would, I, I always
(28:45):
stop by, but I meant to ask,what did you think of the, and I
would just
Jeremy Julian (28:51):
the sole of the ribeye of the
Chip Klose (28:53):
What did you think of the tomahawk chop?
And they would go, oh my God.
It's like nobody does it, but Ijust extended the hospitality
from beyond the four walls andlike now they're in my phone.
I'm in their phone.
So from time to time I used tosay this, I used to spend, I
say, if you texted five peopleevery day from your reservation
(29:14):
list, if a manager did this, ifa Mat D did this.
If you did it every day, itwould change your business
overnight.
So if there's any operatorslistening to this, you start
doing this, you becomeabsolutely, crucial, so valuable
to the restaurant you work at.
That's how you get raises.
That's how you present yourselfas valuable to a competitor.
(29:34):
That's how you get better jobsand better pay when you do just
these simple things.
And so it's just being aware ofit and doing it.
And so the things I'm justteaching you.
Now I'm all, everybody'slistening to it now.
Operational.
Take notes, right?
List this out.
Do this and this.
It becomes an SOP standardoperating procedure when
somebody walks in without areservation and asks for a table
(29:57):
for four.
This is the script we do.
Jeremy Julian (30:00):
Yep.
Chip Klose (30:01):
That's all it is.
That's all it is.
Jeremy Julian (30:04):
and it's so intentional.
one last thought real quick'cause we're getting close to
time and I know that, we canfall off.
I love all of the marketingideas and again, there's so much
that we could do to talk throughthat through.
Tell me some of the areas thatyou find could chip in kind of
the other two prime costs thatpeople miss most often.
food cost and, probably evenmore so menu selection, because
(30:24):
I think all too often people,and you watch taffer, you watch,
Robert Irvine, you watch, all ofthese guys on these TV shows,
they're going in and beating thecrap outta people'cause they're.
Stocking stuff that's notselling.
But I'd love for you to talk alittle bit about how you
evaluate those two prime costsof food cost and labor cost to
give people one or two thingsthat they need to be thinking
about within their brand.
Chip Klose (30:43):
I talk a lot about the 30, 30, 20 rule.
It is a rough rule of thumb.
30% cogs, 30% labor, 20% foreverything else.
So imagine all of your expensesgoing into one of three buckets.
All the product you bring in toturn around and resell to your
customers.
That's cost of goods.
That goes into the first bucketlabor, meaning all your people
(31:03):
costs, your salaries, yourhourly wages, your taxes, your
benefits, all that goes into thesecond bucket, and any other
expenses that don't fit into thefirst or second bucket, go into
the third bucket.
That's what we call theeverything else bucket.
The rough rule of thumb, atleast in the year 2025, is 30.
30 20.
If you keep your cogs at max 30%of revenue.
(31:26):
And labor max 30% of revenue andeverything else to 20% of
revenue, you do the math.
That equals 80.
That leaves 20% leftover.
I believe what we do is way tooimportant and way too difficult
to not make money doing it.
I think to the husband and wifeout there who's got a million
dollar restaurant, I think$200,000 going to your bank
account, I think is a very goodliving.
(31:47):
For running a restaurant, Idon't think that 4%, right?
That$40,000 taking home$40,000on a million dollar restaurant,
I don't think that's propercompensation for the work you
do.
So immediately, again, ratherthan just talking to you about
what to do, I think giveyourself a frame.
Now, if you live in California,I think you're gonna have a hard
(32:08):
time getting your labor below35%.
So it has to be made up in theother ways.
So if you're at 35% for labor.
And it means your cost of goods.
Your blended cogs can't be over25%.
Understanding where your bucketsare or where they should be, and
then looking at where they arenow.
That's how you begin to combatthe problem.
(32:29):
and the, it's different state bystate, it's different
municipalities, it's differentby
Jeremy Julian (32:35):
Even product categories.
Chip Klose (32:36):
understanding that when you then look.
To drill down your cost ofgoods, your beverage has gotta
be 20% or below your food costhas gotta be 30% below.
And I know people say, oh, it'sdollars, it's gross profit.
oh, we've got our lobster.
We, it's at 55% cost, but wemake so much money.
Fine.
We can have that conversation.
But those are sort of shades ofgray.
(32:58):
Ours is a, business ofpercentages.
broad strokes.
30, 30, 20.
You need to keep all yourexpenses at 80%.
You need to understand whereyour bread gets buttered, What
are your popular items?
What are your profitable items?
How do you highlight them?
How do you strip everything fromyour menu?
So all that's left are the itemsthat are very popular, very
(33:19):
profitable, the things that getphotographed, the things that
people will rave about the nextday.
Certainly we've been torestaurants where oh my God, I
gotta tell somebody about this.
Like I talk about carbon.
There are plenty of those itemson the carbon menu that are just
like, I gotta tell somebodyabout this.
I can't believe this.
How much is the chicken parmCarbone?
Jeremy Julian (33:39):
$38 I think.
Chip Klose (33:41):
It's a lot
Jeremy Julian (33:42):
Yeah, it was for a piece of chicken
Chip Klose (33:44):
for, so every else in the world, it's like 14, 16
bucks.
It is easily two x and that'spart of the conversation piece.
It says 38
Jeremy Julian (33:53):
I had a 60 day dry age ribeye that my wife was
like, you're paying what?
That's a car payment for thesteak.
But I did, and I've told bunchesand bunches of people about it
because of it.
Chip Klose (34:03):
Yep.
it, so it's understanding.
It's understanding what are thethings that get ordered all the
time?
What are the things that aregonna, get raves that are gonna
spread about your place.
That's the, that more helpful tome saying, do this, to lower
your food cost.
Do this to lower your laborcost, understanding how your
(34:23):
buckets are.
The thing I'll say about thisthough, and it's an indirect
answer to your question, is.
Every potential solution has tobe on the table.
So if we say, if I walk in andsay, you gotta lower your back
of house labor by X number ofpercent, and I have a chef and
I've had this conversationbefore, they say, I can't do it.
I can't put out this menu.
(34:44):
With that few people, I said,great, this is what you can
afford.
So build me a menu that runs onthis.
I got six guys back there.
You can't afford more than four.
Build me that menu and the bestrestaurateurs out there.
I had John Taffer on my show.
He talked about compression.
He said, there's this a naturalcompression happening in the
(35:05):
industry and I never heard it.
Put that way, and he'sabsolutely right.
He built Taffer Tavern with theidea being that they would be
between 50 and 52% prime.
And so he was looking forconsistency and he was looking
for a way to roam at the leastamount of people possible.
He's I see the way the world isgoing, and I don't think we can
get into this place where we'rerunning 60, 65, 70% prime.
(35:26):
We just can't make money.
Gone are the days of cheaplabor, We have to understand
that you've got to, I talkabout, as I was working at a
Michelin star restaurant, I camein as a consultant and one of
the things we ended up doing isthat you, the way we cut labor
is we got rid of the pastrycooks at night.
And basically what we said is wedetermined the pastry, the hard
(35:47):
work of being a pastry cook isin the day baking and making T
wheels and, making ice creamsand stuff like that.
But at night it's just, puttingthe dish together.
It's just assembling the dish.
So what we did is pastry wasright next to Garmer.
They're both on the cold side.
We said we're gonna pull some ofthe items off the garmer, right?
So less things are gonna comeoff garmo, less things are gonna
(36:09):
come off pastry.
And then these people can alsoexecute desserts.
The strange thing that happenedis we had less, apps that we
offered.
We had less desserts offered.
We increased dessert sales andcut.
Our backhouse labor.
at the same time.
It's again, that idea ofcompression that John Taffer is
now talking about, I think it'sabsolutely right.
(36:30):
You have to be willing to makebold moves like that
Jeremy Julian (36:34):
And to kill your darlings.
Sometimes there's times thatpeople, oh, I, but we've had
this menu item in here forever.
It's not selling, it's notdriving profit, but we've had it
there forever.
And and so to your point,there's these things that all
too many restaurants and youhave to have those hard
conversations, with theseowners.
Chip Klose (36:50):
Or, and to your point, oh, it's your darling.
Oh, but we're famous for thisand all this, okay?
But it's not helping us rightnow.
So if this is so good, so here'smy$12 chocolate cake.
So make it a$19 chocolate.
Call it the, it's the signature.
Call it the signature.
All the other desserts are 12.
Our famous one is 19, so thenI'd be happy to sell it right
Jeremy Julian (37:13):
because now you're driving to exactly what
you're looking
Chip Klose (37:15):
there are things that we did right?
McDonald's, the fries are atwhat 7% cost, then the number
one item on their pix.
Which makes sense.
There's only one side dish.
They pretty much serve frieswith everything, so it makes
sense.
But they're also at 7% cost.
And when I tell you they'retaking advantage of you as the
consumer, it doesn't make youangry because they're actually
worth it.
No one, only a psychopath goesto McDonald's, orders a Big Mac
(37:37):
and says, no, hold the fries,the burger and fries are that
match.
Just because, That they make somuch profit on, it doesn't make
you like them any less.
In fact, I admire it even moreso they, they know what they're
doing.
In most of these instances, wejust look at the big boys and
see what they're doing, and wejust have to emulate them.
So why are they doing that?
We should do it.
Jeremy Julian (37:56):
one last question before we wrap up, and I know
you've got a free gift for ourlisteners.
How do, for those listeners thatare out there that are like, I
don't want, I didn't open up arestaurant to spend 40 hours a
week in the office doingnumbers.
I know that's not the case, butI know you get that feedback
often from people where they'relike, I didn't open up a
restaurant to sit and deal withp and Ls and sit and deal with
my profitability.
(38:17):
While I agree with youwholeheartedly, that they should
be thinking about these thingsmore, but how long does this
really take in a week whenyou've got your system set up
properly?
Chip Klose (38:25):
It's funny, when we work with members in the P three
Mastermind, we can help them setit up.
We ask for six months in theprogram.
Within the first 90 days, theysee a huge change.
The idea is creating a systemthat's not extra work, right?
If you are forecasting, I'mgonna give you a better way to
forecast.
If you are already budgeting,I'm just gonna give you a better
way to budget, and if you arenot forecasting and budgeting,
(38:46):
those are the two actions thatwill take roughly 30 to 60
minutes a month,
Jeremy Julian (38:52):
30 to 60 minutes a month.
I want to, I wanna repeat that.
Sorry.
Chip Klose (38:56):
30 to 60 minutes a month, and then daily check-ins.
When I say daily check-in, it'stwo minutes actually looking at
very specific numbers becauseyou know what they mean.
You know what they're tellingyou.
So it's not busy work.
It's not a lot of line items,it's saying.
The number one is the revenuesetting, revenue targets for
your team, making sure they'rehitting them every day.
(39:16):
The way you figure that out isyou open up your spreadsheet the
next morning and you make surethat they hit the number that
you needed them to hit, and thenmaking sure they kept their
ordering and their scheduling onbudget.
Those are the three biggestculprits back to our three
moving targets.
So if you can properly wranglethose, and yes, it's 30 to 60
minutes a month and get this,honestly, it's not a task that
(39:39):
you even need to do.
Forever.
'cause once you learn how to doit, my goal is always to show
you how to do it in a way that'svery easy to teach your team to
do it.
It's something the GM in yourlocation or something your
executive chef in the locationshould be doing.
this is not a repeat, not anowner action.
It is an operator action.
(40:00):
And so what we need to do isprovide the framework for what
needs to happen and properoversight.
For how it needs to happen.
So give you ways to check on thethings that are happening.
You shouldn't have to, youshouldn't have to do it.
Jeremy Julian (40:15):
I love it.
I, again, as I said on theonset, I'm a huge fan.
I know you've got a gift for ourlisteners.
They've got other ways they canstay connected.
You've got a book already out.
I think another one on its way,you've got the podcast.
So tell the people how to getconnected, how to stay
connected, and how they canlearn more about, engage and
even with the Mastermind in yourteam.
Chip Klose (40:32):
Yeah, super easy.
So if this resonates with any ofyou guys out there, I've got the
podcast, the Restaurant Strategypodcast.
We have conversations aroundthis at two episodes every
single week.
Go check out the podcast.
What I'm gonna offer up to youguys is that if you wanna do a
free p and l review with me, 30minutes, absolutely no strings
attached.
It's the first thing we do withall new members.
(40:54):
We can certainly talk about theMastermind and talk about what
it might look like with you, butwe'll go through that diagnostic
exercise.
We'll look at the numbers.
I'll show you what I see.
I'll give you a handful ofaction items, and if you wanna
continue the conversation andtalk about how we might help you
with that in.
The Mastermind, I'm happy tohave that conversation.
And if no, you just want to gotake care of it yourself, I'll
(41:15):
give you the action items.
You can do it.
So I will give you a speciallink you can include in the
show, in the show notes, so thatpeople can do it, but it's a
link directly to my calendar,not anybody else.
It's me.
You can book time to get a freep and l review.
It'll be 30 minutes and you'llcome out of that.
I think with a lot of clarityabout where your business is at
and where I think it can go.
Jeremy Julian (41:36):
again, we just spent 42 minutes and you've,
you've delivered some pure gold,so thank you for what you do.
I'm passionate as you are atwatching restaurants succeed,
and I hate watching restaurantsstruggle.
so thank you for continuing toput that, info out there.
Thank you for helpingrestaurants.
to our listeners, guys, like Isaid at the onset, you guys got
lots of choices, so thanks forhanging out and make it a great
day.
Speaker 2 (41:57):
Thanks for listening to The Restaurant Technology
Guys podcast.
Visit restaurant technologyguys.com for tips, industry
insights, and more to help yourun your restaurant better.
This is the Restaurant Technology Guides podcast,
helping you run your restaurantbetter.
Have you ever wondered whatreally goes on behind the scenes
of restaurant profitability andsuccess?
Today, we're pulling back thecurtain and revealing the untold
stories, surprising insights andgame-changing moments that you
(00:24):
don't wanna miss.
Today's guest is none other thana bestselling author, chip,
close.
Chip has been in the restaurantbusiness for quite some time and
has an incredible insight toreally be able to drive.
Profitability, which in hisopinion, and he talks about it
on the show, is the only measureof success within the restaurant
(00:45):
business.
Please stick around until theend where he shares some really
great insights on howrestaurants need to be thinking
about these things.
If you don't know me, my name isJeremy Julian, I'm the Chief
Revenue Officer for CBS NorthStar.
We wrote the North Star point ofsale solution for multi-units,
and now onto the episode.
Jeremy Julian (01:06):
Welcome back to the Restaurant Technology Guys.
thank you everyone out there forjoining.
As I say, each and every time, Iknow you guys have got lots of
choices, so thanks for hangingout today.
I am joined by an industryexpert.
I would say, and I know he'sgonna probably be like, ah,
yeah.
But, but I've been following,his stuff and kind of the
content that chip's been puttingout.
So I'm gonna let him introduce alittle bit about, his
background, a little bit, wherehe came from, and then we'll
(01:27):
talk a little bit about one ofthe big things that, a lot of
people open restaurants for,but.
Few seem to have, have masteredas profitability.
And so why don't you get, getour audience a little bit of a
primer as to who you are beforewe jump into why they should
listen to you.
And I hang out for 30 minutes.
Chip Klose (01:40):
I appreciate it.
first things first, thanks forhaving me on the show.
you're a big deal.
This show's kind of a big deal.
I appreciate the opportunity tocome and chat with the audience.
I imagine there's probably afair amount of overlap.
people who listen to both mypodcast and yours.
so I'm the host of theRestaurant Strategy Podcast.
the founder of something calledthe P three Mastermind.
I've been in this industry for25 years, my first job was in
(02:02):
restaurants.
My second job was in, my thirdjob was in restaurants, and,
everything in between.
I took the side door into theindustry though because I was,
going to school for theater.
I came to New York, to be anoutta work actor.
And what do you do as an outtawork actor?
You get a job in restaurantsand, after about, I don't know.
Eight or 10 years.
I realized my, my theater resumewas okay.
but my restaurant resume waspretty good.
(02:23):
certainly much better.
I had a, I dunno, a dozenMichelin stars in the resume.
At that point.
I had worked with threedifferent James Beard Award
winners, so I really started onthe operational side, so I was a
busser.
I folded pizza boxes, I washdishes.
I was a host, I was a server.
I moved up to captain, I gotinto fine dining.
I managed, and that's what I didthrough the heart of my career.
(02:44):
20 years in New York City,mostly in fine dining, opening
restaurants, runningrestaurants.
I worked a lot as a Matre d so Iwas the front of the restaurant.
I was responsible for drivingrevenue, filling butts in seats.
at a certain point I got reallyinterested in marketing, so I
started doing marketing forrestaurants.
I was always an amateurphotographer.
segued that into being aprofessional photographer.
So did a lot of content captureboth.
(03:04):
photo, video, all of thatstarted doing marketing for
restaurants.
'cause I looked around and Isaid, Hey, restaurants, really
either don't do marketing orthey're not good at marketing.
And I think there's a gap I didthat, that led me to go back to
school.
I got my MBA at the age of 42,during the pandemic.
That's what I did.
And really over the last manyyears, I parlayed all that
operational experience, all thatmarketing experience, into
(03:27):
coaching.
So I run that coaching programcalled the P three Mastermind.
So currently I have scaled thatprogram up to four unique
groups.
We have over 150 peoplecurrently enrolled in the
program, and we are laserfocused on profitability.
Because I think independentowners and operators, get into
it for all the right reasons andthey get out of it for all the
wrong reasons.
So I don't teach anybody how tocreate a great experience or to
(03:50):
provide hospitality or how tocook or whatever.
They got all that covered, but Ishow them how to do it
profitably.
How to actually make a living,provide some stability, build
legacy for themselves, theirfamilies, the people who work
for them.
that's the program I run, the Pthree.
mastermind is laser focused onprofitability, which is what I
spend a great deal of timetalking about.
Jeremy Julian (04:12):
I love it.
and talk to me, who is the idealaudience for the P three
mastermind?
Is it, is it multi-units?
Is it single unit operators?
super high volume, super lowvolume.
Talk to me a little bit aboutthose people, because I think,
when people get done with this,they're gonna be like, I gotta
figure out how to get more ofwhat he's, putting down.
And I'd love to, to, just takeit off at the onset.
What are those things?
Who are the right people ifthey're sitting there listening?
(04:33):
when we're going through ourconversation about the things
that you've learned.
Chip Klose (04:35):
I appreciate, it's a great question.
For the most part, we say yougotta be open at least a year.
'cause I don't wanna be workingwith any new restaurants.
I opened a ton of restaurantsduring my operational career and
that's a whole other beast.
So you gotta be open at least ayear.
We like to say you gotta bedoing at least a million dollars
in revenue.
And there's a couple of reasonsfor that as that it's an
investment of time and aninvestment in money to work with
me and my team.
and we wanna make sure that therestaurants are doing enough
(04:58):
revenue to really see the impactof the work that we're going to
do.
The other thing is that I'd saymost of the members in the group
are between 1,000,005 million AUV, and I would say they're like
six locations or less.
More than half of our people aremulti-unit owners, and there's a
(05:19):
sweet spot right there.
And the people that I loveworking with are the people who
are doing something right.
They're growing, they've gotmultiple locations, but they
don't yet have those systems inplace.
And I've had the great fortuneof working with some very
accomplished people and workingwith much bigger groups.
And so all I do is I help bringsome of the systems that I
(05:39):
learned from.
Other groups and bring them tothe independent owners and
operators.
What happens is when you get 10,20, 30 locations, you've got
directors of operation in place,you have regional managers.
You have A CFO, you have a CTO.
You have people in place who canhelp you navigate this.
But where I think there's a hugeneed is that two to 10.
(06:01):
Two to 10 locations, man, I knowwhat I'm doing.
This town loves it.
The next town over loves it.
I'm gonna put it in the nexttown.
I'm gonna put in the block over,I'm gonna put it at the
university.
I'm gonna.
But they don't necessarily havethe systems in place to be able
to step back from the operationthe way that they should be able
to do, to focus on furtherdevelopment, things like that.
So we teach them the systems,give them the tools so that
(06:25):
their teams at the unit levelcan do what needs to be done to
make sure every unit isprofitable.
That helps you grow and scale,more consistently.
It helps you get access to,cheaper capital, better terms.
It helps you.
Be able to have that franchisingconversation, if that's a
direction you want to go, thatwe find that, NOI, that
operating profit, if we canreally focus on that, making
(06:48):
sure that every location isprofiting, consistently and at
the level they're supposed tobe, then there's a lot that
follows after that.
Jeremy Julian (06:58):
Yeah, I love that.
There's a leadership speakerthat I talked to that says I
have to, he goes through once ortwice a year to evaluate what's
working so that he knows how toreplicate it.
And I think all too oftenrestaurants get to that five or
six and go, I dunno, I figuredit out and I got five or six,
but now when I wanna get to mysixth or seventh or eighth, they
can't.
you said something on the introof just why do restaurant owners
hospitality.
(07:19):
People get into the businessoftentimes.
I'd love your take on thatbefore we dig into kind of what
you guys did do to dig out whythey're not growing profitably
at consistent levels.
But what are you finding whenyou interview your clients where
people, talk to our listenersout that are like, that's me.
They get into the business'causethey want to serve, they want to
help, they want to build uppeople.
(07:39):
But what are some common thingsthat you see people.
That want to get into the space?
What are they trying to get intothe space for and what is it
this lack of profitabilitypreventing them from doing?
Chip Klose (07:49):
you know when you're a kid, right?
When you ask a kid, Hey, do you,what do you wanna be when you
grow up?
And what do they always say?
They say, I'm gonna be afirefighter, a police officer, a
teacher.
I'm gonna be an astronaut.
I'm gonna be.
A chef there.
There are things that they say,because those are things that
they see.
Most kids don't ever see anarchitect.
They don't see an engineer, theydon't see, there's tons of jobs
(08:10):
that they don't see.
But the things that are visibleare the, as my son would say,
the community helpers.
The people that we see.
So I think what happens, samething is true in our industry.
You see a restaurant.
And you say, oh, I know whatthat is.
We make food, we give'em a menu,they pick, here's all the stuff
I can make for you today.
Pick what you're in the mood forand I'll make it for you, and
(08:32):
then we'll make sure you have agreat time while you're here.
That's, I think, why people getinto it.
That's what I get.
That's why I get into thisindustry.
'cause you get to have thegreatest stuff on this planet.
Great flavors and food andcombinations and wine and
spirits and beer.
All the coolest things and youget to be a host and we come to
restaurants to entertain andcelebrate and mark occasions
(08:52):
like, that's incredible.
So I think most people get intothis because they're good at
something, because they lovethis.
They want to provide and servepeople and all that.
And what happens is, I think, isthat most people either ignore
or are unaware of the rules.
Let's be clear, the rules arealways changing.
The rules in the seventies aredifferent than the nineties are
(09:14):
different than today.
So what are the rules?
The rules of profitability,meaning you can't spend more
than you're bringing in.
And so it's easier said thandone.
I think we, we have a job andthat determines what house we
buy, what car we buy, whatapartment we rent.
We say, this is how much I make,and so I wanna make sure that I
don't go over budget because Ican only afford a certain
(09:37):
amount.
The same is true in restaurants,and yet it's more complicated.
So when I went back to school,when I went back to get my MBA,
so I went to St.
Joe's.
St.
Joe's has the only program likeit that I've ever seen.
It's an MBA in food marketing.
It was literally made for me,
Jeremy Julian (09:50):
that even existed.
Chip Klose (09:51):
Oh, it's incredible.
But I was around people who werein CPG retail, massive, like
broadliners, big boxsupermarkets and food service,
right?
So I got to see all thesethings, and one of the big
questions that I wanted answeredwas this question.
Our restaurants are full everynight.
They're packed.
People are spending money onwine and beer and drinks and
(10:13):
food, and we got tomahawks goingout and all this.
Why aren't they profitable?
It's funny, I was paired up on aproject with a guy, in my very
first semester and he was a foodscientist at Campbell's.
So St.
Joe's in Philadelphia, rightacross the river is a Campbell
Soup Company and they have areally great leadership program
and they will help pay for youto go back to school and become
(10:36):
part of the leadership.
So all these people were tryingto get their.
Business school paid for.
And it was funny.
And I said, why are you doingthis?
You're a food scientist.
Why go into business school?
And he gave me his answers andhe said, what about you?
I said, I've spent my entirelife in restaurants and I don't
understand why they're notprofitable.
I don't understand why it's sohard to make money.
And without even skipping abeat, he goes, oh, that's easy.
(11:00):
I said, what's so easy?
And he says, it's because youguys have three moving targets.
I said, what do you mean?
He says, you have three movingtargets that at Campbell Soup,
we pretty much don't have.
And he said revenue is a movingtarget.
So at Campbell's, we havesalespeople who are selling our
soups a quarter ahead of time.
He said, so revenue is not aquestion, but at the
(11:20):
restaurants, you can't tellwho's coming in, how many people
are coming in, what they'regoing to buy, right?
So you can't be sure how manycovers you're gonna do and what
your average, guest is gonnaspend.
Jeremy Julian (11:32):
Yeah, and how many tomahawks do you need to
cut versus how many salmons doyou need to cut?
Chip Klose (11:35):
So because revenue is a moving target, therefore,
to your point, cost of goodssold is a moving target.
If I buy too much, I'll havewaste, and that'll cut in my
profitability if I don't.
Bring in enough.
I'm gonna have 86, I'm gonna runout of food, I'm gonna piss
people off.
They're gonna say, I don't wannago back there.
They ran outta half the menu.
So revenue is a moving target,therefore COGS is a moving
(11:55):
target, obviously.
Then labor is the other bigmoving target.
I think there's days gonna bebusy, so I staff up, but let's
say.
You know right when the concertwas gonna get out across the
street, it starts raining.
So everybody just runs to thesubway, runs to their cars, and
they don't come out afterwards.
So I think it's gonna be busy,but it ended up being slow and
that directly cuts into mybusiness.
He said at Campbell's, again, wehave salespeople who sell months
(12:17):
in advance.
So revenue's not a moving targetbecause we know how many sales
we have.
We know how much product to buy,so how many cans, how much
ingredients to fulfill thenumber of orders that we have.
We also.
Know how many people it takes torun the line, to put that many,
to get that many cans off theline, so to speak, since a
revenue cogs in labor.
(12:39):
Aren't our moving targets.
Now we have other movingtargets, right?
They lock in, deals for productsmonths ahead of time, years
ahead of time.
And there are other challengesthey have, he said.
But the three that you havespecific to your industry, we
don't have, and that's whatmakes it so hard.
It was like.
I was three months into theprogram and I was like, holy
crap.
(13:00):
It just gave me such clarity onit, and so we spend a lot of
time talking about the threemoving targets and how important
it is to wrangle that, right?
Obviously cogs and labor, that'sprime cost.
Most people listening to this.
Podcast will understand howimportant it is to manage prime,
and then revenue has to do withgrowth.
So can you manage your keyexpenses in relation to revenue,
(13:22):
and then what are the levers youcan pull to actually grow
revenue?
That's, I think, why it's sodifficult, and I didn't get
that.
At least I couldn't articulateit as clearly as that guy
articulated, and now I lovinglysteal it and I tell everybody.
Jeremy Julian (13:38):
Yeah, this is my 30th year in this industry and
I've never heard it articulatednearly that, that, that
succinctly.
So thank you for that.
I likely will be stealing someversion of that same thing
because I never really hadthought about those three
pillars being so critical.
So let's double click on, useone of those corporate terms.
Let's double click a little biton kind of the revenue side of
things.
You did take, some marketingstuff.
You were in marketing.
(13:59):
how do you guys even think aboutdriving revenue?
Because I think certain placeshave a revenue problem in the
off hours, in the shoulderhours.
Certain people have the qualityof the revenue that's coming in
and it's getting eaten in awayby certain things.
So I'd love to have you walk ourlisteners through the different
revenue levers that you guys canpull when you're talking with
people in your mastermind andthrough the things that you guys
(14:19):
are doing.
Chip Klose (14:20):
Totally.
It's a great question.
So in the Mastermind we spend alot of time talking about
profit.
So it's about locking in,managing our expenses, primarily
cogs and labor in, in relation.
To our revenue, and then wefocus on growth, right?
So it's profit and growth reallyhas to do how do we grow revenue
when we grow revenue, right?
It's on the operation side andon the marketing side.
(14:42):
And I think some things, happenthat people get wrong.
Number one, there are only acouple of ways that we can
actually grow revenue, right?
So when we talk about revenue,revenue growth, we can sell more
of the product.
We can sell, that product formore money.
Or we can sell a variety ofdifferent products so we can
sell more of the product that'smore butts in seats, right?
(15:05):
We can increase covers.
number two, we can sell therevenue, we can, increase the
price of the product.
So literally we can increaseprices, or we can find a way to
increase PPA, the per personaverage, right?
So that each
Jeremy Julian (15:18):
Selling more products to the same guests.
That's already butts in the
Chip Klose (15:20):
correct.
So there's.
Those are the two ways.
And then the third way really isa variety of different products.
So different day parts aredifferent products.
The kind of person who comes infor lunch is looking for a
different solution than they'relooking for dinner.
Private dining is anotherproduct.
Catering is another product,merchandise, cookbooks, those
are all different products.
Jeremy Julian (15:38):
nights, beer nights, all of those kind of
things.
Chip Klose (15:40):
so what I'm really, what I'm really interested in
doing is not giving people theanswers, but giving them a
different frame.
For thinking about the question.
So when we talk about revenuegrowth, let's make sure we're
understanding what we're talkingabout.
'cause usually when we say, Ineed to grow revenue
immediately, people are justtalking about getting more butts
in seats, right?
So from an operationalperspective, I'm gonna say, what
(16:04):
are we doing to increase checkaverage?
Thereby, we have to understandwhat point A is, where's our
check average?
Now, on average, what does eachperson spend when we, when they
walk through the door, we shouldsee like a little number over
their head.
I know that's$36.
$36.
$36, and what.
Is my team, right?
What's the menu?
What's the layout?
What's the team currently doingto generate that$36 per person?
(16:27):
And are there additional thingsthat we could do to grow that?
From 36 to 39, a$3 increase perperson, when you look at the
thousands of people that youtake care of every month,$3
times, thousands of covers endsup being a really meaningful.
growth in revenue.
So the first thing we do from anoperational perspective is what
are the levers we can pull toincrease PPA?
(16:50):
That's a whole man.
We could do a whole podcast juston that.
On the other side of theoperation is what are we selling
our people?
are we maximizing all of ourrevenue streams?
Breakfast, lunch, dinner, happyhour, late night.
Catering, private dining,personal chefs, merchandise,
cookbooks.
what are all the things we cansell to people and are we doing
(17:11):
a good job?
A great example, I spent eightyears at Gotham, so Gotham Bar
and Grill was, one Michelin starfor, years and years before they
closed.
And I was there at, in, in theheight of what?
when they were popular and oneof the things that we were
trying to determine, and thisreally stemmed from our managing
partner, said, we can only getso many covers in.
We can only charge so muchbefore we meet that threshold.
(17:33):
And they say, man, it's reallytoo expensive to go there.
So he was really intent onfinding other things to sell
people.
We basically had a GothamSelections program where we had
catered pantry products, spiceblends, olive oils, balsamic.
Quality ingredients that he wassourcing, that we were curating
for people.
It was another product we couldsell.
We started the chocolatesprogram, right?
(17:53):
These were high-end bean to barchocolates that we could, it was
an additional thing we couldsell to people.
It was all revenue through theregister, but it wasn't
increasing the price of themeal.
It was just finding additionalthings to sell people.
So we could sell them at the endof the meal.
We could sell them via the, thewebsite.
We could sell them via email,right?
Operated as a, as an e-commercebrand for a while, and we were
(18:14):
got really good at findingadditional products to sell our
people.
So have you exhausted all ofyour revenue streams?
So on the operation side, thoseare the pieces on the marketing
side.
Then again, we have to simplifyfurther rather than buts in
seats, right?
'cause butts and seats usuallymean how do we get new people in
the front door?
And I think most restaurants doa particularly bad job.
(18:36):
At retention.
So when we talk about marketing,I wrote about this in my book.
I wrote a book called TheRestaurant Marketing Mindset,
and in it I talk about atriangle.
I said, at the end of the day,there's really only three things
a restaurant needs to do tomarket itself.
Number one, it has to focus oncustomer acquisition.
I call that attraction.
What are you doing to raiseawareness and convince people to
come try you for the first time?
(18:58):
There are things you can do tomake that happen.
Number two, customer retentionspecifically, what are you doing
to get those first timers backand what are you doing to
increase the frequency ofvisits?
Airlines are really good atthis.
Hotels are really good at this.
Restaurants are particularly badat this, right?
And again, there are greatexamples.
We can look at what Delta does.
We can look at what Ritz Carltondoes.
(19:20):
We can look at what Starbucks.
Does they do it better than wedo, but what are we doing to get
new people in the front door?
What are we doing to increasethe frequency of visits?
And then the third piece to thetriangle is what I call
evangelism, which is word ofmouth.
What are we doing right?
If we know word of mouth is sopowerful for our industry, which
I think we'd all agree, it'slike the most powerful marketing
tool out there, then we gottaput our thumb on the scale.
(19:43):
What are we gonna do?
What can we do to make sure ithappens?
More often or that it happensevery single time.
When I ask people, I'll, go totrade shows and I'll say, what's
the best marketing tool we have?
And everyone says, word ofmouth.
I say, you're right.
I say, sir, what's your word ofmouth plan?
And they look at me, I say,miss, what?
What's your word of mouth?
I, what do you do in yourrestaurant?
(20:03):
And there's always some guy inthe back, he raises his hand,
he's that's not really how wordof mouth happens.
I said, oh, tell me how ithappens.
He said, somebody comes in, theyhave a great meal.
We take care of them.
And then they go tell theircolleagues.
They go tell their mom.
They go tell their, I said, Itotally agree, but if that
action is so powerful.
Wouldn't we wanna manufactureit?
Wouldn't we wanna do more thingsto make sure that everybody goes
(20:26):
to tell everybody about it?
That's what a great church does.
There's a reason I call itevangelism.
A restaurant grows the same waya church grows.
Church doesn't grow by thepastor.
Shaking enough hands, churchgrows.
When people in the congregationare moved and they can't help,
they're compelled to go speakabout it.
man, I was at church yesterdayand I heard this thing.
(20:47):
And it really resonated with me.
And somebody says, wow, thatsounds great.
That sounds like the kind ofplace that I'd love.
You should come with me nextSunday.
Maybe we will.
That's how the church growsnaturally.
It's the same way a restaurantgrows.
So when we think aboutoperations, it's about
compartmentalizing.
And when we think aboutmarketing, I think we also have
to compartmentalize so thateverything we do, every action,
every tool, right?
(21:08):
Whether it's Google Ads orFacebook ads, or web or whatever
it is.
That we know what it's trying toaccomplish.
So we can measure, this is whatI did to accomplish this goal.
Did it do it or did it not?
If it did it, let's do more ofit.
If it didn't do it, let's scrapit and go back to the drawing
board.
Jeremy Julian (21:24):
I'd love to have you just,'cause I had a guest on
recently that talked about someexecutive that they were talking
about, and they were like, wealready have 20,000 people in
our database.
We think we've exhausted thiswhole town that's coming and.
his marketing person would sayto him, you realize that people
are moving every day.
People are not coming back.
So you've gotta constantly be onthat growth trajectory and
(21:46):
adding new names to your list.
'cause people are passing away,people are moving outta town.
People are, something ishappening that you're going to,
by the nature of everythingthat's going on, you're going to
lose customers.
And so you have to ensure thatyou're constantly adding to that
database.
And so I find all too often, wehave enough, we place an ad or
we send an email and people comeand so we're in a good spot.
(22:06):
But I would encourage all of ourlisteners out there to always be
adding to that list and alwaysbe communicating.
Chip Klose (22:12):
do you know the two big things?
just to go a little bit deeperthere, when we talk about
marketing, I'm a, I approachmarketing from an operator's
perspective.
There are a couple of simplethings we can do that, that make
this tangible.
So let me share those.
Number one, we should be askingevery single person, every
single table.
(22:33):
Whether they've been here beforeand it sounds tired, it's
cliche.
Hey folks, how you doing?
My name's Chip.
I'll be taking care of you.
You've dined with us before.
We've heard it done badly,
Jeremy Julian (22:43):
Yep.
Chip Klose (22:44):
but when it's done we come over and say, hi,
welcome.
Glad to have you tonight.
My name is Chip.
Or don't say your name.
I come from fine dining.
We never say your name, I'm gladto have you tell me.
Have you guys dined with usbefore?
And when they say no, we saythat's incredible.
Can I ask you a question?
What?
What made you come in today?
They'll tell you.
Say, oh, you know what?
I work with this woman, she's inthe next cubicle, she's in the
(23:06):
next office.
Or, my brother was raving aboutthis.
Oh, my mom loves this place.
You'll find, you'll figure outwhat of your marketing is
working, right?
So number one, you get answersto your questions.
Number two, then you say, okay,whatever we did.
some of our marketing worked andthey got'em in here.
And it's like John Taffer talkedabout this with 12 years ago.
The goal is not to get'em in.
(23:27):
The goal is to get them back.
'cause if you can drive towardsrepeat visits, then you got'em
for life.
So you make it your point, Ialways say you jam something in
their hand.
We will definitely get themback.
So rather than saying, sousually what you say is, Hey,
have you been here before?
And they say, no, it's our firsttime.
Usually what you get is just abig smile, Oh.
amazing.
Welcome.
I'm gonna take really good careof you, and you should do that.
(23:49):
You should say, oh my God,that's amazing.
I'm gonna point out thesignatures.
I'm gonna point out some of myfavorites.
I'm gonna show you the best wayto experience this place.
That should happen.
But then at some point in themeal.
We should do something that willget them back.
So that's a way tooperationalize.
That's a simple bounce backprogram.
You put a postcard, a businesscard, a poker chip, something in
(24:09):
their hands that says, Hey, comeback and you get X next time you
come back.
The other thing you can do, verysimple.
I used to do this.
So when you work at a restaurantand if you take reservations,
you've got a computer system.
If you have a restaurant and youjust have a wait list, it's
walkin only.
You still need a computer systembecause customer acquisition
without data acquisition, as myfriend Rev CIO always says,
(24:32):
customer acquisition withoutdata acquisition is an absolute
waste.
It's like going to the bar,buying somebody a drink.
And they say, Hey, can I buy youa drink?
And they say, sure.
And you buy him a drink and yousay, great.
And you just walk away.
And they walk back to theirfriends.
You walk back to your friends,you buy them a drink for a
couple of minutes ofconversation and maybe a phone
number, right?
If you don't take advantage ofthat thing.
I used to do this all the timeand I used to do it, and people
(24:54):
used to think I'm crazy becausepeople would walk in and say,
Hey, do you have a table fortwo?
It's an empty dining room behindme.
It's easy to say, yeah,absolutely.
Follow me.
But if you just stop and say,yeah, I think we could do that.
My name's Chip, what's yourname?
And they say, oh, it's Ted.
Ted.
What's your last name?
Oh, Ted Smith.
Ted Smith.
You in our system.
And I'm already typing on thecomputer and I say, oh, do I
(25:15):
have you in here?
Is this your phone number?
Or if you're not, I say, oh.
It looks like I don't have youin here.
What's your phone number thisway for the next time?
And you put it in there and say,great.
What's the best email address?
If you do that, 50% of thepeople would say, I'd rather not
give you my information.
Fine, but the other 50% willgive it to you.
What happens is it's a 32ndspeed bump that when you say,
and they come in and say, Hey,do you have a table for two?
(25:36):
Let's be real.
People say, yeah, I think we cando that.
My name's Chip.
What's your name?
You'd be amazed.
And how people light up and theysay, oh yeah, that's right.
It's not just transactional orit doesn't have to be.
If we wanna pretend like we'rein hospitality, let's actually
be in hospitality.
Let's introduce ourselves, let'sget to know people.
If you can get their name, theirphone number, their email
address, it'll take you all of30 seconds.
(25:57):
And that's if they, people haveto think deeply about it, but
otherwise say, great, now you'rein our system.
Follow.
And then you follow the sametrack, but now you've got them.
There's so much you can do withthat.
once you have that, those aretwo easy ways to operationalize
marketing.
That's marketing.
Jeremy Julian (26:14):
Yeah, and people think it's Facebook ads and
Google AdWords and all of thosekind of things, but at the end
of the day it's creating amemorable experience.
Recently I celebrated myanniversary with my wife.
We went to Carbon in Dallas.
They did exactly what you said.
I had been for a businessdinner.
Now I was taking my wife there.
They created an.
Unbelievable experience.
We've now told bunches ofpeople, the manager has reached
(26:36):
out to me post to say, Hey, I'mso glad that you had such a
great, they asked for a Googlereview'cause they knew I'd had a
great experience.
I've gotten comments now on thatGoogle Review that's marketing
that creates this word of mouththat's in an industrial area in
downtown Dallas.
carbon, I'm sure because ofbeing, you know where you're at.
But it was one of those thingsthat I think, but it really
requires.
(26:56):
Thoughtful and intentional waysof going about it.
Chip, and I'd love for you to,and you have to train your staff
to do these things and so
Chip Klose (27:02):
You have to be aware of
Jeremy Julian (27:03):
that idea.
You have to be aware.
You have to evaluate what you'redoing and go what is not
working, and then get them intothat place to be able to do it a
little bit differently becausethat difference, just, that
difference in the way that youtook the 30 seconds at the onset
versus the way that you normallydo it can create double digits
increase in profit if you do itproperly.
is that something you'relearning and,
Chip Klose (27:22):
hundred percent.
and anybody listening to this,I'm sure you've never been to a
restaurant that did it.
Most times you walk in and say,Hey, do you have a table for
four?
Yeah, right This way, just bydoing it, you win.
You beat out 99% of everyoneelse in your market simply
because you're aware of it.
(27:42):
There are these little moves.
So yeah, while Google ads work,and I think you should do them
while meta ads work, and I thinkyou should do them not before
you do some of this basicblocking and tackling where you
say, data acquisition isabsolutely crucial to the
success and growth of ourbusiness.
And what are all the ways we'regonna do that?
So don't just do a plug andplay.
Oh, my POS my POS system offersloyalty programs.
(28:05):
We'll do it.
You should do that, but don'trest on your laurels thinking
that's enough.
Find all the different ways.
So when I used to do this, whenI used to get people's
information, I would mark it inmy old days as MHD, I'd mark
them on the sheet, and at theend of my night I was done.
I'd go upstairs, I'm doing myclosing report, I'm sitting, I
loosen my tie.
(28:25):
And what I would do is I wouldtext.
I would text people and I'd say,Hey, I just wanted to thank you
again.
This, my name is Chip.
I'm the maitre d at thisrestaurant.
You just came in.
I hope you had a great meal.
If you ever need anything in thefuture, just let me know.
Or I would ask a question like Imeant to ask you, and I would do
this purposely.
Sometimes I would stop by thetable, but I would, I, I always
(28:45):
stop by, but I meant to ask,what did you think of the, and I
would just
Jeremy Julian (28:51):
the sole of the ribeye of the
Chip Klose (28:53):
What did you think of the tomahawk chop?
And they would go, oh my God.
It's like nobody does it, but Ijust extended the hospitality
from beyond the four walls andlike now they're in my phone.
I'm in their phone.
So from time to time I used tosay this, I used to spend, I
say, if you texted five peopleevery day from your reservation
(29:14):
list, if a manager did this, ifa Mat D did this.
If you did it every day, itwould change your business
overnight.
So if there's any operatorslistening to this, you start
doing this, you becomeabsolutely, crucial, so valuable
to the restaurant you work at.
That's how you get raises.
That's how you present yourselfas valuable to a competitor.
(29:34):
That's how you get better jobsand better pay when you do just
these simple things.
And so it's just being aware ofit and doing it.
And so the things I'm justteaching you.
Now I'm all, everybody'slistening to it now.
Operational.
Take notes, right?
List this out.
Do this and this.
It becomes an SOP standardoperating procedure when
somebody walks in without areservation and asks for a table
(29:57):
for four.
This is the script we do.
Jeremy Julian (30:00):
Yep.
Chip Klose (30:01):
That's all it is.
That's all it is.
Jeremy Julian (30:04):
and it's so intentional.
one last thought real quick'cause we're getting close to
time and I know that, we canfall off.
I love all of the marketingideas and again, there's so much
that we could do to talk throughthat through.
Tell me some of the areas thatyou find could chip in kind of
the other two prime costs thatpeople miss most often.
food cost and, probably evenmore so menu selection, because
(30:24):
I think all too often people,and you watch taffer, you watch,
Robert Irvine, you watch, all ofthese guys on these TV shows,
they're going in and beating thecrap outta people'cause they're.
Stocking stuff that's notselling.
But I'd love for you to talk alittle bit about how you
evaluate those two prime costsof food cost and labor cost to
give people one or two thingsthat they need to be thinking
about within their brand.
Chip Klose (30:43):
I talk a lot about the 30, 30, 20 rule.
It is a rough rule of thumb.
30% cogs, 30% labor, 20% foreverything else.
So imagine all of your expensesgoing into one of three buckets.
All the product you bring in toturn around and resell to your
customers.
That's cost of goods.
That goes into the first bucketlabor, meaning all your people
(31:03):
costs, your salaries, yourhourly wages, your taxes, your
benefits, all that goes into thesecond bucket, and any other
expenses that don't fit into thefirst or second bucket, go into
the third bucket.
That's what we call theeverything else bucket.
The rough rule of thumb, atleast in the year 2025, is 30.
30 20.
If you keep your cogs at max 30%of revenue.
(31:26):
And labor max 30% of revenue andeverything else to 20% of
revenue, you do the math.
That equals 80.
That leaves 20% leftover.
I believe what we do is way tooimportant and way too difficult
to not make money doing it.
I think to the husband and wifeout there who's got a million
dollar restaurant, I think$200,000 going to your bank
account, I think is a very goodliving.
(31:47):
For running a restaurant, Idon't think that 4%, right?
That$40,000 taking home$40,000on a million dollar restaurant,
I don't think that's propercompensation for the work you
do.
So immediately, again, ratherthan just talking to you about
what to do, I think giveyourself a frame.
Now, if you live in California,I think you're gonna have a hard
(32:08):
time getting your labor below35%.
So it has to be made up in theother ways.
So if you're at 35% for labor.
And it means your cost of goods.
Your blended cogs can't be over25%.
Understanding where your bucketsare or where they should be, and
then looking at where they arenow.
That's how you begin to combatthe problem.
(32:29):
and the, it's different state bystate, it's different
municipalities, it's differentby
Jeremy Julian (32:35):
Even product categories.
Chip Klose (32:36):
understanding that when you then look.
To drill down your cost ofgoods, your beverage has gotta
be 20% or below your food costhas gotta be 30% below.
And I know people say, oh, it'sdollars, it's gross profit.
oh, we've got our lobster.
We, it's at 55% cost, but wemake so much money.
Fine.
We can have that conversation.
But those are sort of shades ofgray.
(32:58):
Ours is a, business ofpercentages.
broad strokes.
30, 30, 20.
You need to keep all yourexpenses at 80%.
You need to understand whereyour bread gets buttered, What
are your popular items?
What are your profitable items?
How do you highlight them?
How do you strip everything fromyour menu?
So all that's left are the itemsthat are very popular, very
(33:19):
profitable, the things that getphotographed, the things that
people will rave about the nextday.
Certainly we've been torestaurants where oh my God, I
gotta tell somebody about this.
Like I talk about carbon.
There are plenty of those itemson the carbon menu that are just
like, I gotta tell somebodyabout this.
I can't believe this.
How much is the chicken parmCarbone?
Jeremy Julian (33:39):
$38 I think.
Chip Klose (33:41):
It's a lot
Jeremy Julian (33:42):
Yeah, it was for a piece of chicken
Chip Klose (33:44):
for, so every else in the world, it's like 14, 16
bucks.
It is easily two x and that'spart of the conversation piece.
It says 38
Jeremy Julian (33:53):
I had a 60 day dry age ribeye that my wife was
like, you're paying what?
That's a car payment for thesteak.
But I did, and I've told bunchesand bunches of people about it
because of it.
Chip Klose (34:03):
Yep.
it, so it's understanding.
It's understanding what are thethings that get ordered all the
time?
What are the things that aregonna, get raves that are gonna
spread about your place.
That's the, that more helpful tome saying, do this, to lower
your food cost.
Do this to lower your laborcost, understanding how your
(34:23):
buckets are.
The thing I'll say about thisthough, and it's an indirect
answer to your question, is.
Every potential solution has tobe on the table.
So if we say, if I walk in andsay, you gotta lower your back
of house labor by X number ofpercent, and I have a chef and
I've had this conversationbefore, they say, I can't do it.
I can't put out this menu.
(34:44):
With that few people, I said,great, this is what you can
afford.
So build me a menu that runs onthis.
I got six guys back there.
You can't afford more than four.
Build me that menu and the bestrestaurateurs out there.
I had John Taffer on my show.
He talked about compression.
He said, there's this a naturalcompression happening in the
(35:05):
industry and I never heard it.
Put that way, and he'sabsolutely right.
He built Taffer Tavern with theidea being that they would be
between 50 and 52% prime.
And so he was looking forconsistency and he was looking
for a way to roam at the leastamount of people possible.
He's I see the way the world isgoing, and I don't think we can
get into this place where we'rerunning 60, 65, 70% prime.
(35:26):
We just can't make money.
Gone are the days of cheaplabor, We have to understand
that you've got to, I talkabout, as I was working at a
Michelin star restaurant, I camein as a consultant and one of
the things we ended up doing isthat you, the way we cut labor
is we got rid of the pastrycooks at night.
And basically what we said is wedetermined the pastry, the hard
(35:47):
work of being a pastry cook isin the day baking and making T
wheels and, making ice creamsand stuff like that.
But at night it's just, puttingthe dish together.
It's just assembling the dish.
So what we did is pastry wasright next to Garmer.
They're both on the cold side.
We said we're gonna pull some ofthe items off the garmer, right?
So less things are gonna comeoff garmo, less things are gonna
(36:09):
come off pastry.
And then these people can alsoexecute desserts.
The strange thing that happenedis we had less, apps that we
offered.
We had less desserts offered.
We increased dessert sales andcut.
Our backhouse labor.
at the same time.
It's again, that idea ofcompression that John Taffer is
now talking about, I think it'sabsolutely right.
(36:30):
You have to be willing to makebold moves like that
Jeremy Julian (36:34):
And to kill your darlings.
Sometimes there's times thatpeople, oh, I, but we've had
this menu item in here forever.
It's not selling, it's notdriving profit, but we've had it
there forever.
And and so to your point,there's these things that all
too many restaurants and youhave to have those hard
conversations, with theseowners.
Chip Klose (36:50):
Or, and to your point, oh, it's your darling.
Oh, but we're famous for thisand all this, okay?
But it's not helping us rightnow.
So if this is so good, so here'smy$12 chocolate cake.
So make it a$19 chocolate.
Call it the, it's the signature.
Call it the signature.
All the other desserts are 12.
Our famous one is 19, so thenI'd be happy to sell it right
Jeremy Julian (37:13):
because now you're driving to exactly what
you're looking
Chip Klose (37:15):
there are things that we did right?
McDonald's, the fries are atwhat 7% cost, then the number
one item on their pix.
Which makes sense.
There's only one side dish.
They pretty much serve frieswith everything, so it makes
sense.
But they're also at 7% cost.
And when I tell you they'retaking advantage of you as the
consumer, it doesn't make youangry because they're actually
worth it.
No one, only a psychopath goesto McDonald's, orders a Big Mac
(37:37):
and says, no, hold the fries,the burger and fries are that
match.
Just because, That they make somuch profit on, it doesn't make
you like them any less.
In fact, I admire it even moreso they, they know what they're
doing.
In most of these instances, wejust look at the big boys and
see what they're doing, and wejust have to emulate them.
So why are they doing that?
We should do it.
Jeremy Julian (37:56):
one last question before we wrap up, and I know
you've got a free gift for ourlisteners.
How do, for those listeners thatare out there that are like, I
don't want, I didn't open up arestaurant to spend 40 hours a
week in the office doingnumbers.
I know that's not the case, butI know you get that feedback
often from people where they'relike, I didn't open up a
restaurant to sit and deal withp and Ls and sit and deal with
my profitability.
(38:17):
While I agree with youwholeheartedly, that they should
be thinking about these thingsmore, but how long does this
really take in a week whenyou've got your system set up
properly?
Chip Klose (38:25):
It's funny, when we work with members in the P three
Mastermind, we can help them setit up.
We ask for six months in theprogram.
Within the first 90 days, theysee a huge change.
The idea is creating a systemthat's not extra work, right?
If you are forecasting, I'mgonna give you a better way to
forecast.
If you are already budgeting,I'm just gonna give you a better
way to budget, and if you arenot forecasting and budgeting,
(38:46):
those are the two actions thatwill take roughly 30 to 60
minutes a month,
Jeremy Julian (38:52):
30 to 60 minutes a month.
I want to, I wanna repeat that.
Sorry.
Chip Klose (38:56):
30 to 60 minutes a month, and then daily check-ins.
When I say daily check-in, it'stwo minutes actually looking at
very specific numbers becauseyou know what they mean.
You know what they're tellingyou.
So it's not busy work.
It's not a lot of line items,it's saying.
The number one is the revenuesetting, revenue targets for
your team, making sure they'rehitting them every day.
(39:16):
The way you figure that out isyou open up your spreadsheet the
next morning and you make surethat they hit the number that
you needed them to hit, and thenmaking sure they kept their
ordering and their scheduling onbudget.
Those are the three biggestculprits back to our three
moving targets.
So if you can properly wranglethose, and yes, it's 30 to 60
minutes a month and get this,honestly, it's not a task that
(39:39):
you even need to do.
Forever.
'cause once you learn how to doit, my goal is always to show
you how to do it in a way that'svery easy to teach your team to
do it.
It's something the GM in yourlocation or something your
executive chef in the locationshould be doing.
this is not a repeat, not anowner action.
It is an operator action.
(40:00):
And so what we need to do isprovide the framework for what
needs to happen and properoversight.
For how it needs to happen.
So give you ways to check on thethings that are happening.
You shouldn't have to, youshouldn't have to do it.
Jeremy Julian (40:15):
I love it.
I, again, as I said on theonset, I'm a huge fan.
I know you've got a gift for ourlisteners.
They've got other ways they canstay connected.
You've got a book already out.
I think another one on its way,you've got the podcast.
So tell the people how to getconnected, how to stay
connected, and how they canlearn more about, engage and
even with the Mastermind in yourteam.
Chip Klose (40:32):
Yeah, super easy.
So if this resonates with any ofyou guys out there, I've got the
podcast, the Restaurant Strategypodcast.
We have conversations aroundthis at two episodes every
single week.
Go check out the podcast.
What I'm gonna offer up to youguys is that if you wanna do a
free p and l review with me, 30minutes, absolutely no strings
attached.
It's the first thing we do withall new members.
(40:54):
We can certainly talk about theMastermind and talk about what
it might look like with you, butwe'll go through that diagnostic
exercise.
We'll look at the numbers.
I'll show you what I see.
I'll give you a handful ofaction items, and if you wanna
continue the conversation andtalk about how we might help you
with that in.
The Mastermind, I'm happy tohave that conversation.
And if no, you just want to gotake care of it yourself, I'll
(41:15):
give you the action items.
You can do it.
So I will give you a speciallink you can include in the
show, in the show notes, so thatpeople can do it, but it's a
link directly to my calendar,not anybody else.
It's me.
You can book time to get a freep and l review.
It'll be 30 minutes and you'llcome out of that.
I think with a lot of clarityabout where your business is at
and where I think it can go.
Jeremy Julian (41:36):
again, we just spent 42 minutes and you've,
you've delivered some pure gold,so thank you for what you do.
I'm passionate as you are atwatching restaurants succeed,
and I hate watching restaurantsstruggle.
so thank you for continuing toput that, info out there.
Thank you for helpingrestaurants.
to our listeners, guys, like Isaid at the onset, you guys got
lots of choices, so thanks forhanging out and make it a great
day.
Speaker 2 (41:57):
Thanks for listening to The Restaurant Technology
Guys podcast.
Visit restaurant technologyguys.com for tips, industry
insights, and more to help yourun your restaurant better.
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