In this episode of the Instant Payments Podcast, host Tal Clark, CEO of Instant Financial, continues the conversation with Kep Sweeney, CEO of PDQ Restaurants. They delve into the business environment of the quick-service restaurant (QSR) space, discussing the handling and implications of tips, employee compensation, the free market, and industry trends. Kep and Tal also explore the challenges distressed restaurant brands face, common pitfalls, and the evolving role of AI in enhancing operations and financial forecasting. The discussion wraps up with advice for emerging restaurant leaders on gaining diverse experiences and taking advantage of educational opportunities. To learn more, visit instant.co/podcast.
00:00 Introduction and Welcome
00:19 Discussing Employee Tips in QSR
07:22 Employee Well-being and Management
11:38 Challenges in Distressed Restaurant Brands
14:48 AI in the Restaurant Industry
20:07 Final Advice for Future Leaders
23:05 Conclusion and Farewell
To learn more about PDQ: eatpdq.com
Connect with Kep: https://www.linkedin.com/in/kep-sweeney-a19a3b5/
Connect with Tal: https://www.linkedin.com/in/tal-clark-a60776b/
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Tal Clark (00:05):
Welcome to the Instant Payments Podcast.
I'm your host, Tal Clark,CEO of Instant Financial.
And we're back for part two ofour conversation with Kep Sweeney,
the CEO of PDQ Restaurants.
Kep, thanks again forbeing a guest on the show.
Let's jump right back in.
We left, we left off on the lastsession talking a little bit about
the headwinds and the businessenvironment within the QSR space.
(00:28):
What I'd like to do issort of shift a little bit.
And let's talk about, you know,the people, the employees.
As you know, what we do is we wanna makesure that employees have access to their
wages, when they want them, and wherethey want them, and their tips as well.
And there's been a lot of conversationaround tips in the last year, from
a legislative perspective and justthe environment, around tips as well.
(00:52):
A lot of conversationsaround tipping etiquette.
What are you seeing in the fast casualspace and QSR specifically, around tips?
How do you feel about it?
And, and how is PDQ handling tips?
Are you making thoseavailable to employees?
And what does that look likegoing forward for you guys?
Kep Sweeney (01:09):
Well, we don't take tips at PDQ and I think that,
um, it, the offset is speed.
Speed is, is critical.
So it, it's a little bit like,um, uh, a, a Formula One pit stop.
So.
Again, like we spoke about in the lastepisode, that you had an interest, if
you have an interest in going to a QSRrestaurant, you're either gonna have a
(01:33):
poverty of income or a poverty of time.
You, you, you're driving andyou're really hungry, and now
what is your best alternative?
And you may pull into a PDQ.
The tipping slows everything down.
So we try to embed that full compensationpackage into whatever is an hourly rate or
(01:56):
a salary, wherever they are in the stack.
Tal Clark (01:59):
Got it.
What is, what do you, what are youseeing just in the QSR space as a whole?
As, as an example?
Um, I know that Subway hasmade tipping available across
most of their franchisees.
If you go to a Subway now, when you checkout, you have the option to leave a tip.
And I know there has been, justchallenges in dealing with that.
(02:22):
Not only for those guys, butalso with other QSR brands.
And I, and I feel like some of this to behonest is driven by the payments business.
You know, my background is payments,credit cards, facilitation of payments,
and I think a lot of it has beendriven by the payments industry.
The reason is because theymake money on volume, right?
The more dollars.
(02:43):
The more revenue, right?
And so they can add, you know, 10, 15, 20%to a check in a place that has not been,
uh, having tips, then all of a suddenthey see their interchange revenue go up.
Kep Sweeney (02:55):
Mm-hmm.
Tal Clark (02:56):
So what, I mean, I guess just your general sense of where
it's gonna go in the QSR space.
Have you noticed it in other places?
Do you, do you think they'll ever bepressured just in general to, to provide
tips, I guess to in, in all places.
Kep Sweeney (03:09):
Well, I'm not sure that in QSR that it is a good idea
and, but it doesn't mean that the,the employee should make less.
I just think it has to be embedded inthere because again, when you, when
you pull in that, how many decisionsdo you want the guests to have to make?
And if you are, if you are on astopwatch, it's a lot different
(03:32):
than if you have a waiter.
And whether you spend 30 minutes in acasual dining restaurant for lunch or
45 at Outback, it's all the same, right?
If you get to choose and you didn'tgo there because you have to be
back at your desk in 45 minutes.
So if you work at a Wells Fargobank and you wanna get lunch
and you have a 10 minute, 5,10, 5 minutes to drive and park.
(03:57):
Five minutes to get back and park.
Now you're down to 35 minutes.
So it's like that time goes very quickly.
How long does it take you tosit there and eat your meal?
How long does it take, uh, takethe, uh, you to, um, get through
the line to order your meal?
How long does it take thekitchen to prepare your meal?
All of that's important, and thattime goes very, very quickly.
(04:17):
So you just have to, I, I justthink that adding in tips will
slow things down, but no way shouldpeople make less and they wouldn't.
By the way, that's the beauty of a freemarket, that, that if we weren't paying
that, what the equivalent is, everybody'ssmart, they'll just go next door.
Tal Clark (04:38):
Absolutely.
Absolutely.
Well, that makes, that makesall the sense in the world.
I, I'll tell you another example.
I will refrain from, uh, calling outthe brand here, but, it's been a little
bit, but I think I was on the roadsomewhere in one of the quick bites, as
you mentioned, stopped in a quick servicerestaurant brand, and they had, they had
the tips, you know, you checked out andthey, they, they had the tip screen pop
(04:58):
up, but I thought it was interesting.
I actually asked them about this.
They had a tip jar rightby the point of sale.
So they had it on the screen, but thenthe people working there had a tip jar
and I said, what's up with the tip jar?
You've got, you've got itright here on the screen.
We can tip.
But, and you know what it came down to,they didn't trust that they were ever
gonna get the tip money that was acrossthe screen, so they had set out a tip jar
(05:21):
so that they felt more secure about that.
So it's an interesting dynamic going on.
Kep Sweeney (05:25):
That they're discussing with you the mistrust
they have with senior management.
Tal Clark (05:31):
Exactly.
Exactly, and I think there'sbeen some confusion about that.
Did you, did you have any thoughts onthe whole, uh, discussion, legislative
discussion around no tax on tips?
It didn't sound, doesn't sound like itreally impacted you guys at all, but did
you have any thoughts or opinion on that?
Kep Sweeney (05:48):
You know, it doesn't, it, it, but it, I have a soft
spot where in general I mightbe on this side of the aisle.
So I have a soft spot for the restaurantindustry and it's a very hard industry.
And yeah, if that can help out someand it doesn't hurt somewhere else,
and that's, I, I would, I needto get better educated on that.
(06:09):
But how bad is it hurting some,there's only a hundred percent, right?
So we're dealing withthe a hundred percent.
If, if you don't pay taxes here,you're gonna pay more over here.
So.
That's the way it works.
So what's over here?
And I'm sure that there, thatsomebody out there is going to be
clamoring that their taxes will not.
(06:31):
But I do, I do like that for, um, for therestaurant industry, it's, what is it the
second biggest industry in the world andis a great starter industry for people.
I mean, again, going back toOutback, the number of people that
started as a waiter and moved up.
To a manager, moved up to the, thepartner, moved up to a regional and
(06:54):
has built a great life for theirfamily, and they have businesses that
they run and support their community.
I mean, it's phenomenal.
So it, it is a great starter industry,and it's an industry where you don't
have to come, uh, from Harvard.
There's a, you know, there's alot of industries that don't have
Harvard, Stanford, Yale- you'renot going to, um, you're not
(07:16):
going to be able to participate.
Tal Clark (07:20):
That makes sense.
And well, let me, uh, let's continueto talk about people . What are
you seeing or hearing from youremployees or as you're recruiting
employees , that they're looking for?
We know, you know, we're doing surveys,uh, every two years and, and what we
find out is that, we've seen a realshift, especially in, in, in, in the
(07:45):
restaurant space and the staffingspace around flexibility, speed to
pay and, and financial wellness.
What are you hearing from youremployees, first of all, and then I
probably have a follow up question.
And, what do you think's importantas you hire someone today?
Kep Sweeney (07:59):
Well.
So when you look at hospitalitypeople that they have pride,
they have energy, they haveextroversion, and they have empathy.
So those are the fourcharacteristics that you would
want to interview for and test for.
When you see an employee who's happythat they consistently say the same
(08:24):
thing, my manager cares about me.
So when we go and what we did is we'vestudied here the higher performing
restaurants, and we've tried tobring, whether it's the, the way that
they scheduled, to the rest of therestaurants, the top quartile to the
bottom three quartiles, or we'll go in,um, and or, or their business practices.
(08:50):
And the one thing that you see over andover again in the top quartile is they
take, uh, a personal interest in each one,um, each, each person and their families.
So they'll sit down withsome frequency and they will
talk about like, like weekly.
What's going on in their world?
(09:10):
How's school going?
Those things.
It's not about chicken,it's about them personally.
So companies like yoursreally enhance people's lives.
One is that they take out thatpeople were doing it, but there
was predatory lending, right?
So now you guys have made this veryeasy and I think that it's, uh, it's
(09:31):
something that we enjoy offering becauseof, you know, there, there's empathy.
There's a lot of people that in, inQSR, there's a, I don't have the exact
percentage, but there's a certainnumber of people that are homeless.
Tal Clark (09:46):
Okay.
Kep Sweeney (09:47):
There's a certain percent, there's a big percentage of people
that live in multi-generational homes.
That money that they're getting atthe end of that shift is critical.
It's not because they now havedisposable personal income.
That's for perhaps grandma's medicine.
These are real issues, and whatwe try to do is be aware of them.
(10:09):
One of the founders here is Nick Readerand, uh, that, that, you know, and I'll
call him out in a positive way, whichI, I mean, he's a hero, but there are
things that where people have, and Ifound out through other people, I don't
find out through Nick, but he's goneand found that somebody was homeless.
(10:31):
And got them an apartment and thenhad it furnished or was getting moved
out of their house and have kidsand done the same thing because they
can't sign a lease because they don'thave, uh, any kind of guarantee.
So he's done that for a lot of peoplehere and, and he and Bob did a very
nice job setting the standard whereNick goes in, uh, to restaurants
(10:53):
and he will know, like kids willbring their parents in to meet him.
That's the aura that, so I thinkit's, um, that it is, it's back
to your manager cares about you.
It's not the square footage of the office.
It's not that you've gota dollar more an hour.
It's my manager cares about me.
(11:14):
And that's the key point there.
And a caring manager bringsus products like yours and
says, Hey, this would help us.
Tal Clark (11:23):
That's huge and that's, uh, insight.
And that also, uh, would, would lendcritical importance to making sure
you're hiring the right managers, whichit sounds like you guys are as well.
So, um.
Yeah.
Good stuff.
Good stuff.
Let me ask you this and we'llkinda shift back a little bit
to some of your background.
You have, you know, you spenttime working with distressed
(11:45):
restaurant brands in your history.
Uh, what are, what are some ofthe common themes that you see
as you go into that environmentthat you might could share with?
Current restaurant operators or futurerestaurant operators that might help
them avoid getting in those situations?
What is it that, that, that yousort of see as, are there any
(12:06):
common challenges typically whenyou, when you see that distress?
Kep Sweeney (12:10):
Well, there are a a and that, that there's, and, and, and it,
it's true whether it's restaurants,manufacturing, uh, you know, all
the industries that there are thesecommon themes and in restaurants.
There's only three waysto change the outcome.
It's either corporate governance,capital structure, or operations.
(12:30):
And we all think in terms of operations,that in general it's capital structure.
So it would be naive to say, well, theywent out and overlevered the company.
It's generally not that.
It has to do with the rollout.
And you see this over and over andover again, the expansion part.
And a lot of people we're that, that are
(12:53):
are, are pushed for growth maybebefore they're ready for growth?
Do they have all of theinfrastructure necessary?
How's their supply chain, uh,that needs to be examined?
How do you hire people?
How do you keep getting these managers?
Everybody wants to be In-N-Out Burger,but In-N-Out Burger will only open
a restaurant when they determinethey have a killer general manager.
(13:18):
Now it's time.
Tal Clark (13:19):
Okay.
Kep Sweeney (13:19):
They're not pushed by Wall Street for growth.
They don't have PE behind them sayingthat you have to build X units next year.
And the CEO knows that.
The CEO knows that's the onlyway they're keeping their job
is if they get these open.
So you might make bad decisions.
So you see that it's generallyin restaurants around growth in
(13:40):
manufacturing, it's very often arounda a, a failed software install.
And you can go and I go to a, aboard, a whiteboard, and I put up
on the whiteboard, uh, a timeline.
And then I've counted back ayear with the board of directors,
and I've circled that date.
And I said, what happened here?
Well, that has nothing todo with why you're here.
What happened here?
(14:01):
Oh, we installed, uh, an ERP.
How did that go?
Poorly.
You know, so that's why I'm.
So it's like, it's just you, you seethose consistencies, but it's generally
in the capital structure where you'reoverlevered and you're, you're kind of
struggling and having to make decisions,but it's not that you got over levered,
(14:24):
it's that you had to close units.
The, the investment, the debt,and the equity didn't go away.
They're still.
On the balance sheet, you just have lessunits to be able to support that cash.
Tal Clark (14:39):
Yeah.
Okay.
That's interesting.
And I think that's, that's veryvaluable insight for anybody that
has an opportunity to listen to this.
So let's talk about, I mean, everywhereyou go, uh, you and I met at Prosper
Forum, this year and, uh, therewas quite a few sessions around AI
and the use of AI for inventory ororder taking or, reservation taking,
(15:03):
you know, all all types of things.
Talk about, I guess, what you'veseen in regards to AI solutions in
the restaurant envir environment.
Um.
Which of those are trulymaybe ready for prime time?
And then maybe a little bit aboutwhat you guys are thinking or, or
might be using now or in the future.
Kep Sweeney (15:23):
Uh, right now we're finding that in corporate.
It is a more valuable tool than at theunit and that we're like, like I do
think, and we don't have, um, like aspeaker box and a speaker box, AI driven.
They're probably getting there.
And the difference between January,2025 to March, 2025 is phenomenal: what
(15:47):
happened in AI, the difference betweenMarch 25, 25 to June, phenomenal.
I can do things today thatI couldn't do in June.
So it's, it, it, it's actually, we'regetting pretty close to being able to
have our financial forecast done, butthrough prompts and anybody that wants
(16:09):
to kind of get ready for the future,learn how to prompt, um, that, that's,
that's the most important skill I think.
I, I have two kids that have one yearnow outta college in the workforce.
And, um, I, I, they don't like hearing it.
They think it's boring for me tosay, but that they, but I think
(16:31):
prompting and knowing how to do thatis really important, but I think
that they, I'm not seeing it for us.
Um, I don't have any interestin having, um, our hand breaded
tenders done, uh, mechanically.
You know, through AI.
I do think that from predictive,uh, sales, I think that
(16:53):
that's really important.
So how do we, how do we makesure that our inventory is, is
close to spot on as possible?
And I think from a labor scheduling,AI has become very effective for us.
Tal Clark (17:07):
Okay.
And what are you using there?
What?
What tools are you using in laborscheduling that work for you?
Kep Sweeney (17:12):
Well for us, you know, that we, we have, in the back hot
schedules, but everything that's beingbuilt for us right now, we do internally
using one of three or four AI agents.
Tal Clark (17:27):
Okay.
Okay.
Well that's good.
That's really interesting.
Um,
Kep Sweeney (17:31):
You can build most of this yourself.
You can build apps, you canbuild most of this yourself.
I, I set a goal in January.
Well, a little before January, 2025.
Really got started in January tobecome, you know, a quasi expert
in AI for the restaurant industry.
(17:52):
Now, keep in mind, that's likesaying I'm the best surfer in Omaha.
It's
Tal Clark (17:56):
You're good.
Kep Sweeney (17:56):
I'm not set in a high bar, right?
It's like there are other industriesthat are far, far ahead of us, but
I think that, that I've, I've been.
I take classes at night andI'm just shocked at how what
I can build on my phone.
I'm shocked at this morningover coffee watching CNBC,
(18:19):
I'm able to write a contract.
They'd got me 80% there and at some pointI'm gonna print it today, review it.
I think I'm gonna have two or threetweaks and I'm gonna send it off.
Tal Clark (18:34):
That's amazing.
So, so gimme a little more detail.
What, what tools are you usingspecifically for your use?
Kep Sweeney (18:40):
I like Claude.
I like, uh, Manus a lot.
I think Manus has the best reasoningcapability of any of the, the AI apps.
And, we have, subscriptions to these.
And, um, I, there, there, there area couple people here that prefer
for certain things, Grok and Gemini.
Tal Clark (19:00):
Okay.
Kep Sweeney (19:01):
But we could do real estate analysis.
I can plug in the location and I couldplug in demographic data that we have
per location, and I could plug inour sales and of every location and.
By, you know, some of these will takea little longer, but, but from a, uh,
statistical, um, analysis perspective,I can get really good information on why
(19:25):
this location is working, what's the daypop, what's the night pop, those types
of things, versus another location.
Because they look tothe naked eye identical.
And I think those, that type of analysisused to be very, very expensive.
And we can do all of that internally now.
Tal Clark (19:44):
That's really, uh, good knowledge to share and we certainly
are looking at it, looking for waysto use it, continuing to use it
and build it within our business.
And, uh, certainly good to hear that youguys, sounds like you're ahead of the
curve and in many ways, so well look.
Finally, you've had such, such a diversecareer, Kep, chef, analyst, consultant,
(20:07):
uh, CEO, uh, if you had to give onepiece of advice to the next generation
of restaurant leaders, you've given quitea bit on this podcast already, but, uh,
if you had to give one piece of finaladvice before we depart, what would it be?
Kep Sweeney (20:22):
I, I think that range would be the bit of advice, and
it's, it's, let's say that you'rea 25-year-old in the industry.
Give yourself to the next 10 years,give yourself the next 10 years to
35 and learn as much as you can.
And it doesn't have to beabout the restaurant industry.
My dad used to talk about before I wentto MBA school that the best training for
(20:44):
MBA school is reading Shakespeare becauseyou have to be able to peel that onion.
You have to have to be ableto understand the, the essence
of what they're talking about.
So whether you, one, one of thebest things that I did was I,
I hired a professor, um, fromNYU and we wrote a screenplay.
(21:04):
And I spent two yearswriting that screenplay.
And I mean, I hired actors and he'dfly out and we would do a rehearsal
so I could hear it and I could, I seewhat parts were working, what parts
weren't working, but you really had tounderstand the essence of each character.
Well, each, I worked with a lotof characters here and I have to
(21:24):
understand what makes everybody tick.
So don't, don't pride yourself oncooking that same steak for two
years in a row, do something elseand then it will all come together.
One of the other things thatwe did here, and I'm very proud
of, I do this everywhere, isI start an education program.
(21:46):
And I've never been trained by the wayin my life, but I have been educated.
So I'm trying to bring thatto everybody that I work with.
And so I put together a reading listthat includes Good to Great Annie
Duke's Thinking and Bets, et cetera.
I put together a speakers program thathas, uh, uh, Bob Nardelli and Joe Essa
and I, um, uh, we watch masterclass.
(22:09):
Different, Schultz's Masterclassand a couple of the others.
So I want people to start thinking.
And then suddenly I have unit levelmanagers, um, talking about, yeah, but
Kep when you're doing the analysis,uh, you've completely forgotten about
the supplier power in Porter's model.
(22:29):
And I'm, oh, okay.
You're right.
You know, and they're using my wordsagainst me, which is, is hurtful in
the beginning, but it's, um, but I'msaying that they're just, they're,
they, they, when you educate people,it, you'd be amazed at what can happen.
Tal Clark (22:48):
Well, that's, uh, that shows you're being successful though.
If they start using your words againstyou, it means your program's working.
So, absolutely.
I think that's great adviceand it's been great speaking.
Uh, thank you for joining uson Instant Payments Podcast.
Your perspective bridging finance,operations, and culinary makes
your rare voice in the restaurantindustry and such a valuable guest.
(23:11):
To our listeners, you can learnmore about Kep's work at eatpdq.com
and follow along with the new podcastepisodes at instant.co/podcast
Be sure to subscribe and leave areview wherever you get your podcast.
Kep.
Thank you again, and thanks toall of our listeners for tuning in
to the Instant Payments podcast.
Kep Sweeney (23:30):
Ah, thank you.
Welcome to the Instant Payments Podcast.
I'm your host, Tal Clark,CEO of Instant Financial.
And we're back for part two ofour conversation with Kep Sweeney,
the CEO of PDQ Restaurants.
Kep, thanks again forbeing a guest on the show.
Let's jump right back in.
We left, we left off on the lastsession talking a little bit about
the headwinds and the businessenvironment within the QSR space.
(00:28):
What I'd like to do issort of shift a little bit.
And let's talk about, you know,the people, the employees.
As you know, what we do is we wanna makesure that employees have access to their
wages, when they want them, and wherethey want them, and their tips as well.
And there's been a lot of conversationaround tips in the last year, from
a legislative perspective and justthe environment, around tips as well.
(00:52):
A lot of conversationsaround tipping etiquette.
What are you seeing in the fast casualspace and QSR specifically, around tips?
How do you feel about it?
And, and how is PDQ handling tips?
Are you making thoseavailable to employees?
And what does that look likegoing forward for you guys?
Kep Sweeney (01:09):
Well, we don't take tips at PDQ and I think that,
um, it, the offset is speed.
Speed is, is critical.
So it, it's a little bit like,um, uh, a, a Formula One pit stop.
So.
Again, like we spoke about in the lastepisode, that you had an interest, if
you have an interest in going to a QSRrestaurant, you're either gonna have a
(01:33):
poverty of income or a poverty of time.
You, you, you're driving andyou're really hungry, and now
what is your best alternative?
And you may pull into a PDQ.
The tipping slows everything down.
So we try to embed that full compensationpackage into whatever is an hourly rate or
(01:56):
a salary, wherever they are in the stack.
Tal Clark (01:59):
Got it.
What is, what do you, what are youseeing just in the QSR space as a whole?
As, as an example?
Um, I know that Subway hasmade tipping available across
most of their franchisees.
If you go to a Subway now, when you checkout, you have the option to leave a tip.
And I know there has been, justchallenges in dealing with that.
(02:22):
Not only for those guys, butalso with other QSR brands.
And I, and I feel like some of this to behonest is driven by the payments business.
You know, my background is payments,credit cards, facilitation of payments,
and I think a lot of it has beendriven by the payments industry.
The reason is because theymake money on volume, right?
The more dollars.
(02:43):
The more revenue, right?
And so they can add, you know, 10, 15, 20%to a check in a place that has not been,
uh, having tips, then all of a suddenthey see their interchange revenue go up.
Kep Sweeney (02:55):
Mm-hmm.
Tal Clark (02:56):
So what, I mean, I guess just your general sense of where
it's gonna go in the QSR space.
Have you noticed it in other places?
Do you, do you think they'll ever bepressured just in general to, to provide
tips, I guess to in, in all places.
Kep Sweeney (03:09):
Well, I'm not sure that in QSR that it is a good idea
and, but it doesn't mean that the,the employee should make less.
I just think it has to be embedded inthere because again, when you, when
you pull in that, how many decisionsdo you want the guests to have to make?
And if you are, if you are on astopwatch, it's a lot different
(03:32):
than if you have a waiter.
And whether you spend 30 minutes in acasual dining restaurant for lunch or
45 at Outback, it's all the same, right?
If you get to choose and you didn'tgo there because you have to be
back at your desk in 45 minutes.
So if you work at a Wells Fargobank and you wanna get lunch
and you have a 10 minute, 5,10, 5 minutes to drive and park.
(03:57):
Five minutes to get back and park.
Now you're down to 35 minutes.
So it's like that time goes very quickly.
How long does it take you tosit there and eat your meal?
How long does it take, uh, takethe, uh, you to, um, get through
the line to order your meal?
How long does it take thekitchen to prepare your meal?
All of that's important, and thattime goes very, very quickly.
(04:17):
So you just have to, I, I justthink that adding in tips will
slow things down, but no way shouldpeople make less and they wouldn't.
By the way, that's the beauty of a freemarket, that, that if we weren't paying
that, what the equivalent is, everybody'ssmart, they'll just go next door.
Tal Clark (04:38):
Absolutely.
Absolutely.
Well, that makes, that makesall the sense in the world.
I, I'll tell you another example.
I will refrain from, uh, calling outthe brand here, but, it's been a little
bit, but I think I was on the roadsomewhere in one of the quick bites, as
you mentioned, stopped in a quick servicerestaurant brand, and they had, they had
the tips, you know, you checked out andthey, they, they had the tip screen pop
(04:58):
up, but I thought it was interesting.
I actually asked them about this.
They had a tip jar rightby the point of sale.
So they had it on the screen, but thenthe people working there had a tip jar
and I said, what's up with the tip jar?
You've got, you've got itright here on the screen.
We can tip.
But, and you know what it came down to,they didn't trust that they were ever
gonna get the tip money that was acrossthe screen, so they had set out a tip jar
(05:21):
so that they felt more secure about that.
So it's an interesting dynamic going on.
Kep Sweeney (05:25):
That they're discussing with you the mistrust
they have with senior management.
Tal Clark (05:31):
Exactly.
Exactly, and I think there'sbeen some confusion about that.
Did you, did you have any thoughts onthe whole, uh, discussion, legislative
discussion around no tax on tips?
It didn't sound, doesn't sound like itreally impacted you guys at all, but did
you have any thoughts or opinion on that?
Kep Sweeney (05:48):
You know, it doesn't, it, it, but it, I have a soft
spot where in general I mightbe on this side of the aisle.
So I have a soft spot for the restaurantindustry and it's a very hard industry.
And yeah, if that can help out someand it doesn't hurt somewhere else,
and that's, I, I would, I needto get better educated on that.
(06:09):
But how bad is it hurting some,there's only a hundred percent, right?
So we're dealing withthe a hundred percent.
If, if you don't pay taxes here,you're gonna pay more over here.
So.
That's the way it works.
So what's over here?
And I'm sure that there, thatsomebody out there is going to be
clamoring that their taxes will not.
(06:31):
But I do, I do like that for, um, for therestaurant industry, it's, what is it the
second biggest industry in the world andis a great starter industry for people.
I mean, again, going back toOutback, the number of people that
started as a waiter and moved up.
To a manager, moved up to the, thepartner, moved up to a regional and
(06:54):
has built a great life for theirfamily, and they have businesses that
they run and support their community.
I mean, it's phenomenal.
So it, it is a great starter industry,and it's an industry where you don't
have to come, uh, from Harvard.
There's a, you know, there's alot of industries that don't have
Harvard, Stanford, Yale- you'renot going to, um, you're not
(07:16):
going to be able to participate.
Tal Clark (07:20):
That makes sense.
And well, let me, uh, let's continueto talk about people . What are
you seeing or hearing from youremployees or as you're recruiting
employees , that they're looking for?
We know, you know, we're doing surveys,uh, every two years and, and what we
find out is that, we've seen a realshift, especially in, in, in, in the
(07:45):
restaurant space and the staffingspace around flexibility, speed to
pay and, and financial wellness.
What are you hearing from youremployees, first of all, and then I
probably have a follow up question.
And, what do you think's importantas you hire someone today?
Kep Sweeney (07:59):
Well.
So when you look at hospitalitypeople that they have pride,
they have energy, they haveextroversion, and they have empathy.
So those are the fourcharacteristics that you would
want to interview for and test for.
When you see an employee who's happythat they consistently say the same
(08:24):
thing, my manager cares about me.
So when we go and what we did is we'vestudied here the higher performing
restaurants, and we've tried tobring, whether it's the, the way that
they scheduled, to the rest of therestaurants, the top quartile to the
bottom three quartiles, or we'll go in,um, and or, or their business practices.
(08:50):
And the one thing that you see over andover again in the top quartile is they
take, uh, a personal interest in each one,um, each, each person and their families.
So they'll sit down withsome frequency and they will
talk about like, like weekly.
What's going on in their world?
(09:10):
How's school going?
Those things.
It's not about chicken,it's about them personally.
So companies like yoursreally enhance people's lives.
One is that they take out thatpeople were doing it, but there
was predatory lending, right?
So now you guys have made this veryeasy and I think that it's, uh, it's
(09:31):
something that we enjoy offering becauseof, you know, there, there's empathy.
There's a lot of people that in, inQSR, there's a, I don't have the exact
percentage, but there's a certainnumber of people that are homeless.
Tal Clark (09:46):
Okay.
Kep Sweeney (09:47):
There's a certain percent, there's a big percentage of people
that live in multi-generational homes.
That money that they're getting atthe end of that shift is critical.
It's not because they now havedisposable personal income.
That's for perhaps grandma's medicine.
These are real issues, and whatwe try to do is be aware of them.
(10:09):
One of the founders here is Nick Readerand, uh, that, that, you know, and I'll
call him out in a positive way, whichI, I mean, he's a hero, but there are
things that where people have, and Ifound out through other people, I don't
find out through Nick, but he's goneand found that somebody was homeless.
(10:31):
And got them an apartment and thenhad it furnished or was getting moved
out of their house and have kidsand done the same thing because they
can't sign a lease because they don'thave, uh, any kind of guarantee.
So he's done that for a lot of peoplehere and, and he and Bob did a very
nice job setting the standard whereNick goes in, uh, to restaurants
(10:53):
and he will know, like kids willbring their parents in to meet him.
That's the aura that, so I thinkit's, um, that it is, it's back
to your manager cares about you.
It's not the square footage of the office.
It's not that you've gota dollar more an hour.
It's my manager cares about me.
(11:14):
And that's the key point there.
And a caring manager bringsus products like yours and
says, Hey, this would help us.
Tal Clark (11:23):
That's huge and that's, uh, insight.
And that also, uh, would, would lendcritical importance to making sure
you're hiring the right managers, whichit sounds like you guys are as well.
So, um.
Yeah.
Good stuff.
Good stuff.
Let me ask you this and we'llkinda shift back a little bit
to some of your background.
You have, you know, you spenttime working with distressed
(11:45):
restaurant brands in your history.
Uh, what are, what are some ofthe common themes that you see
as you go into that environmentthat you might could share with?
Current restaurant operators or futurerestaurant operators that might help
them avoid getting in those situations?
What is it that, that, that yousort of see as, are there any
(12:06):
common challenges typically whenyou, when you see that distress?
Kep Sweeney (12:10):
Well, there are a a and that, that there's, and, and, and it,
it's true whether it's restaurants,manufacturing, uh, you know, all
the industries that there are thesecommon themes and in restaurants.
There's only three waysto change the outcome.
It's either corporate governance,capital structure, or operations.
(12:30):
And we all think in terms of operations,that in general it's capital structure.
So it would be naive to say, well, theywent out and overlevered the company.
It's generally not that.
It has to do with the rollout.
And you see this over and over andover again, the expansion part.
And a lot of people we're that, that are
(12:53):
are, are pushed for growth maybebefore they're ready for growth?
Do they have all of theinfrastructure necessary?
How's their supply chain, uh,that needs to be examined?
How do you hire people?
How do you keep getting these managers?
Everybody wants to be In-N-Out Burger,but In-N-Out Burger will only open
a restaurant when they determinethey have a killer general manager.
(13:18):
Now it's time.
Tal Clark (13:19):
Okay.
Kep Sweeney (13:19):
They're not pushed by Wall Street for growth.
They don't have PE behind them sayingthat you have to build X units next year.
And the CEO knows that.
The CEO knows that's the onlyway they're keeping their job
is if they get these open.
So you might make bad decisions.
So you see that it's generallyin restaurants around growth in
(13:40):
manufacturing, it's very often arounda a, a failed software install.
And you can go and I go to a, aboard, a whiteboard, and I put up
on the whiteboard, uh, a timeline.
And then I've counted back ayear with the board of directors,
and I've circled that date.
And I said, what happened here?
Well, that has nothing todo with why you're here.
What happened here?
(14:01):
Oh, we installed, uh, an ERP.
How did that go?
Poorly.
You know, so that's why I'm.
So it's like, it's just you, you seethose consistencies, but it's generally
in the capital structure where you'reoverlevered and you're, you're kind of
struggling and having to make decisions,but it's not that you got over levered,
(14:24):
it's that you had to close units.
The, the investment, the debt,and the equity didn't go away.
They're still.
On the balance sheet, you just have lessunits to be able to support that cash.
Tal Clark (14:39):
Yeah.
Okay.
That's interesting.
And I think that's, that's veryvaluable insight for anybody that
has an opportunity to listen to this.
So let's talk about, I mean, everywhereyou go, uh, you and I met at Prosper
Forum, this year and, uh, therewas quite a few sessions around AI
and the use of AI for inventory ororder taking or, reservation taking,
(15:03):
you know, all all types of things.
Talk about, I guess, what you'veseen in regards to AI solutions in
the restaurant envir environment.
Um.
Which of those are trulymaybe ready for prime time?
And then maybe a little bit aboutwhat you guys are thinking or, or
might be using now or in the future.
Kep Sweeney (15:23):
Uh, right now we're finding that in corporate.
It is a more valuable tool than at theunit and that we're like, like I do
think, and we don't have, um, like aspeaker box and a speaker box, AI driven.
They're probably getting there.
And the difference between January,2025 to March, 2025 is phenomenal: what
(15:47):
happened in AI, the difference betweenMarch 25, 25 to June, phenomenal.
I can do things today thatI couldn't do in June.
So it's, it, it, it's actually, we'regetting pretty close to being able to
have our financial forecast done, butthrough prompts and anybody that wants
(16:09):
to kind of get ready for the future,learn how to prompt, um, that, that's,
that's the most important skill I think.
I, I have two kids that have one yearnow outta college in the workforce.
And, um, I, I, they don't like hearing it.
They think it's boring for me tosay, but that they, but I think
(16:31):
prompting and knowing how to do thatis really important, but I think
that they, I'm not seeing it for us.
Um, I don't have any interestin having, um, our hand breaded
tenders done, uh, mechanically.
You know, through AI.
I do think that from predictive,uh, sales, I think that
(16:53):
that's really important.
So how do we, how do we makesure that our inventory is, is
close to spot on as possible?
And I think from a labor scheduling,AI has become very effective for us.
Tal Clark (17:07):
Okay.
And what are you using there?
What?
What tools are you using in laborscheduling that work for you?
Kep Sweeney (17:12):
Well for us, you know, that we, we have, in the back hot
schedules, but everything that's beingbuilt for us right now, we do internally
using one of three or four AI agents.
Tal Clark (17:27):
Okay.
Okay.
Well that's good.
That's really interesting.
Um,
Kep Sweeney (17:31):
You can build most of this yourself.
You can build apps, you canbuild most of this yourself.
I, I set a goal in January.
Well, a little before January, 2025.
Really got started in January tobecome, you know, a quasi expert
in AI for the restaurant industry.
(17:52):
Now, keep in mind, that's likesaying I'm the best surfer in Omaha.
It's
Tal Clark (17:56):
You're good.
Kep Sweeney (17:56):
I'm not set in a high bar, right?
It's like there are other industriesthat are far, far ahead of us, but
I think that, that I've, I've been.
I take classes at night andI'm just shocked at how what
I can build on my phone.
I'm shocked at this morningover coffee watching CNBC,
(18:19):
I'm able to write a contract.
They'd got me 80% there and at some pointI'm gonna print it today, review it.
I think I'm gonna have two or threetweaks and I'm gonna send it off.
Tal Clark (18:34):
That's amazing.
So, so gimme a little more detail.
What, what tools are you usingspecifically for your use?
Kep Sweeney (18:40):
I like Claude.
I like, uh, Manus a lot.
I think Manus has the best reasoningcapability of any of the, the AI apps.
And, we have, subscriptions to these.
And, um, I, there, there, there area couple people here that prefer
for certain things, Grok and Gemini.
Tal Clark (19:00):
Okay.
Kep Sweeney (19:01):
But we could do real estate analysis.
I can plug in the location and I couldplug in demographic data that we have
per location, and I could plug inour sales and of every location and.
By, you know, some of these will takea little longer, but, but from a, uh,
statistical, um, analysis perspective,I can get really good information on why
(19:25):
this location is working, what's the daypop, what's the night pop, those types
of things, versus another location.
Because they look tothe naked eye identical.
And I think those, that type of analysisused to be very, very expensive.
And we can do all of that internally now.
Tal Clark (19:44):
That's really, uh, good knowledge to share and we certainly
are looking at it, looking for waysto use it, continuing to use it
and build it within our business.
And, uh, certainly good to hear that youguys, sounds like you're ahead of the
curve and in many ways, so well look.
Finally, you've had such, such a diversecareer, Kep, chef, analyst, consultant,
(20:07):
uh, CEO, uh, if you had to give onepiece of advice to the next generation
of restaurant leaders, you've given quitea bit on this podcast already, but, uh,
if you had to give one piece of finaladvice before we depart, what would it be?
Kep Sweeney (20:22):
I, I think that range would be the bit of advice, and
it's, it's, let's say that you'rea 25-year-old in the industry.
Give yourself to the next 10 years,give yourself the next 10 years to
35 and learn as much as you can.
And it doesn't have to beabout the restaurant industry.
My dad used to talk about before I wentto MBA school that the best training for
(20:44):
MBA school is reading Shakespeare becauseyou have to be able to peel that onion.
You have to have to be ableto understand the, the essence
of what they're talking about.
So whether you, one, one of thebest things that I did was I,
I hired a professor, um, fromNYU and we wrote a screenplay.
(21:04):
And I spent two yearswriting that screenplay.
And I mean, I hired actors and he'dfly out and we would do a rehearsal
so I could hear it and I could, I seewhat parts were working, what parts
weren't working, but you really had tounderstand the essence of each character.
Well, each, I worked with a lotof characters here and I have to
(21:24):
understand what makes everybody tick.
So don't, don't pride yourself oncooking that same steak for two
years in a row, do something elseand then it will all come together.
One of the other things thatwe did here, and I'm very proud
of, I do this everywhere, isI start an education program.
(21:46):
And I've never been trained by the wayin my life, but I have been educated.
So I'm trying to bring thatto everybody that I work with.
And so I put together a reading listthat includes Good to Great Annie
Duke's Thinking and Bets, et cetera.
I put together a speakers program thathas, uh, uh, Bob Nardelli and Joe Essa
and I, um, uh, we watch masterclass.
(22:09):
Different, Schultz's Masterclassand a couple of the others.
So I want people to start thinking.
And then suddenly I have unit levelmanagers, um, talking about, yeah, but
Kep when you're doing the analysis,uh, you've completely forgotten about
the supplier power in Porter's model.
(22:29):
And I'm, oh, okay.
You're right.
You know, and they're using my wordsagainst me, which is, is hurtful in
the beginning, but it's, um, but I'msaying that they're just, they're,
they, they, when you educate people,it, you'd be amazed at what can happen.
Tal Clark (22:48):
Well, that's, uh, that shows you're being successful though.
If they start using your words againstyou, it means your program's working.
So, absolutely.
I think that's great adviceand it's been great speaking.
Uh, thank you for joining uson Instant Payments Podcast.
Your perspective bridging finance,operations, and culinary makes
your rare voice in the restaurantindustry and such a valuable guest.
(23:11):
To our listeners, you can learnmore about Kep's work at eatpdq.com
and follow along with the new podcastepisodes at instant.co/podcast
Be sure to subscribe and leave areview wherever you get your podcast.
Kep.
Thank you again, and thanks toall of our listeners for tuning in
to the Instant Payments podcast.
Kep Sweeney (23:30):
Ah, thank you.
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