Pod Insights How I Built This with Guy Raz Advice Line with Scott and Ally Svenson of MOD Pizza About this episode MOD Pizza founders Scott and Ally Svenson join Guy on the Advice Line, where they answer questions from three founders about strategic expansion, plus discuss MOD’s recent acquisition.
Today we meet Evan, who recently turned his Richmond-based pizza restaurant into a vegan frozen pizza company. Then Zebbie, a restaurateur in Birmingham who's looking to take his hot chicken concept on the road. And Christiane, a Los Angeles area tequila-maker on a mission to improve her industry’s labor conditions.
Thanks to the founders of Udderless Plant-based Pizza, Eugene’s Hot Chicken and Valor Bebidas for being a part of our show.
If you’d like to be featured on a future Advice Line episode, leave us a one-minute message that tells us about your business and a specific question you’d like answered. Send a voice memo to [email protected] or call 1-800-433-1298.
And be sure to listen to MOD Pizza’s founding story https://art19.com/shows/831bd173-0992-41b7-b1eb-112db904d947/episodes/a66736fd-b95e-4289-9e0a-4e08b9f0cdb7/embed as told by Scott and Ally on the show in 2023.
This episode was produced by Katherine Sypher with music by Ramtin Arablouei. It was edited by John Isabella. Our audio engineer was Cena Loffredo.
You can follow HIBT on X https://x.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis/ and sign up for Guy's free newsletter at guyraz.com http://guyraz.com.
See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.
Transcript 10,030 words · 7 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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5:13 Guy Raz? Hello and welcome to The Advice Line on How I Built This Lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show, who will attempt with me to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Send us a one-minute message that tells us about your business and the issues or questions that you'd like help with. You can also send us a voice memo at [email protected] . And make sure to tell us how to reach you. And also, don't forget to sign up for my newsletter.
5:57 Guy Raz? It's full of insights and ideas from the world's greatest entrepreneurs. You can sign up for free at guyraz.com. And we'll put all this info in the podcast description. All right, let's get to it. Joining me this week are Scott and Ali Svenson. They are the co-founders of the fast casual pizza chain, Mod Pizza. Scott, Ali, welcome back to the show. Guy, great to see you.
6:20 Speaker 01 Great to see you, Guy.
6:21 Guy Raz? Thanks for having us. Great to have you back. So both of you were on the show in the summer of 2023. You told the story of how you created Mod Pizza. And if you haven't heard, Scott and Ali Were high school sweethearts. After college, they moved to London. Scott worked in finance, but then he got bored with it and they decided to start a coffee shop in London, which turned into a massive business called Seattle Coffee Company, which they sold to Starbucks and then eventually came back to Seattle where they're from and started Mod Pizza, which today has around 500 stores. It's such an awesome story. I loved having you guys on. We have lots to talk about, of course, especially a bit of news around Mod. I know that recently it was announced that Mod Pizza was acquired by the Elite Restaurant Group. It's an investment group.
7:05 Guy Raz? I guess to help avoid a potential bankruptcy, and I'm curious, you know, because Mod is such a great business and was operating as such a great business. What, what happened? Was it inflation? Was it the cost of goods? Was it too rapid of an expansion that created some of the challenges?
7:21 Speaker 02 Yeah, Guy, it's a great, it's a great question. And I think to summarize, we had, it was a 16 year journey for us. And the first 12 or 13 of those was incredibly exciting, growth-filled expansion across the US. We were built as an experience to have on premise. And we, we entered the pizza industry, did pizza a different way. And then when the pandemic hit, it really forced us to change how the business operated. And it also dramatically impacted our growth strategy. We had been expanding across the country very rapidly
8:01 Guy Raz? Fast.
8:02 Speaker 02 To be a first mover. And then we pivoted very intentionally in about 2018 from first mover into market infill. And so we started to fill in all the markets that we were in, raised a bunch of capital in 2019 to execute that phase of our strategy. And then in 2020, that basically came to a halt while we moved to surviving the pandemic.
8:26 Guy Raz? Yeah.
8:26 Speaker 02 And as we came out of the pandemic, we, we made several attempts to get back into growth mode, to fill those markets in and to finish the strategic plan that we had had. And there was just a number of challenges that came out of it, whether or not it was staffing crisis or supply chain issues or inflation.
8:43 Guy Raz? Yeah.
8:43 Speaker 02 It was a combination of those things as we were trying to come out. And then ultimately, The inflationary spike that led to a lot of price change in the industry last, over the last few years, started to manifest in terms of consumers eating out less or having less occasions, less restaurant visits.
9:02 Guy Raz? Yeah.
9:03 Speaker 02 And then we got into a dynamic where we needed to raise capital, which we knew we were going to. It just accelerated it and put us into a position of, of either needing to raise capital or sell the company, and we ended up selling.
9:14 Guy Raz? And the good news is, Mod Pizza will survive and thrive. You've got all these locations around the country, and so Scott, you're no longer the CEO, but will you stay as advisors for a short period of time?
9:27 Speaker 02 We are, we're still connected with the company. I think that's a, a story that's yet to be told in terms of exactly what role we play or how we might be able to help. Things have changed quite substantially and will continue to change. You know, I'm sure Elite has a, a vision for where they're going to take it. It's a concept that people love. It's an experience that people love, but the future will no doubt be different than the past.
9:50 Guy Raz? Well, Scott and Ally, the two of you have scaled two chain businesses, one in coffee, one in pizza. We've got callers today who I know have lots of questions about, you know, things like expansion and, and building brands. So a lot of questions, I'm sure we'll have a lot of, hopefully good advice for them. Let's, let's take our first caller.
10:09 Speaker 01 Good, great.
10:10 Guy Raz? All right. Hello, hello caller. Please introduce yourself. Tell us your name, where you're calling from, and just a little bit about your business briefly.
10:18 Speaker 03 God, Raz, Ally, Scott, I'm so happy to be here. My name's Evan Byrne from Udderless Plant-Based Pizza.
10:24 Speaker 01 Hi, Evan.
10:25 Speaker 02 Hey, Evan.
10:25 Speaker 03 We're located in Richmond, Virginia, and we're making the world's best bake at home vegan pizza.
10:31 Guy Raz? I love it. Okay, cool. So, so tell us a little bit about how you got into the vegan pizza business.
10:37 Speaker 03 Well, we've had a restaurant up until recently, so I can certainly identify with a lot of the challenges that, that Scott and Ally have faced.
10:45 Guy Raz? This was a pizza restaurant?
10:46 Speaker 03 Pizza restaurant, yep.
10:47 Guy Raz? Okay. In Richmond?
10:48 Speaker 03 In Richmond. Had it for about six years. We actually just closed on the sale last week, so.
10:55 Guy Raz? Congrats.
10:56 Speaker 03 Thank you. So this is. A pivot, we noticed that we had a huge vegan clientele. We actually geared it, you know, in the beginning, we wanted to have something to be inclusive and have something for everybody. Richmond has a huge vegan community. So we started offering vegan options and we brought on someone who was making a local vegan cheese and they were on our menu and then every time, they were not the most reliable vendor and every time we would be out of the vegan cheese, we would notice a dip in our sales. So it was really just, really just self-preservation. I started kind of reverse engineering it and sort of came up with my own version of it and there's a lot of tinkering around in the kitchen. We came up with something we were
11:41 Speaker 03 happy with and it just kind of took off and we've just found that it's a much easier business and seems like it's got much more legs than the restaurant.
11:50 Guy Raz? Cool. And are you in grocery stores right now, at least local stores?
11:55 Speaker 03 We're in about 15 stores locally. So there's some mid-size health food stores. Richmond has a big market community, so we're in tons of different markets around here. And then we just recently got some regional distribution in the southeast.
12:09 Guy Raz? Nice.
12:10 Speaker 01 Congratulations.
12:11 Speaker 03 Thank you.
12:11 Guy Raz? And they're frozen. They come frozen?
12:13 Speaker 03 They come frozen, that's right. So it's a cashew-based cheese. All the, we make the dough by hand. It's naturally leavened, fermented for 24 hours. We use fresh produce. And then we par-bake the dough, freeze it, put the sauce on it, shred the cheese on it, top it, and then, and then freeze it again and repackage it.
12:33 Guy Raz? I love the name Udderless.
12:34 Speaker 03 Yeah.
12:35 Guy Raz? Yeah. Evan, what's, what's your question for us today?
12:38 Speaker 03 So I think our, my question is, you know, we're Richmond famous. People love our pizza around here, but how do we expand our, our footprint beyond our local market with limited resources? You know, I mean, AKA money, essentially. Like, how do we, how do we get our pizza in the hands of, of people outside of our local market? Because generally, once they try it, they love it.
13:01 Guy Raz? All right. Scott, Ally, maybe answers to, to Evan's questions or maybe some questions for Evan before we tackle this question?
13:09 Speaker 01 We're big fans of a grassroots, scrappy approach to things.
13:12 Speaker 03 Oh, yeah.
13:12 Speaker 01 Yeah. So this is, you're, you're, you're doing it the right way, I think.
13:16 Speaker 02 Yeah. And congrats on, you know, building a restaurant and then pivoting into this. I love that entrepreneurial. You know, ability to see the opportunity and to pivot. I'm curious with the way you've been distributing the product to date. It sounds like you just got some, a slightly bigger distribution opportunity. Maybe you could share a little bit more about that.
13:35 Speaker 03 Yeah, it's in the southeast. So it's a smaller regional distribution company called P10 who we love. And you know, this is, distribution from what I've learned is kind of chicken or the egg. Right. You can't get distribution without these key accounts, but you can't get key accounts without distribution. So we feel really fortunate that, you know, they actually approached us. They heard of us and they added us to their, you know, sort of repertoire. And then also it's hard to find frozen distribution. You know, many times I have cranked down the AC in my car and driven as fast as I can to deliver some frozen pizzas.
14:12 Speaker 01 Entrepreneurial journey.
14:14 Speaker 03 Right, yeah. It's tough in the summertime.
14:16 Speaker 02 Whatever it takes.
14:17 Speaker 03 But anyway, you know, they've been great so far. You know, we are part of a catalog of other products that they offer, right? So how do we stand out, you know, among those, you know, is it going in person to do events? To get the, you know, the pizza in the hands of people, you know? How do we transfer the sort of buzz that we've generated in Richmond to these other places? And get them to, you know, sort of dive in. It's, you know, it's hard to get your name out, so.
14:47 Speaker 02 Yeah. Do you do direct to consumer?
14:49 Speaker 03 No, we don't.
14:49 Speaker 02 Do you do any mail order or online or, or subscription or otherwise?
14:54 Speaker 03 I think the turn off for us with that was, has just been that it's a frozen product. So the shipping cost is astronomical.
15:01 Speaker 02 Yeah.
15:02 Speaker 01 I noticed that you, you promote the fact that your vegan meat topping Beehive, a product I hadn't heard of. But boy, when I started to go down that rabbit hole, they are a real thing. And they have lots and lots of like 22 and a half thousand followers on their Instagram, I think. And they promote a lot of pizza and a lot of product using cheese like yours. Have you discussed with them, having them help promote and bring you into their venues where they are?
15:33 Speaker 03 Yeah, absolutely. I think that that's definitely in the cards. We've been kind of going through a lot of change, you know, the past couple of weeks with the restaurant sale and everything. But that was kind of the thought process when we got into business with them was like we'll do some co-branding.
15:47 Speaker 01 Good.
15:47 Speaker 03 It'll be beneficial, it'll be beneficial for both of us. They're a really well-known company and their vegan proteins are great.
15:53 Speaker 01 And if they endorse your product, I mean, that's, that's gold.
15:56 Speaker 03 Mm-hmm.
15:57 Speaker 01 And it looks like Beehive is based, I think, in Nashville.
15:59 Speaker 03 Right, they're Nashville.
16:00 Speaker 01 Again, depending on how deep you can build out that partnership, that would, there's a logic to possibly, you know, create some presence there with them. And some of these publications, when you just do a random search on the best vegan frozen pizza in the country, you know, these publications, Veg Out, Veg News, they are,
16:18 Speaker 03 Oh, yeah.
16:19 Speaker 01 they are intensely focused on exactly this and they list a lot of pizza brands that aren't yours. And I would use that as an opportunity. I would contact those reporters and say, I see that you listed these 12 brands as the best vegan pizza. I'm sending to your office this week one to try because you need to add a new one to your list. I mean, those are reporters that are already studying this stuff.
16:41 Speaker 03 Yes. Yeah, that's great. We had, we did have an article in Veg News.
16:44 Speaker 01 Good.
16:45 Speaker 03 Just, just by chance. So, yeah, that's definitely somebody we should reach out to.
16:50 Speaker 02 One of the things we found in our experience with Maud is that the vegan community was strong and outspoken. And while maybe small as a percentage of our overall customer base, they were very influential. And, you know, a lot of people, when they're talking about building a young, emerging brand like yours, they talk about connecting with that core. Customer, that that community that you can build, man, that that vegan community is a is a prime one for you to tap into and and it does come down to all the things you've talked about, the quality of the product, how differentiated it is. And for your, you know, getting out and as you explore moving into new markets.
17:32 Speaker 02 And my strong advice is you've got, it sounds like, a very strong following in your home market of Richmond. I would take advantage of that and make sure that you're kind of leveraging it and moving almost in concentric circles. What's that next market where you can take advantage of the strong following and then move into that next market? Growth is seductive and it's exciting, but man, it's better to do it the right way, be slow and deliberate about it as opposed to be measured. Quality growth over growth is a really important differentiator, particularly for someone like you. It sounds like this is your business. You own it. You have to fund the growth. You have to manage it. And and therefore, just being really thoughtful about how you step through those next few chapters.
18:16 Guy Raz? I wonder if, you know, you're in Richmond, right? And and let's be frank, Richmond is a small market, right? But but you're you're three hours from one of the biggest metro areas and one of the most influential metro areas in the US, right? Washington DC, home of Kava, Sweetgreen. I mean, so many brands have really started and scaled out of that city. And it's and it's really been a test market for a lot of these small startups to to grow and to become national brands. And I wonder whether there's a world where you go there and you go to to farmers markets there and you have a mobile pizza truck and you're making these there, you know, the DuPont Circle Farmers Market. It's influential. You just get more attention than you would in Richmond.
18:55 Speaker 01 Sampling, sampling, sampling.
18:57 Speaker 03 Yeah, I think that's I think that's a great piece of advice. I mean, we haven't really explored the Washington DC market yet. It's a little daunting, but that's definitely something to consider.
19:06 Speaker 01 Yeah.
19:06 Speaker 02 I agree with Guy. Thinking about how what's the bridge from Richmond to the the greater DC metro? And how do you kind of build up to that? And and who are those key influencers? Who are those key retailers? And it feels like, you know, that idea that Ally mentioned of what's the way to get the product in people's hands and into their mouth? Investing in a mobile, you know, a food truck that you can actually take the product would be super cool.
19:33 Speaker 03 Sure.
19:35 Speaker 03 I think, you know, I haven't really explored DC and then mom's organic market is around that area. So that's something that, you know, I could see, you know, being having some legs where I can maybe get somebody's ear there. So that seems like a great, a really great piece of advice.
19:49 Speaker 02 And Evan, in the retailers that you're currently in, do you do tasting events? Do you get into the store?
19:55 Speaker 03 We do.
19:56 Speaker 02 Yeah.
19:56 Speaker 03 We do.
19:57 Speaker 02 Because I would really, really focus on making sure that the retailers that are currently supporting you are being really successful with your product and that you're nurturing those relationships. Taking that data then on the sell-through in those stores to the next retailer, because that's when you eventually have that meeting with Whole Foods. If you have all of that data and that experience about how, once you get the product on the shelf and in consumers' hands and in their mouth, how they respond to it. That's what, that's the data I think that they're going to respond to and that that might be the breakthrough that gives you the opportunity to get into that one store and then eventually more. But making sure that those retailers that you're in, it's so easy, again, this gets back to the conundrum of growth. Once you focus on growth, then your time and effort and energy
20:42 Speaker 02 ends up being focused there as opposed to in your core business. And man, making sure that-
20:48 Speaker 03 That's always a struggle.
20:49 Speaker 01 That's attention.
20:50 Speaker 02 In a small business like yours, where it's really you getting pulled, making sure that you're not neglecting those current retailers and making sure that they love you and that they, they're big advocates because that's what's going to feed the reputation and the demand then for the product going forward. The most powerful marketing you have is getting your product into people's mouths.
21:12 Speaker 03 Gorilla pizza drops.
21:13 Speaker 02 Yes, exactly.
21:14 Speaker 01 That's right.
21:16 Guy Raz? Awesome. The brand is called Udderless. Evan Byrne, congrats on launching this. Good luck, man.
21:21 Speaker 03 Thanks so much, y'all. I appreciate it.
21:23 Speaker 01 Nice to meet you.
21:23 Speaker 02 Nice to meet you.
21:24 Speaker 01 Good luck, Evan.
21:24 Speaker 03 Thanks.
21:25 Guy Raz? Fun. I just, I'm not eating pizzas very often now because I'm on this annoying diet, but I do love it, as you guys do.
21:33 Speaker 02 Oh, for sure.
21:34 Guy Raz? You love pizzas, but you can't eat it every day.
21:36 Speaker 01 That's right.
21:37 Guy Raz? It's going, you're right. We just, although, maybe I shouldn't say that because we want pizza, people to eat mod pizza every day.
21:43 Speaker 01 Sure.
21:44 Speaker 02 Yeah, no, I mean, and he's right on it. I mean, health, lifestyle, diet, those are such powerful trends. And if he can develop a really craveable product that caters to that very strong and vocal community, man, that's a, that's an exciting place to be.
21:58 Guy Raz? How did, how did you guys do with vegan pizzas? Because you presumably, did you have a vegan cheese option or was it just like cheeseless?
22:04 Speaker 02 Yeah.
22:05 Guy Raz? You did?
22:05 Speaker 02 We had a gluten free and a cauliflower crust option. And then we had vegan cheese. So we had a lot of strong customer following from people that had dietary restrictions or preferences.
22:15 Speaker 01 And by the way, that all happened very organically. We did not market that. We did not push that. So it was wonderfully surprising for us.
22:21 Guy Raz? People wanted that.
22:22 Speaker 01 Right. And once they discovered it and made mod a solution for their vegan needs, they were big promoters of it to their community. And that's why I think in, in talking with Evan and really getting, you know, making sure that he is very close to and building that relationship with the, with that community is just key.
22:40 Guy Raz? Okay. Next up after the break, another caller with another business challenge. I'm Guy Raz and we're answering your questions right here on the advice line on how I built this lab.
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26:32 Guy Raz? Welcome back to The Advice Line on How I Built This Lab. I'm Guy Raz, and my guests today are Scott and Ally Svenson, founders of Mod Pizza. Scott, Ally, let's say we take another caller. Hello, caller. Welcome to the show.
26:46 Speaker 04 Hello. How are you doing today?
26:47 Guy Raz? Hello. Please introduce yourself. Tell us where you're calling from and just a little bit about your business.
26:54 Speaker 04 I'm Zebby Carney. I'm the owner of Eugene's Hot Chicken. I'm calling from Birmingham, Alabama. Hey, Zebby. We are a hot chicken restaurant, catering company, and food truck. We started in 2015. We got two restaurants and three food trucks, and we got two sauces in a couple of local stores here in Birmingham, Alabama. And we're looking to expand.
27:17 Guy Raz? So, Zebby, tell us how you got into the restaurant business and how you came up with this idea.
27:22 Speaker 04 Yeah, so I'm originally from Nashville, the home of hot chicken. I've been in restaurants since I was 16. 27 years I've been in restaurants. I kind of worked my way up through restaurants. I went back to school to get my bachelor's in business. Yeah, there was no hot chicken in Birmingham, and it's such an incredible food town. And I was kind of tired of corporate America, and I was just looking to do something else. I always wanted my own little restaurant. And I was just trying to add value to the great food scene here in Birmingham. And you know, I was like, hot chicken was perfect. So I started doing pop ups. They became successful. And then I purchased a food truck and we just kind of grew from there. And it's all been organic growth, you know, we went, you know, we kind of outgrew our commissary kitchen.
28:06 Speaker 04 We was working in. So then we opened up a restaurant and the restaurant just kind of took off from there.
28:11 Guy Raz? Wow, nice.
28:12 Speaker 04 Cool.
28:13 Guy Raz? Uh, Zebby, tell me about the name Eugene's. Who's Eugene?
28:16 Speaker 04 Oh, so Eugene's my father's middle name, you know, he passed when I was 17 years old. And just a way to honor him, I named the whole company after him. Bless you, jeans had that old school southern name to it that I wouldn't get with Zebby.
28:27 Guy Raz? Are the, are these his recipes by any chance?
28:29 Speaker 04 No, they all my recipes. I created them in our apartment.
28:32 Guy Raz? Wow, amazing. I'm, I'm looking at your menu. It looks delicious. I can't wait to dive into, to a little bit about your, your process. Tell me about, uh, your question. What's, what question do you have for us today?
28:41 Speaker 04 Yeah. So, you know, all of our growth has kind of been organic growth. Um, but you know, we's looking to grow more as more brands come about. How do you handle, um, fast growth and how do you scale? Like, just a few thoughts on that.
28:55 Guy Raz? Got it. Okay. We'll get to your question in a moment, but before that, uh, Scott, Ellie, any questions for, for Zebby?
29:01 Speaker 02 Yeah. And, and congrats. It sounds like you've had a lot of success and man, you are in a really good space. If you were to look across the restaurant industry over the last five years, and I'm sure you know this, being in chicken and chicken sandwiches, there's no better place to be.
29:14 Guy Raz? Massive.
29:14 Speaker 02 You, you just can't get enough of it. You've seen all of the, what's happened with, you know, the different brands who brought in chicken sandwiches. And it just seems like the, you know, as long as we don't run out of chicken, we're going to be, uh, you, you'll be in good shape.
29:27 Speaker 04 We just added a vegan chicken sandwich to the menu as well.
29:30 Guy Raz? Wow, there you go. Um, so I take it that you've financed all of this and, and this is all company owned, uh, today?
29:38 Speaker 04 Yeah, I have. And you know, that's one issue with, with growing, you know, like,
29:43 Speaker 02 Yeah, for sure.
29:44 Speaker 04 I don't want to stretch this out too thin.
29:45 Speaker 02 Yeah. Well, congrats. I mean, that's, it's commendable that you've done it all on, off, off the back of, you know, your own hard work and, and incrementally grown it. Um, and right now you are just in, um, Birmingham. That's right. Uh, the three, the two stores and the three food trucks.
30:00 Speaker 04 That's correct.
30:01 Speaker 02 Yeah, and so I take it that there is a desire to want to take this great menu, this great brand you have and grow it.
30:07 Speaker 04 Yeah, so we bought a new food truck this year, which we called a travel truck. And we've just been traveling different markets. We just got back from Nashville.
30:15 Speaker 02 Oh.
30:15 Speaker 04 For four days on Sunday, because if you're gonna do hot chicken, you gotta do it in Nashville. Plus, it's a bigger market and, you know, I feel like we can scale quicker if we get to Nashville. So we've been taking our food truck there. Great way to test it, too. Yeah, and it's been great.
30:29 Speaker 02 So, Zebby, it's funny, you're smart, you're smart, because my first piece of advice was, if you're gonna test new markets, you've got a food truck, it's mobile, it's a low-cost way of getting the product in people's hands and seeing how they respond. And it sounds like you've done that. So you've done it in Nashville, have you done it anywhere else?
30:46 Speaker 04 We've been to Atlanta, oh, we've been to Nashville a couple of times.
30:51 Speaker 02 Yep.
30:51 Speaker 04 We've got a hot chicken, not a hot chicken, a fried chicken festival coming up in New Orleans in October. So I'm pretty excited about that one.
30:58 Speaker 02 And the response from customers in Nashville and Atlanta was positive?
31:02 Speaker 04 It was real positive. You know, people tell them it's great, but it's a little bit different. So that's awesome, just to hear it, because we're not like anybody else, you know. That's a compliment. Yeah, that shows background, you know, and growing up with hot chicken, I want it, I don't want it just hot. I want to add more flavor to it, you know, and it's been, it's been great.
31:20 Speaker 02 What's the population in Birmingham?
31:22 Speaker 04 Ah, roughly, you know, if you add in the suburbs, it's 33 municipalities, I'd say around a million people.
31:29 Speaker 02 So the first thing that I would ask you to consider is, you know, in our industry, there's a, there's a formula that is the more penetrated you are in a market, the more well-known your brand, and generally, the brands that are more well-known perform better. So making sure that you really feel like you've, before you move into a new market, that you feel like you've really taken advantage of your home market. Yeah. And, and I don't know, I would tell you, in a market with a million people, I would be surprised, Zebby, if you couldn't have. 10 or 12 or maybe even 15 points of distribution, whether they're food trucks or stores. In Birmingham. And I'll tell you, it's exciting and it's seductive to go to that new market.
32:11 Speaker 02 But man, it does bring a whole series of challenges and complexities that at the right time are worth taking on. But man, before you've really maximized the opportunities in your home market, I would just strongly encourage you to do that first. And then with a really strong foundation, then think about, okay, how do we want to extend into a new market? And then there's all types of questions, Zebby, around how much risk do you want to take? Meaning, do you want to do it all company owned? Meaning, you're going to continue to finance it all? Or do you want to bring in partners? Do you want to franchise? And this is another challenge with growth. As soon as you start focusing on growth, particularly if it's in a new market, you got to travel, you got to hire people, you got to bring...
32:57 Speaker 02 Now you're not focused on your core business, you're focused on the growth because there's only so many hours in the day. And that's when people get into trouble because now, as opposed to focusing on how do I elevate and improve the quality of what I'm doing? How do I manage my costs so that I can keep my prices where they need to be? How can I take care of my team so they're delivering a great experience? You start focusing on the fact that, well, I had a general manager in Nashville and they left and I got to leave, I got to go to Nashville for two weeks and I got to stay in a hotel and that's going to cost me... And you just, you end up changing your priorities and your focus. And so, man, I think the more you can really own that, own your home is a mantra that a lot of people in the, in the industry talk about.
33:40 Speaker 02 Own your home, build a fortress because if you can become the loved local brand in Birmingham and if you end up having six, seven, eight, 10 locations, there's a loyalty that develops. You know, with those iconic local, we have many, we have several of them here in Seattle, which have been around for 50, 60, 70 years. And the value of the brand is almost more now than the value of the business. Then you can decide to do anything, you can go franchise it, you could grow into a new market, you're doing it from a really solid foundation, or you can just build it up, have a really easy business to run, and then eventually sell it as this iconic local Birmingham institution.
34:18 Speaker 01 Zebby, quick question on the, you mentioned that you have sauces that are, that are distributed in grocery stores. That's a huge deal. How did that come about?
34:25 Speaker 04 Yeah, during COVID, you know, we were just looking for another way to pivot and we, you know, we're a scratch restaurant. We're one of a few fast casual scratch restaurants. And, you know, people, they love that comeback sauce and they love their white sauce. And I was just figuring out what else could we do with it? And, you know, we end up bottling it and putting it in grocery stores.
34:41 Speaker 01 How do they sell?
34:43 Speaker 04 They're doing well. We're in a few local, Piggly Wiggly's, but that's another thing, trying to figure that out. You know, I'm really, I'm trying to get somebody else to kind of take care of that part of the business while I still focus on growth of the restaurants. And, but, you know, how do we handle that growth and that scaling? You know, what key performance indicators do you look for to measure success?
35:05 Speaker 02 Yeah, Zebby, it's a, it's a great question. I mean, I'll give you a few, which are pretty typical in our industry. The first is average unit volumes. Everyone wants to know, what are your AUVs? Secondly, is your store level contribution? How profitable is the store? And that's going to be obviously a byproduct of where your cost to get sold, where's your labor and all, and your occupancy costs and then other operating expenses. And people want to see that, a couple of things, that your revenue is at least two times your cost to build and open a store, your capital cost, and ideally closer to three, but at least two times. So if it costs you half a million dollars to open a store, they want to see it at least a million to a million and a half in revenue. And then a 20% store level contribution,
35:51 Speaker 02 store EBITDA, store profit, is, is, is a really important marker. Sometimes people are in the high teens, best in class brands, Chipotle and Cava and, and others are in the mid twenties. So being at that 20% level or higher is really important. And then frankly, the other key metrics that you've got to keep track of are how your customer's feeling about you, all of those, you know, the customer feedback, how's your, your team feeling about you? Because you know turnover is expensive, both in terms of cost, hire people, train them, as well as just the experience they deliver. So I'd say those are probably the most important metrics to track.
36:29 Guy Raz? Yeah.
36:30 Speaker 04 Thank you.
36:30 Guy Raz? Zebby Carney of Eugene's Hot Chicken in Birmingham. Thanks so much for calling in. Good luck.
36:36 Speaker 04 Thank y'all so much for having me.
36:37 Speaker 02 Yeah, congratulations.
36:38 Guy Raz? Great having you. Yeah.
36:39 Speaker 02 It's exciting.
36:39 Speaker 01 Take good care.
36:40 Speaker 02 Good luck.
36:42 Guy Raz? I just, I love a fried chicken sandwich, I gotta say.
36:45 Speaker 02 He's in the right spot. Yes. He's been doing it for a long time, so he clearly, he knows what he's doing. He's clearly developed a product that people love.
36:54 Guy Raz? Yeah, and you just see in the last, as you mentioned, the last several years, you know, Raising Canes and
36:59 Speaker 02 Oh, man.
37:00 Guy Raz? Obviously, obviously Chick-fil-A.
37:03 Speaker 02 Yep.
37:04 Guy Raz? I mean, even the chicken sandwiches at Popeyes, I mean, they're, they've just, it's exploded. I mean, you see, and Dave's Hot Chicken, you see these other chains coming up. I mean, that, that category is just
37:14 Speaker 02 It's just exploded. Exactly.
37:18 Guy Raz? All right, we're gonna take another quick break, but we'll be right back with another caller. Stay with us. I'm Guy Raz and you're listening to the Advice Line, right here on How I Built This Lab.
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38:10 Guy Raz? Welcome back to the Advice Line on How I Built This Lab. I'm Guy Raz, and let's go ahead and take another call. Hello, welcome to the Advice Line. You are on with me and Ally and Scott. Hello, who's this?
38:23 Speaker 06 Hi, everybody, I'm Christiana. How are you?
38:26 Guy Raz? Hello, Christiana, welcome. Tell us where you're calling from and a little bit about your business.
38:31 Speaker 06 I'm calling from Los Angeles, California, and I'm the founder of Valor Bebidas. Valor is a tequila company that's committed to really creating a brighter future for the tequila industry through fair and sustainable practices, both for the people and the natural resources that bring this beautiful spirit to the world.
38:50 Guy Raz? Cool. How long have you, when did you start the business?
38:53 Speaker 06 We formed the corporation in May of 2022 and launched the product in July of 2023.
39:00 Guy Raz? And you're making it in the United States or in Mexico?
39:04 Speaker 06 Tequila is just like champagne. In order to be called tequila, it has to have Yeah, a designated region and 95% of tequila comes out of the state of Jalisco. And then there's a few other municipalities within the country of Mexico. But yes, we produce out of the town of Tequila in Jalisco, which is where the name Tequila came from is actually the town.
39:24 Guy Raz? Cool. Tell me a little bit about your background. Have you been in the spirits business for a long time?
39:29 Speaker 06 I've no, not at all. My background actually is in corporate responsibility and sustainability. I worked for the Walt Disney Company for seven years, leading our environmental and science education portfolio across the enterprise. And then I went to an environmental nonprofit in DC. And then in 2019, decided to start my own company called You Goodery, where we consult with major corporations like Amazon and Disney to help them be better corporate citizens. And then one of my mentors said, you know, Christiana, you spent your entire career helping companies try to do better. Maybe it's time for you to start your own company. So you can model what it looks like to create a responsible company from the very beginning.
40:12 Guy Raz? And how did you land on tequila? Which, by the way, is the only spirit I'm drinking now because it doesn't spike blood sugar.
40:17 Speaker 06 Yes.
40:18 Guy Raz? At least for me.
40:18 Speaker 06 Yes, I'm so excited to hear this.
40:20 Guy Raz? It really does. It's amazing. I just had some last night because all my friends were drinking whiskey and I can't drink it. Tell me how you decided to get into tequila?
40:27 Speaker 06 So I am the daughter of immigrant parents. And so I spent my time as a kid living between California, El Salvador, and Mexico. And tequila was my very first drink in fourth grade. My sisters
40:40 Guy Raz? Wow, in fourth grade?
40:41 Speaker 06 Yes. And my sisters get so mad at me for telling the story because they're 12 and 13 years older than I am. It was just a little sip of a margarita.
40:51 Speaker 06 Tequila has had a really special place in my heart since I was little, appropriately little, but you know, I grew up with a family, you know, that sort of always took care of people and being and growing up in developing countries like El Salvador, you know, you got to understand like the deep disparity in labor. And so tipping and taking care of people was always a really important ethos to our family. And I was in Mexico for a New Year's trip and learned a lot about tequila and the real inequitable practices in the industry. It's a multi-billion dollar industry. It's one of the most labor intensive industries in the world, but the money stays up here, the money stays in the UK and it doesn't go back to the people. So I came back and it's also really exploitative in
41:35 Speaker 06 terms of not the people, but also extractive for the environment. So came home and I said, you know what? Tequila, that is what I'm going to do. And I don't know, one door just kept opening and opening and opening and opening. It was kind of a natural thing.
41:47 Guy Raz? Amazing. And tell us, well, which question is?
41:51 Speaker 06 Yeah. So, Ally and Scott, I listened, I did a lot of research on you guys and I listened to your How I Built this episode. I was in tears like 19 times. I'm like, they put people first. They were able to do this. And, you know, because there have been so many times where I'm like, am I insane? Like, is this crazy to think that we can do this? And, you know, people are demanding more and more that companies be more responsible, but not quite yet at a higher price point. And so how do we get consumers to demand more of companies like ours and everybody? Because supply chains rarely begin here in the US, but we get to benefit from, you know, inequitable labor practices all around the world.
42:30 Guy Raz? Scott, Ally, you can answer the question or ask your own questions, please.
42:36 Speaker 01 First of all, congratulations. What you're doing is really exciting, cool, and it's so authentically, I just love that your mission and your purpose is just so fundamental to why you're doing what you're doing. So that's really great to hear. Is any other tequila brand in the world focused this way?
42:51 Speaker 06 No.
42:52 Speaker 01 Great. Okay, great. That was my question.
42:54 Speaker 02 Yeah. And I would just say, first of all, congratulations. I love the story. And I just popped onto your website. I think it's important to note. Dedicating 10% of sales is not trivial. I mean, that is a serious commitment.
43:10 Guy Raz? Serious.
43:10 Speaker 02 I would, I would suggest that you are taking the position of building a company in order to promote these, which is spectacular. Our journey with MaD was similar, different, but similar. And, you know, I think a lot of people try to wrap social impact and, and, you know, being a good corporate student or, and dedicate teeny little bits of resource and try to get the benefit. And it feels like you're doing exactly the opposite.
43:39 Guy Raz? Yeah.
43:39 Speaker 01 What's your price point?
43:40 Speaker 06 So our Blanco is 79.99 retail and our Reposado is 99.99 retail. Which, by the way, when we launched, it was 119 for the Blanco and 135 for the Reposado. But we just, we pigeonhole ourselves by doing that. So we took a big plunge and we're actually getting ready to do another price drop. I'm sort of taking the Uber approach where, you know, we'll probably break even with this next price drop. But for us, like, velocity and just getting this product in front of people is really important. Because that's our biggest, that's our biggest roadblock is price.
44:11 Guy Raz? Hmm. Ali and Scott, I'm curious. I mean, and I, I'm going to play a little devil's advocate here for a moment because I think that the 10% is incredible. But I wonder whether, again, we talked about this with MaD, you know, whether consumers ultimately care about that to the point where they're going to choose that product, right? Because, I mean, there are, I think about the coffee industry and I know La Colombe and a lot of other coffee brands do a version of this where they really focus on sourcing and making sure that they're buying it from the farmers. I'm not convinced, based on my conversations on the show and around the country, that consumers care as much as we hope they will, right?
44:50 Guy Raz? And so I wonder whether there is a, that approach is, is really the way to, to sell the tequila.
44:58 Speaker 02 Yeah. So I would just offer that, first of all, Christiana, we totally applaud you because I do think, as you said, that consumers are starting to become more aware and are starting to appreciate good corporate citizens who are building businesses the right way.
45:17 Speaker 02 But I agree with Guy. I think you are in the vanguard. You are a pioneer. And I don't think consumers yet are necessarily voting with their pocketbooks the way they do with their conscience, the way that they might talk about it. Now, that's not to say that you can't be one of the pioneers that prize it open and finds a way. And Guy, you gave a few examples. The one I would offer is Tom's shoes. And so Tom's, that one for one model, and Ally could speak more articulately about this than I, but I do believe consumers at the time when they went in to buy that type of shoe,
45:51 Speaker 03 They cared, yeah.
45:52 Speaker 02 They cared enough to buy that product.
45:54 Speaker 03 Yes, yes.
45:55 Speaker 02 And I do think you have a similar opportunity. It all comes back, though, to the product. People have to love your product. And you're selling a premium product, so you're selling it to people who are maybe not quite as price-conscious or as price-sensitive as others. And I do think if you can find a way to communicate with them, educate them, and get into their conscience, that this is not a matter of you just having a token. You're giving 10% of sales.
46:23 Speaker 01 I think a key word is education because, gosh, ideally, you almost want to find some journalists or a publication. You need people to help do some sort of an expose and help educate us as consumers, our country, around this industry and the practices that either are good or bad. Because as soon as there's more discussion or education around it, then people will ask the question, "Well, who is doing it right? What are my options?" And if you can get people asking those questions, you're going to be the only one standing there saying, "I'm doing it." And so education, as much as you can help educate people, I think, would be huge.
47:03 Speaker 01 I might also suggest that you study Starbucks and what they did years and years ago when people started. Nobody knew anything. People knew they liked drinking Starbucks coffee, but nobody knew anything about ethical sourcing of coffee beans. Nobody was talking about that. And I think Starbucks did a phenomenal job years ago, starting to help us consumers racing in, getting our latte. And they started to seed bits of information and education in their locations that started to discuss this. And I think that can help get people made more aware of what really the issues are. That's where you've got to get it to the point where people are asking or curious. And, boy, you're then the person to have the conversation with.
47:45 Speaker 02 It feels like there's an opportunity as well. If, you know, this is a type of product and it's an industry in particular where influencers and people who have
47:55 Guy Raz? Ambassadors.
47:56 Speaker 02 I'm forgetting the name of the brand that was started by the famous movie star. It's gone out of my head.
48:05 Guy Raz? George Clooney?
48:06 Speaker 02 Yes.
48:07 Guy Raz? Oh, the Casamigos.
48:08 Speaker 02 Casamigos.
48:09 Guy Raz? Yeah.
48:10 Speaker 02 But there's a great example of a product that blew up because of that affiliation. I would be surprised if you couldn't find some very influential influencers who would buy into your mission and buy into, maybe partner with you to say, we're going to get this story out. We're going to help you promote this brand in a way that's much more efficient than just buying marketing or what have you, or media. That's the type of thing that's going to just elevate the brand, elevate the story, and start to trickle down this message that, hey, this is a brand that's doing things differently. A lot of people love tequila and I think if you can tap into that Venn diagram of people
48:52 Speaker 02 who are loving tequila and who love the fact that you're doing it differently and obviously ultimately need to love the product.
48:58 Guy Raz? Right. I'm gonna just, I'm gonna push back a little bit. I think that all of that advice is really sound, but there's one thing that I still think is important, which is the product. And from what I understand, looking at your website, Christiana, is that you, there's something slightly, somewhat unique about your tequila, right? It's mature agave and water and that's it. Nothing else. Really clean. Very clean. I would push that because, because, you know, the mission side is going to be critical and you're going to be pushing that and you're going to be explaining that. But the flip side is, you know, you want people like me who are on keto diets who want to have a drink, or people who are going to CrossFit gyms, or people who are going
49:41 Guy Raz? to Orange Theory who want to have a drink and, you know, nobody should drink in excess, but I'd love to just, for you to double down on that clean, mature agave plus water. Something that really evokes this idea that this isn't just another tequila. This is the one you should go for.
50:01 Speaker 01 And who are the most high-end bartenders these days that are, you know, introducing people to the best of the best? You want them to, I mean, if the product is so great and it's so clean and it's helping build community and solve real problems? I mean, that's a wicked combination. And if you have bartenders, you know, the ones that people are writing articles about or people are building concepts around, making sure that they are your ambassadors, I think would also help. So much of it, I think, does come down to education. People just don't know until they know. And that's a big job. You can't do it on your own.
50:36 Guy Raz? I also think there's an opportunity, you probably are already doing a version of this, to really push this with women.
50:41 Speaker 01 Yes, being a women-owned brand is something to trumpet as loudly as you can. You know, I think about the Aveline, the wine, you know, with Cameron Diaz's brand. I think people really respond to that and you can have your version of that. I think consumers are open to it and respond very well, but it's a matter of just getting out there for them.
51:03 Speaker 06 Yeah. Oh, gosh, you guys, thank you so much. This is all, you guys are amazing. You know, we are a very tiny brand. We don't, you know, we're actively going to actually raise real capital now because to do all of this, it takes so much money. And unfortunately bartenders, a lot of them are pay-to-play now and influencers. And I get it, they have to make their money, right? We just don't have, like, we're too busy. We say 10% of the bottle, like, 900% of the bottles are going to the work that we're doing right now until we get this work off the ground, you know? So it really is like our advocates that have been wonderful and haven't charged us to promote us. And Walt Disney World actually brought us in. We're the first female additive-free brand for Disney ever to.
51:43 Speaker 01 Congratulations. That's huge.
51:46 Speaker 06 Thank you, thank you. Yeah. It's been an exciting, it's been an exciting ride, but I'm not joking. When I listened to your episode, I was, I felt very hopeful, very hopeful, very, very hopeful.
51:57 Guy Raz? Awesome. Christiane Martin's, the brand is called Valortekila. Congrats, keep us posted. We're gonna, we'll be following you.
52:05 Speaker 01 We will be watching.
52:06 Speaker 06 Thank you guys. Thank you guys so much.
52:08 Guy Raz? Thanks so much.
52:09 Speaker 06 Bye.
52:09 Speaker 02 Take care.
52:10 Speaker 01 Bye.
52:12 Speaker 01 There seems to be a theme from almost all of the entrepreneurs that we got to talk with today. They're all at the right time, in the right place, in terms of a product or offering something that is right now, so whether it's chicken, or just the vegan movement, tequila. The time is now. It's very exciting, and I think we can be very hopeful for all of them.
52:35 Speaker 02 For sure. We could have a great meal. It's true.
52:38 Guy Raz? We could, for sure.
52:39 Speaker 01 I would go.
52:40 Guy Raz? Scott and Ally Svenson, co-founders of Mod Pizza. Thank you so much for joining me on the Advice Line. It was great to have you guys back on the show.
52:47 Speaker 01 So fun to be with you again.
52:49 Speaker 02 Yeah, great to see you again, and great to be a part of this.
52:51 Guy Raz? And by the way, if you haven't heard Scott and Ally's original How I Built This episode, you have to go back and check it out. You can find a link to it in the podcast description. And here's one of my favorite moments from that interview.
53:05 Speaker 01 We had never worked in retail. Our qualification was the fact that we had been customers of the thing that we wanted to create.
53:12 Guy Raz? Yeah.
53:13 Speaker 02 It's interesting. I think one of our strengths at the time was the fact that we didn't know what we didn't know. A friend joined our board early on, and the week before our first store opened, he said, "Listen, I decided to do this because I really like you two, and I wanted to make the process of failure less painful for you, because this is never going to work."
53:37 Guy Raz? Thanks so much for listening to the show this week. Please make sure to check out my newsletter. You can sign up for it for free at guyraz.com. Each week, it's packed with tons of insights from entrepreneurs and my own observations and experiences interviewing some of the greatest entrepreneurs ever. And if you're working on a business and you'd like to be on this show, send us a one-minute message that tells us about your business, the issues or questions you'd like help with, and hopefully, we can help you with them. And make sure to tell us how to reach you.
54:13 Guy Raz? You can send us a voice memo at [email protected] , or call us at 1-800-433-1298 and leave a message there. And we'll put all this in the podcast description as well.
54:29 Guy Raz? This episode was produced by Catherine Seifer with music composed by Ramtin Arablouei. It was edited by John Isabella. Our audio engineer was Sina LaFredo. Our production staff also includes Alex Chung, Carla Estevez, Chris Messini, Devin Schwartz, Elaine Coats, J.C. Howard, Kerry Thompson, Neva Grant, and Sam Paulson. I'm Guy Raz, and you've been listening to How I Built This.
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