Pod Insights How I Built This with Guy Raz CAVA: Ted Xenohristos and Brett Schulman About this episode When Ted Xenohristos and two childhood friends opened their first sit-down Greek restaurant in 2006, they had no idea it would eventually grow into CAVA, a sprawling national chain that serves stuffed pita sandwiches and salads. Raised by Greek immigrants, the three founders understood how to make great food, but were rookies at running a restaurant–maxing out their credit cards, and learning the hard way that you should never write dinner orders on sticky-notes. As the restaurant tried to raise its profile by selling its hummus and tzatziki to grocery stores, it continued to lose money. But eventually the founders decided to hire Brett Schulman as their boss. Brett had invaluable experience in the snack food industry, and predicted that CAVA’s Mediterranean cooking would take off among health-conscious diners. He was right. Today, CAVA is a publicly-traded company with over 280 restaurants across the country.
This episode was produced by Sam Paulson with music by Ramtin Arablouei and Sam Paulson.
Edited by Neva Grant, with research from Rommel Wood.
Our engineers were Gilly Moon and Patrick Murray.
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Transcript 15,509 words · 6 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Guy Raz? Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2 a.m. kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one hard question. How do we make sure AI goes well for people? So they asked over 100,000 people their hopes and their fears and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan,
0:46 Guy Raz? build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.
1:32 Guy Raz? Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands, on the table in rewards you never earned, money that could have gone back into the business. Path B, you pause and get the US Bank Triple Cash Rewards Visa Business Card. Now, you're earning 3% cash back
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5:10 Guy Raz? Hey, before we start the show, a question for you. Do you ever get nervous when performing or speaking in front of an audience? Because I definitely do, and I have to stand in front of a lot of big audiences. Well, I recently interviewed Ellie Goulding about being shy onstage. And even though she's a music superstar who's performed at Coachella and a royal wedding, she told me that she finds ways to break through the anxiety and be present in the moment. You can hear my conversation with Ellie Goulding on my other podcast. It's called The Great Creators. Just search for The Great Creators with Guy Raz wherever you listen to podcasts, or go to thegreatcreators.com. And now, on to today's show.
5:53 Speaker 01 As we kind of got busier and busier, we didn't really know what we were doing. We were bringing in octopus. And let's just say the octopus weighed 40 pounds. We would divide that by the ounces that we served. And we were like, great, we could serve octopus for six bucks. Well, we didn't take into account that once we cooked that octopus off, that 40 pounds became 18 pounds. And so all the loss in that, we didn't capture that in the pricing. So we were really giving away octopus for way less than you could buy it anywhere in the world, probably. And we did the same for scallops and lamb chops. And we were kind of getting busier and busier and losing more and more money.
6:40 Guy Raz? Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.
6:51 Guy Raz? I'm Guy Raz. And on the show today, how three childhood friends who grew up on Greek food launched a restaurant and found just the right guy to help them grow it from a struggling sit-down into a sprawling national chain, CAVA.
7:09 Guy Raz? You may have heard this statistic around the restaurant industry. 90% of restaurants fail in year one, which actually is an exaggeration. But still, only 80% of restaurants survive past year five. The restaurant business is hard because there are so many variables that can put you in trouble, fast. If there's bad weather, people don't eat out. One bad review from a disgruntled customer can lower your rating. If you overestimate your supply needs, you could lose thousands of dollars in spoiled inventory. If you underestimate them, you leave your customers disappointed when they can't get what they want.
7:52 Guy Raz? The list goes on and on. And by the way, the margins are usually pretty slim. So why do people do it? Well, in the case of CAVA, the founders really wanted to share their Greek culinary heritage. Ted Xenohristos, Dimitri Moschevides, and Ike Gregoropoulos all met as kids in their Greek Orthodox youth group. They grew up eating things like lamb meatballs, souvlaki, tzatziki, and fresh salads with feta cheese. And as adults, they all ended up working at restaurants. So when they came together in their 20s to open a small Greek taverna in suburban Washington DC, that was the plan: run a restaurant, be a gathering place for
8:36 Guy Raz? the community, and maybe earn enough to live off. What they didn't plan for or anticipate was for CAVA to become a national chain of fast casual restaurants, a chain of more than 280 restaurants across the US. But to get there, the three friends had to go through a lot of pain: permit violations, near bankruptcy, and a money-losing venture to package their products. But a few years in, the founders connected with a guy named Brett Schulman, and Brett believed there was potential to turn CAVA into something much bigger. And together, after a few more years of pain and financial struggle, they managed to figure
9:17 Guy Raz? out how to make CAVA work. In today's episode, you'll hear from Ted Xenohristos and Brett Schulman. Brett will join us a bit later, because the story really starts with Ted and his childhood friends Dimitri and Ike. Ted grew up in suburban Maryland in the 80s and 90s. His parents were working-class immigrants from Greece. And at home, Ted was immersed in Greek culture, not just the food, but the language, the holidays, and the Greek Orthodox Church. His mom worked as a waitress, and his dad worked in construction.
9:49 Speaker 01 He did jobs on his own. It was a company, but he was the only employee, right? So it was called JX Contractor. And my dad would come home pretty late from those construction days. And I remember him dragging me to a few days of work with him, whether it was a construction site, or roofing job, or whatever that was. I remember a day where he said, I need you to move all that wood from this side of the room to that side of the room. And I did it. And when I was done, I said, what's next? He's like, I need you to move that wood back to the other side of the room. So he was definitely testing me. And I just remember it being so hot. And I was like, I cannot do this for the rest of my life. I'm gonna have to figure out something to do.
10:35 Guy Raz? And what about your mom? I mean, did you go to the restaurant with her?
10:37 Speaker 01 Yeah, my mom worked at Tally Hill Restaurant, which is actually her sister's restaurant. So my aunt and uncle owned it. And she used to take me all the time because she couldn't afford childcare. But I loved it. I loved being there.
10:51 Guy Raz? This restaurant's in Potomac, Maryland. It is still there, by the way.
10:54 Speaker 01 Yeah, it's Potomac, Maryland.
10:56 Guy Raz? It's a classic Greek American diner.
10:58 Speaker 01 It's like Greek American diner. Yep, they have oddly Italian items, pizza, Greek items.
11:04 Guy Raz? Bacon and eggs, breakfast, yeah.
11:06 Speaker 01 A little bit of everything. My uncle actually still cooks breakfast there every single day. So it's whenever I get the chance to stop by, I do. But I remember her dragging me there and, and I fell in love with it. I was able to wash dishes. I would bus tables. I loved interacting with the customers. It's, it's really where I fell in love with the restaurant business.
11:26 Guy Raz? And I have to assume Greek culture was probably pretty sort of central at, at home. Like you probably eating Greek food, bringing Greek food to school for lunch, like, right?
11:36 Speaker 01 That is literally all I ate. I mean, I, I was truly amazed. And I am more amazed today because I know how difficult it is to have a family and have work. Then my mom would go to work and still have time to prepare these elaborate, amazing meals, you know, whether it was like a whole leg of lamb, or stuffed tomatoes, or espagnoa kopa that she would make from scratch. I mean, I tried to make one the other day and it took me like five hours. I'm like, I don't have time for this. And it was really amazing, the experiences that we had around the dinner table. And in my mind, it's, it seems like it was yesterday where I opened my lunch at school. And the smell that came out of the tinfoil container was of espagnoa kopa, which is, you know, spinach and feta cheese, sitting, sitting
12:21 Speaker 01 in my lunchbox for a few hours before I opened it, kind of smelled up the whole cafeteria. And people were like, what is that? What are you eating? And I was always embarrassed to explain what that was, right? I was a young kid and I was trying to explain what espagnoa kopa was. And it was really, really hard, kind of growing up. Being so different, now I obviously really appreciate it and love it. And any chance I get to eat my mom's food is a treat.
12:46 Guy Raz? So you met, I mean, you basically met the guys who would, you would go on to start this business with, Dimitri and Ike, as kids. They were, I mean, you met them in the neighborhood, or at the church, or in the youth group?
12:59 Speaker 01 Yeah, we met at the church. I mean, one thing about, there were so many different churches around us, all Greek churches. And you got to interact with the kids from all over, right? So I met both Dimitri and Ike through that church system. And we were a little difference in ages. I was the oldest. I was one year older than Dimitri, two years older than Ike. But we hit it off as soon as we met through those church programs.
13:25 Guy Raz? I know that you did a couple of years at the University of Maryland, but you've obviously grown up watching your mom in the restaurant business. And I guess you, in the early 2000s, you dropped out and basically started working in restaurants as a server, right?
13:41 Speaker 01 Yeah, mainly as a server. I did work in, on the line a few times in the kitchens. I would bartend. I managed a little bit. A good friend of mine opened up an Italian restaurant called Olatzo in Bethesda, Maryland.
13:55 Guy Raz? Still there.
13:56 Speaker 01 Yeah, still there. They do a great job. Both Ike and myself worked there. And I really loved it. I did everything there. It's where I really learned and started to understand the restaurant business, started to understand what it meant, you know, to have a P and L. And they really let Ike and myself kind of entrench ourselves in that business and do a lot of like, the wine ordering, the food ordering, the menu creation. Ike, who was an accountant by trade, was doing a lot of the bookkeeping for them. So it was, it was an awesome opportunity to learn.
14:29 Guy Raz? So, all right, so you guys were all working, I mean, you and I were working at A Lotso. And Dmitry, he was working at another restaurant, I think it was an Israeli restaurant, right?
14:40 Speaker 01 Yeah, it was called, actually, Tel Aviv Cafe, was literally right around the corner from where we were at. And, you know, I remember we would kind of grab coffee and talk about doing our own restaurant one day and talk about doing a real version of a Greek restaurant that really represented what Greek cuisine was. And we grew up visiting Greece, we grew up visiting our villages. We grew up really seeing what Greek food was about, whether it was our parents cooking it or those experiences in Greece and in our villages. And, you know, Greek cuisine was never technique-driven like the French or the Italians or Japanese, right? It was always about the quality of ingredients.
15:21 Speaker 01 So even when my mom cooked here, she didn't need Greek tomatoes or Greek rosemary. She just needed the best version of those from here to make amazing Greek food. So that's really what we wanted to kind of bring here to open a restaurant.
15:35 Guy Raz? I guess you had some money from waiting tables, but I can't imagine you had enough money to open a restaurant. Clearly, you all came to this idea of, let's start something together, but how did you make that happen?
15:47 Speaker 01 So, you know, we didn't have any money, you're right about that. We just had the will to want to do something different. And I remember, you know, Dmitry got a call from one of his distributors who said there's this Russian bakery going out of business. And this is probably 40, 45 minutes outside of Washington DC in Rockville, Maryland. And we went up and we looked at the spot and, I mean, this shopping center was just barren. There was no cars in it. We went into this kind of Russian bakery. It looked like a, it looked like a subway, if I could best describe it, you know? And so we offered to buy the business. And I remember it was, I don't know, I think it was like $10,000, $15,000.
16:30 Speaker 01 And the agreement would be that we would pay that over time.
16:34 Guy Raz? And in buying the business, you weren't buying like the brand name or anything? What were you buying?
16:39 Speaker 01 Just the space.
16:40 Guy Raz? Just all the equipment?
16:41 Speaker 01 Yeah, just the equipment and everything inside, which I later came to find out was, you know, worthless because we couldn't use any of it. But, uh, so when we met with the landlord, the landlord actually said, no.
16:55 Speaker 01 Because some of the same things we ran into in the past, our finances weren't there. We didn't have the personal guarantees. We didn't have any cars or homes to put up. So he didn't want to give us the space. We were 26, 27 years old. He just didn't want to do it. So we eventually, we come up with this plan. We had found out through conversations with the woman who owned the Russian bakery that she owed back rent. And so we went to the landlord and we said, well, what if we paid her back rent? Would you give us the space then? And I'm sure as many of your listeners will know already is that money talks. And he immediately said, yeah, I can do that. So then the question was, where are we going to find this money now?
17:40 Guy Raz? Yeah.
17:40 Speaker 01 We offered something that we didn't have.
17:43 Guy Raz? And by the way, how much was the rent per month? Do you remember?
17:45 Speaker 01 I'm not sure what the actual rent was per month, but I knew that she owed about $20,000. And so where were we going to find this $20,000, right? None of us had 20 bucks in our pocket. So I think I always preface it with like, this is, this is what you shouldn't do when you start a business. So we took all our credit cards, our personal credit cards, and we just pulled money off them.
18:08 Guy Raz? You just withdrew cash?
18:09 Speaker 01 withdrew cash. We basically maxed them out. And we were able to come up with that, that money to pay the landlord off.
18:15 Guy Raz? Like, like what? You like walked in with like a suitcase of cash?
18:21 Speaker 01 I think we turned it all into a cashier's check, but.
18:24 Guy Raz? I got you. Okay.
18:25 Speaker 01 And the story would probably be much better if we did walk in with a suitcase of cash.
18:28 Guy Raz? Here's the 20 grand. It's all there.
18:30 Speaker 01 It felt like that. It did feel like that.
18:32 Guy Raz? Hand numbered bills. Yeah. So, and, and what was the concept that you were thinking of? It was, I mean, this is a Russian bakery that you were taking over. Tell me what it was going to be.
18:42 Speaker 01 So the idea was that we would do meze, which many people know as tapas or small plates, shared plates, because that's how they eat in Greece. When you go, you order a bunch of these plates and you kind of share them. So. The idea was that we would create these, these dishes, tzatziki. We had crazy feta, which was feta infused jalapenos and shallots. We had baby lamb chops over french fries. But we would hand cut them every day, fry them in olive oil, top them with oregano. So the way that we had them in Greece, right? With real fresh potatoes and so.
19:17 Guy Raz? And this was a sit down restaurant or you'd order at the counter and sit down?
19:21 Speaker 01 You sat down, we had full service, we had a full bar.
19:24 Guy Raz? Full service, waiters, wow.
19:26 Speaker 01 Everything, full service, bar, host stand, everything that you would experience at, at a nice restaurant.
19:32 Guy Raz? And the three of you guys were gonna do everything?
19:35 Speaker 01 Everything. Dimitri was gonna cook, I was gonna run the kind of front of the house with Ike. He would use his time to focus on the finances. But that was the plan, that we would own and work in this restaurant for the rest of our lives.
19:47 Guy Raz? All right, so you got the 20 grand to pay off the back rent, but you still need money to like get supplies and get, and build it out and you know, and right? So where, where'd the rest of the money come from?
19:58 Speaker 01 So the rest of the money came from us working during the day, during the evenings, I should say. We worked at night at a lotto restaurant and Dimitri worked at his restaurant. And during the day, we, we would build and we would do all the work ourselves.
20:13 Guy Raz? Your dad was a contractor, so presumably you had some guidance.
20:16 Speaker 01 They helped, they were really disappointed that we were going into the restaurant business and that we were not lawyers and attorneys.
20:22 Guy Raz? You're not gonna be a lawyer or a doctor?
20:25 Speaker 01 Yeah.
20:25 Guy Raz? What are you doing? Why did I move from Greece for this?
20:28 Speaker 01 And they, and, and you know, they saw the center and they were like, are you gonna even have any business here?
20:32 Guy Raz? Yeah.
20:34 Speaker 01 Yeah, they weren't happy about that, but they did help. Ike's dad, Ike's uncle, my dad, Dimitri's dad, they all really helped us bring it together. But I'm telling you, we built this thing for right around like 10 grand. We, everything was from Marshalls, TJ Maxx, Target. We, we would go into these, to Target or Walmart. We would open up the credit card so we could get that extra 10% discount, you know, when they offer that at the, at the point of sale and. And we did everything ourselves. It was, it was, there were crazy stories that happened along the way. I mean, we did our own electricity.
21:09 Guy Raz? Wow. Was that permitted?
21:10 Speaker 01 Um, I'm gonna plead the fifth on that, you know, it's uh.
21:14 Guy Raz? Okay, I got you.
21:15 Speaker 01 Not everything was done by the books, I will say, for, for the build out and uh, everything's up to code today. So we, we resolved any issues we had, but before it was a Russian bakery, it was a tile shop. So the person who was selling tile there had tiled every part of this place in different color tiles. And so we tried to hand chisel this stuff up. We tried to get it up with machinery. None of the, none of the tiles would come up. Once we hand chiseled it all off, there was about an inch of glue underneath them. I don't know why anyone would need that much glue, but for some reason it just was there and we could not get it off. And I remember asking people what they recommended and someone said to me, you know, you should try muriatic acid.
21:56 Speaker 01 And I said, okay, that sounds cool. I head over to Home Depot, I buy some muriatic acid. I remember mixing it with my flip flops and a t-shirt and shorts. It starts kind of, you know, steaming up, the vapors are coming up. I pour it all over that glue and I'll tell you what, that glue was gone. That muriatic acid worked miracles, but I was literally at the doctor and in the hospital. Hours later, I was just, I could not breathe.
22:24 Guy Raz? Wheezing.
22:25 Speaker 01 Wheezing. I had, blood was dripping from my nose and, you know, you're supposed to be wearing goggles and a mask and gloves. And there I was, just literally just pouring that stuff out, but it worked. We got the glue up and we can move on.
22:37 Guy Raz? So you guys are working your day jobs as waiters or night jobs and then, or maybe in the daytime, you're working on the build out. How long did it, between the time that you got the lease and the time that you eventually opened, how long did it take?
22:49 Speaker 01 I think it took, I think we were working on it in, in the summer of oh six. And we eventually got to, opening day was in November of oh six, a few days before Thanksgiving.
23:03 Speaker 01 And I remember right around October, we went for final inspection and the fire, the fire inspector came in and he looked at us and he said, he was there to to test the ansel system. Ansel system in the restaurant is basically what puts out fires on your grill or fryer if you have one. And he said, where's your grease hood? And we said, what do you mean? It's just a, there's the hood right there. And he said, well, this is a baker's hood. Call me when you have a grease hood. And we went out and we, we got a quote for this and it was going to cost over 20 grand. It was like 23 grand to remove that hood and put a new one in. And I just remember we were sitting in that restaurant. It was all built out. The candles
23:46 Speaker 01 were lit. We had the tables, the tables and chairs were all set. I mean, there was, we were just ready to go. And we thought we were done right then and there because, I don't know, we just didn't know how we were going to find that money to put that hood in.
24:01 Guy Raz? Wow. I can only imagine how, how just dispiriting that was because you need that approval to open up. You can't open it up until you get that final inspection. So what did you do?
24:13 Speaker 01 So that was one moment where it felt insurmountable because where was this money going to come from? Our credit was already down the tubes, by the way, because we were not paying those credit cards we maxed out. So nobody was, was really going to give us another credit card. And I remember talking to my uncle who had recommended we talk to a banker he knew. And so we met with this banker and he met us. He came into that restaurant and sat down. By the way, this restaurant at the time had no sign on the outside. So you, it was hard enough for him to find it, let alone our, what our customers were going to experience down the road. So he comes in and he's like, where's your sign? And we start to tell him our story about the money and how we've run out and the hood. But he kind of looks around and
24:57 Speaker 01 he sees the space and he's like, well, how did you get it to this point? And, you know, I told him the story that I've been telling you about all the work we had done ourselves. And he looked at us and he said, you know what? I believe in you guys. There's something here. I love this story. I love everything you've done in here. I'm gonna lend you the money.
25:14 Guy Raz? Wow. You guys had no credit?
25:16 Speaker 01 No credit.
25:17 Guy Raz? But this is, I mean, and it happens less and less with bank consolidations, but this is what used to happen more often when you'd have small, local banks.
25:25 Speaker 01 Yeah, it was, it was a nice, it was my first interaction with a bank or a banker. Because I'd never even had any money to put in a bank, so I, I kind of thought it always worked like this. You meet a guy, he gives you money and you, and you build your business, but you know, obviously, as we've been in business for, since then, and we've learned that that was actually a pretty miraculous moment.
25:46 Guy Raz? Lucky break.
25:47 Speaker 01 Yeah, very lucky break.
25:48 Guy Raz? What kind of collateral did you guys have to put up against it?
25:51 Speaker 01 Well, there was no collateral except for the restaurant itself. So there was a lien on the restaurant, which, like I said, I mean, we built that place for 10 grand. So the collateral's less than the loan was gonna be, so.
26:02 Guy Raz? Yeah.
26:02 Speaker 01 What was impressive is how quickly we also got that loan. I mean, it was probably a week, maybe 10 days later, the check came in.
26:11 Guy Raz? So you then went out and bought that Greece hood?
26:13 Speaker 01 We bought the Greece hood, we got it installed and we called the inspector in. Everything worked, everything clicked and we were set to go. And that was the Tuesday before Thanksgiving of 2006.
26:26 Guy Raz? Huh. So let me, let me ask you about the name, CAVA Meza. Why'd you choose it? Does, by the way, does CAVA mean like a cellar or like a cave?
26:35 Speaker 01 So Kavo with an O on the end means cellar or cave. And the word CAVA actually comes from that word. It's when you go to Greece, you'll see a lot of stores called CAVA, or you'll see a lot of bottles of wine with the word CAVA on them. And it's not the sparkling wine from Spain. It, it really means that this wine has spent a little time in, in a, in a cellar and, and becomes kind of like a, a reserve wine.
27:00 Guy Raz? And tell me about the menu. It was like, was it sponakopita, musaka, tzatziki, dolma, souvlaki? Was it like that kind of stuff?
27:08 Speaker 01 Yeah, we had, we had some of the basics. Again, it was like all small plates. We had chicken souvlaki. But we also, you know, did these beautiful like yutens scallops that we sauteed in our Greek olive oil. We did lamb chops. We did grilled meatballs. A lot of the recipes came from Dimitri's mom. And just doing it in the way that Greeks would do their food or their, treat their food or their cuisine and have the best possible products. And, and create food out of that.
27:41 Guy Raz? All right. So you eventually get the go ahead to open. I'm assuming when you open, there was probably a lot of friends and family and people from the church to support you at the beginning, right? Like people were coming in and you were probably busy from day one.
27:54 Speaker 01 So we had some friends and family who came in just to kind of help us practice. And, you know, things kind of went wild. We didn't really know what we were doing. And we were trying to figure that out because we didn't have a POS system. We didn't have any way of like tracking orders. We were handwriting everything. We were using all these-
28:15 Guy Raz? You're handwriting orders on tickets?
28:16 Speaker 01 Everything. We were, so we were writing it on, on a ticket and then we were going in the kitchen and transferring that order onto yellow sticky notes. And, you know, I remember, I remember one of the early moments of, of those sticky notes. You know, I think the common theme has been we, we didn't have a lot of money and we were trying to save money and everything we bought. And I remember we bought the knockoff brand of the 3M sticky notes. And walked into the kitchen. We had a packed house. I'm looking around. I'm wondering where the chefs have gone. I'm wondering where all the food is. I look down and they're all on their hands and knees, kind of looking through these tickets. It was so hot in the kitchen that the glue was melting on the back of these knockoff sticky notes.
29:01 Speaker 01 And they were all falling down on the ground. So, you know, I remember we end up kind of giving all this food away for free. And, uh, you know, that was a little bit later after opening, but I just, I remember funny stories like that, uh, along the way.
29:14 Guy Raz? I mean, restaurant is a very risky business, right? I mean, anyone who's been in the business knows that you're more likely to fail than succeed in the first three years. I mean, once you factor in, you know, the cost of labor, the cost of rent, the cost of food, there's very little margin left. I mean, it was just the three of you, so you didn't have, presumably you didn't have to pay employees, but were you bringing money in? Were you losing money?
29:38 Speaker 01 I think in the restaurant industry, and maybe it's, it's just, I don't know, maybe it's in our blood, but every single day you feel like the restaurant could fail. It's, uh, it's kind of a crazy feeling. Even, even that first day of opening, we had one customer come in. I remember he came in, he sat down, I was the waiter, and I went up to him and I said, this is what we're doing here. We're doing this Greek concept, small plates, shared. And he said, well, I want big plates. I want a dinner. I came to have a meal and, you know, I tried to be as charming as I could. I love talking to people and I love making people happy. And I went into the kitchen and I think it was Ike that pointed out that we had only purchased small plates. So there were not even any big plates in the restaurant.
30:23 Guy Raz? Literally, you only had small plates.
30:25 Speaker 01 Exactly. And so I went back out there and I said, I'm, I'll figure it out. I'll make him happy. And he got up and left and we didn't have another customer for two more days. And again, we thought we were going to fail there. And so like, as we kind of got busier and busier, we didn't really know what we were doing. We were bringing in octopus and let's just say the octopus weighed 40 pounds. We would divide that by the ounces that we served and we were like, great, we could serve octopus for six bucks. Well, we didn't take into account that once we cooked that octopus off, that 40 pounds became 18 pounds. And so all the loss in that, we didn't capture that in the pricing. So we were really giving away octopus for way less than you could buy it anywhere in the world, probably.
31:10 Speaker 01 And we did the same for scallops and lamb chops and we were kind of getting busier and busier and losing more and more money.
31:23 Guy Raz? When we come back in just a moment, how CAVA starts hitting its stride with the help of a new partner who sees the marketability of the Mediterranean diet. Stay with us. I'm Guy Raz and you're listening to How I Built This.
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33:57 Speaker 02 Hey, Guy. My name's Keith. I'm from Bush Mills in Northern Ireland. I love the story of Ooni Pizza Ovens. It was great to hear how two people in the UK were able to take a concept and build and grow a business, enabling people to produce true Neapolitan-quality pizza in their own home. I'm also a teacher. I live in the UK, and I was captivated by this story, so much so that I'm now the proud owner of an Ooni Coda 16. I love your show. Keep up the good work. Thanks.
34:29 Guy Raz? If you want to share your favorite episode of How I Built This, record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is, and why, a lot like the voice memo you just heard, and email it to us at h i b t at i d dot wondery dot com, and we'll share your favorites right here in the ad breaks in future episodes. And thanks so much. We love you, guys. You're the best. And now, back to the show.
35:05 Guy Raz? Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2008, and even though Cabo Meze is popular, the restaurant is losing money. Ted and his partners are paying themselves basically nothing. But then, the customers start giving them an idea for how to expand the business.
35:24 Speaker 01 We had people kind of requesting to buy our dips and spreads, like our hummus and tzatziki, and like, they were like, oh, can I get a pint of that? Can I get a...
35:34 Guy Raz? To take home.
35:35 Speaker 01 Yeah, like, can I get a gallon of that? Like, what are people doing with a gallon of hummus or tzatziki? Right? And eventually, you know, we had a customer who came to the restaurant all the time, Kenny Maids, who said to me, like, why don't you guys sell it in the grocery store? And... I said, well, I'm not really sure how we're gonna do that. I don't have any experience doing that. And so we decided to do it because everything that we had done in the past, we had no experience doing. And it's found a way to work itself out. So we started doing that whole business. And, you know, at that same time, we started talking about doing a second restaurant. We're like, hey, we figured out what we're doing. We must be geniuses, right? Let's go do a second restaurant and, and let's try to sell, you
36:17 Speaker 01 know, our dips and spreads in grocery stores at the same time. And I remember we would make these dips at night. We would hand scoop them into the packages. We would use these little scales. And then we would use blow dryers to melt the ring of plastic around the top to crimp them. And then eventually deliver them to the grocery stores in the early morning.
36:38 Guy Raz? Was the payoff good? I mean, I mean, it's you're getting into a few small, local groceries, but a lot of work. You gotta make all that tzatziki, and you gotta make all that feta, and you gotta make all that hummus and then package it. And was it worthwhile? Was it a good revenue stream?
36:56 Speaker 01 It was not a good revenue stream. It was losing money. It was giving us heartache. I remember even the first delivery I took, the grocery store refused it. I delivered it in the backseat of my car. And they said, well, you know, has this been refrigerated? You know, since you delivered it, I go, no, we pretty much made it through it in my car and brought it over. So I had to throw that all away. Obviously, we're making this stuff without preservatives. And as we made it, a few days later, these packages were kind of blowing up, because we didn't have any preservatives in it. So we didn't really understand the business at all. And it really, really struggled.
37:36 Guy Raz? I guess this is sort of around the time when you get connected with Brett Schulman. First of all, why were you looking to reach out to somebody? You sort of felt like you guys needed help figuring this, this part of your business out?
37:48 Speaker 01 Yeah, I mean, at that time, we had signed a lease for our second location. We were delivering to a few Whole Foods in the mid Atlantic and a few smaller other grocery brands. And we were having issues. We were having logistical issues. We're having production issues. It was not profitable. And right around that time, the economy started to kind of collapse. And
38:12 Guy Raz? This 2008?
38:13 Speaker 01 Yeah, it was
38:14 Guy Raz? 2009, yeah.
38:15 Speaker 01 Yeah, we were building that restaurant.
38:17 Speaker 03 We had a loan for that restaurant and the bank eventually pulled it because of the collapse. And so we were in a tight spot. Like, things were not going well.
38:26 Guy Raz? Hmm. And I guess this is a probably good time to bring in Brett Schulman, who soon at this point become your partner. You kind of come into the picture at this point, Brett.
38:36 Speaker 03 Yeah.
38:36 Guy Raz? And you've been sitting here quietly the whole time, listening. But just to kind of paint a picture here, while Ted and Dmitry and Ike were building up CAVA, you were working at your wife's business, which was a sort of a startup that she had called Sneakety Snacks, a small snack food business.
38:56 Speaker 03 Yeah.
38:57 Guy Raz? Which I guess eventually got acquired. So at this point in your life, you were kind of looking for your next move, right?
39:04 Speaker 03 Yeah. You know, I'd been heads down for four years helping build that business. And the exit that we did, it was a success. I wouldn't say it was, you know, a tremendous success by any means. Like, it was like pushing a boulder up a hill. But it was a tremendous learning experience in what it takes to build a business and build a brand.
39:25 Guy Raz? Yeah.
39:26 Speaker 03 But now, here I was at a crossroads. What was I going to do next? So I did seek counsel from people around me and thinking about what I wanted to do next. And that's where I started thinking about consulting. And even before I started thinking about that is when I got connected with Ted.
39:49 Guy Raz? Hmm. And from what I understand, from what I read, the two of you basically get introduced and you get together, you start talking about CAVA. And I guess eventually, Brett, in exchange for your consulting help, because I don't think they could afford to pay you, Ted basically offered you some equity in that grocery business that they were doing, like the dips and spreads, right?
40:11 Speaker 03 Yeah, at first, that was the idea.
40:14 Guy Raz? But why were you interested in doing that? I mean, it's a small restaurant. They're hand packaging dips and spreads to a couple of local places. I mean, that's a tough business, right? I mean, there's, you know, big brands out there, Sabra and other big brands that are making hummus and dips and stuff. And so the question is, why would you take this opportunity? I mean, you were looking for something to do. But they couldn't pay you.
40:37 Speaker 03 Yeah.
40:38 Guy Raz? They were, they were offering you equity, but equity in something that, that wasn't worth anything.
40:43 Speaker 03 Well, it's interesting, Guy. At the time, I had been speaking with a former colleague from my finance days about starting up a consulting practice where we would consult with small emerging brands and potentially take equity in lieu of compensation and help create value with that equity interest. And when I met Ted, you know, we, we kind of clicked right away. And then we were customers of the product. We had it in our refrigerator and really believed in the opportunity in that category.
41:19 Guy Raz? So you start to learn about what they're doing. And why was it not working based on what you were, you were looking at?
41:25 Speaker 03 One of the things I learned in the snack food business is just how precise and how detailed you have to be. As Ted said earlier, it's, it's a pretty low margin business. And I remember walking in and saying, you know, how much does this tub of hummus cost us to make? And it was like, oh, you know, around $2. I said, well, like to the third decimal point, you know, hundreds of a penny, you know, including the label, including the seal, like making sure we have all of our costs down. A little bit like Ted talked about what, what they learned in the, in the full service restaurant. And, and then how are we monitoring our batch production and our yields? And I remember the business was using just QuickBooks at the time and QuickBooks had a manufacturing version.
42:08 Speaker 03 And that was very relevant. So you could build what's called bill of materials for those products to have a true understanding of every production you run, what the yield is, what the usage is, what the true costs are in the business. So there was a lot of just experience I had gained through the snack food business that I was able to apply very quickly to that business to drive more profitability and efficiency.
42:32 Guy Raz? So you were focused entirely on the dips and spreads that were being sold to grocery stores. You were not at all focused on the restaurant at all?
42:40 Speaker 03 No, I solely, when I first came on board, I was focused on the dips and spreads business.
42:44 Guy Raz? And Ted, you, it sounds like you guys were happy to just like let him run with that, that that was more of a burden for you guys and you guys could go back to focusing on the restaurant.
42:53 Speaker 01 Yeah. I mean, we were super happy to have the help. And what we really saw was that business slowly start to turn around and. I saw him so complimentary of what I do. I like to be a little more creative. I like to be a little loose with the numbers. I'm like the guy with the briefcase of cash, right? And he really just brings this completely different way about thinking about the business. And I really started to think right then and there like how he could help us in our restaurant business.
43:25 Guy Raz? So Brett, before that happened, right? What was your sort of thinking around the dips business? Were you thinking, all right, this is really going to be the thing that grows this overall business? And this thing is going to be, could potentially be huge. Like, we should go raise money. We should turn into a brand. Like, was that how you were thinking about it?
43:47 Speaker 03 Yeah, that's exactly how I was thinking about that. We could raise capital and really grow this into, you know, a large player in the hummus and the dips and spreads category, that this could be a brand we could scale. And it was around that time that, you know, I had experienced the full-service restaurant and was really struck by a couple of things. I was struck by, A, the authenticity of what Ted Iken-Dimitri had started, just the soulfulness of the brand. And B, here was a way of eating that was satisfying and flavorful. And oh, by the way, it happened to be healthy. And I said to the guys, like, we need to bring this to a larger audience.
44:28 Guy Raz? Yeah.
44:29 Speaker 01 He said to us, he's like, guys, look around. Like, you know, this kind of Mediterranean food is already healthy. And I don't think I realized that. I just grew up eating that, right? The prebiotics and yogurt, the amazing qualities of olive oil, the chickpeas, just the natural healthfulness of all the different items that we had at our restaurant, right? And so I remember saying, hey, let's talk. Let's have a coffee. And we sat down and I said to him, hey, you know, I really love what you're doing. The guys love what you're doing. I think what you bring to the table is very different than all the tools that we have. And I would love nothing more than for you to join us as our fourth partner. And I remember, you know, to his credit, he looked at me and he actually told me that
45:14 Speaker 01 that was, that's actually a, a, a bad decision. That's bad, you know, he's trying to give me good, good advice as a, as a business partner already. Like, that's not a good thing to just give away 25% of your equity of a company, right? And I said, I, I really see something. I believe in, in what you're doing. I believe in our partnership and-
45:31 Guy Raz? And you wanted him to be the CEO?
45:34 Speaker 01 Yeah. I, I literally was interviewing him to be my boss, right? And so, um, you know, outside advice that we got were like, oh, you're crazy. Why would you want to hire a boss? Why would you want to give this up? And I just saw a bigger picture. I, I knew and I, I could see it, what he was going to bring to, to the, to the three of us. Uh, and it was going to be much bigger than, than what the three of us were going to accomplish on our own.
45:59 Guy Raz? And, and at that point, do, do, were you guys profitable?
46:03 Speaker 01 So the restaurants were, were making profit. The dips, of course, were not. We were funding those with the restaurant profit, but you know, we were starting to see the light at the end of the tunnel coming out of that whole economic collapse of, of 08, 09. And we were in a good place. Ike was running the books. Brett was actually even helping us a little with that without having any kind of consulting agreement. We were just kind of going to him for advice. And so, things were going well at that time.
46:29 Guy Raz? I'm, I'm curious about the dips business. I mean, if that business was so hard to turn a profit, why, why continue doing it at the time?
46:36 Speaker 03 Well, we thought that there was opportunity to continue to make it more profitable, which we were able to do. And we wanted to maintain being a culinary brand and really bring Mediterranean to consumers across the country. So having those dips and spreads, being able to be in our customers' refrigerator in their house, being served to their friends and family, having that awareness touch point, having the validation of the quality of being sold in Whole Foods markets was just a great brand amplifier to what we were trying to do in the fast casual.
47:08 Guy Raz? I mean, when you and the other guy started to talk about, all right, what can we do next? The idea was, let's open a fast casual version of CAVA, right? Like, let's do something more like, like, were you thinking more like a Chipotle or something like that? Was that what you were thinking?
47:23 Speaker 03 Yeah, I had been a customer of the early fast casuals like Chipotle and Panera and had looked at the different business models, counter service, the walk the line, assembly line format. And one of the things that struck me that really helped us make the decision was that the walk the line format allowed very efficient labor costs. You know, it's the old Henry Ford production line that allowed you to invest in high-quality ingredients. And the guys were already using these great high-quality ingredients, whether in the dips and spreads or at the restaurant. And we felt like that's what was going to matter. And if we could bring those high-quality ingredients, like we served in the restaurant,
48:07 Speaker 03 or put in the dips and spreads to a larger audience at a more affordable price point, that, you know, that could be a great proposition. And so we ultimately settled on that format.
48:18 Speaker 01 And I remember immediately kind of getting into the kitchen with Dimitri and working on bowl ideas and calling bread up and be like, hey, come up to CAVA Emese, at the time, our original restaurant. And we kind of put these bowls in front of them. And it was the start of, you know, what we've kind of been doing for the last 12 years here and last, you know, 16 years overall. This partnership of kind of working through what the concept would be, what the food would be, how it would look, how it would taste. So we were super excited. I think we loved the idea.
48:49 Guy Raz? All right, so now you have to, you've got to get the money to open this restaurant. How did you get it?
48:56 Speaker 03 Yeah, it was, you know, the guys had a lot of customers of the original CAVA Emese restaurant, who were some successful local business folks, who would come to them and say, we want to invest in your next CAVA Emese restaurant. And so we reached out to all of them. We got them all together at the original Cava Mezze, closed for lunch one day. We mocked up all this food, put a presentation together, and we said, look, this isn't going to be another Cava Mezze, but here's our idea. We want to take the great food of Cava Mezze, put it in a fast, health-based format, open two or three, prove that this, you know, has the appeal we think it will, and then
49:38 Speaker 03 look to scale it from there. And, and that's what we were looking to raise money for. So we got everybody together at that original restaurant in Rockville.
49:46 Speaker 01 You know, we had people who worked there invest, had bartenders, servers, family members. I mean, we had almost anybody who wanted to, we were willing to take money to help get this thing off the ground.
49:58 Guy Raz? Yeah.
49:58 Speaker 03 Yeah, it was really interesting. I remember that one investor that I met with when we were trying to raise that original friends and family around, he said to me, after I finished, you know, presenting the idea to him, he's like, I, I like this idea. He's like, how many restaurants can you name off the top 100 Washingtonian restaurant list from 10 years ago? And I'm sitting there thinking, and I'm like, gosh, I don't know. He's like, exactly. He's like, full-service restaurants are hard, and it's hard to build a brand around. And he said, I love what you're trying to do to take the great aspects of what you have in your full-service restaurant and create a brand around it in this fast format that's much more scalable.
50:42 Guy Raz? All right. So this was not going to be a small plates restaurant. This is going to be more like a, like a Chipotle, like you go in and there's a line. So tell me, so you had to streamline the menu. And tell me what, how you guys started to think about it. Like, it was going to be like a Chipotle, like salads or, or rice bowls or? Or stuffed pizza sandwiches?
51:04 Speaker 03 Well, one of the first things we thought about was we had a commissary that we were making the dips and spreads at, a central commissary. And we also felt like those handcrafted dips and spreads were the flavor centerpiece of the menu. So we started to think about building the menu around that and that grain bowls and greens and mains that were elements of the full-service restaurant, whether spicy lamb meatballs or the chicken marinade that was used at the restaurant. So that's how we started to build out the menu. And then Ted and Dimitri really working on, how do you take these items from a made-to-order format to a cook-and-hold format on the serving line?
51:48 Guy Raz? And so, tell me about that first location.
51:51 Speaker 03 It was, yeah, it was really funny. I still have a picture from our friends and family night, you know, before we officially opened.
51:58 Guy Raz? And it was, this was in Bethesda, Maryland, the first one?
52:01 Speaker 03 In Bethesda, yeah.
52:02 Guy Raz? Got it.
52:02 Speaker 03 It was January of 2011. And we had raised money from friends and family to open two to three locations, and this was the first. And it was a good market for this type of fast format. There was a lot of office workers, but there was a lot of also residential and families and high school students. So I remember standing in front of the line with Ted on the friends and family night, and we're looking at the topping section, and we're like, this kind of looks like a salad bar. You know, it's just like a bunch of chopped tomatoes, a bunch of chopped cucumbers. And so we were constantly iterating and thinking about, how do we elevate it? We did not have dressings at that time.
52:46 Speaker 03 We only had one type of greens. So, you know, it was a very basic version of what we have now. We've always continued to try and iterate and evolve, but yeah, we did not want it to be a salad bar.
53:00 Guy Raz? And how did it do in comparison to the, to the sit-down restaurants? I mean, the sit-down restaurants were popular, but how did the fast casual place do?
53:09 Speaker 03 It didn't do great at first.
53:11 Speaker 01 Yeah, I mean, we had guests walking in who knew the full service, who were like, What do you mean? I have to serve myself here? I have to walk through a line? Where's my lamb chops? Where's my scallops? Where's my martini? Where's my Grey Goose? You know, so
53:26 Speaker 03 Totally.
53:26 Speaker 01 We had many, many moments of that. Yeah, it was a really bit of a struggle in the beginning trying to educate people on what this CAVA was, because the full service was called CAVA Meza, which still exists today. And then this was called CAVA. And so there was a little bit of confusion as they walked through the front door.
53:45 Guy Raz? Was there a clear, at this point, vision? Like, you knew that you'd raise some money, I think about $2.5 million from friends and family, to open those three locations. But were you thinking, Brett, like, okay, let's start like this, and then let's go to investors and raise a lot of money and really see what we can do?
54:05 Speaker 03 I don't think we, at the time, we were thinking about raising a lot of money. I think it was really, let's prove these out, and then maybe go raise a little bit more money to keep growing it.
54:14 Guy Raz? And, I mean, it sounds like every kind of decision you made up until this point was very, you know, sort of methodical and baby steps. But I imagine that there were also some mistakes that you were making at that time.
54:28 Speaker 01 Always.
54:29 Guy Raz? You laugh. Yeah, tell me. What were you doing wrong?
54:33 Speaker 03 Well, really, I think it started with the second location. An opportunity came up at Tyson's Corner Center, which is, at the time, one of the top malls in the country. And there was an opportunity for a location that was at a mall entrance with an interior and exterior storefront. And it was a bit of a sleepier entrance. But we opened in March of 2012, and we opened our doors expecting people to show up. And it was tumbleweeds. There were very few people that showed up. And I just remember thinking, oh, no, I've made a bad decision. I've undermined this business.
55:17 Speaker 03 This is a lot of money we just committed. We only have so much money to build so many locations and no one's coming. So, and then it really spurred the idea that has become customary tradition. You know, how do we introduce ourselves to our new neighbors and the new communities? And so we started this idea of our community day where about three weeks after we had opened, I mean, the sales were really anemic. We did what's called our community day and we advertised and got out on social media and radio that we were doing this free lunch service. So anybody could come and have free lunch and we didn't require a donation, but if you donated, we would match your donation.
55:58 Guy Raz? Donated to what, by the way?
56:00 Speaker 03 A local philanthropic partner that addresses food insecurity.
56:04 Guy Raz? So you're offering free, free lunch for the day?
56:06 Speaker 03 Yep. So we had a huge crowd that day. And then that was at the end of March. And then in July, something else interesting happened. It's called a derecho. I don't know if you know this weather event?
56:20 Guy Raz? Yeah.
56:20 Speaker 03 Where we had a derecho.
56:22 Guy Raz? It's like a mini tornado.
56:23 Speaker 03 Yeah. And so we had a really severe one come through the DC area and it knocked everyone's power out. You know, tens of thousands of people were without power for like three, four days. And so people couldn't eat at home. So everyone came to the mall and everyone came and there were huge crowds. And so it drove even greater awareness. And by the end of July, early August, we had such significant lines, we had to get those movie stanchions and ropes to corral the lines so that they didn't block the concourse entrance.
56:56 Guy Raz? Wow. All right. So at what point do you remember saying, all right, let's see if we can build this out even further? I mean, you've got the three fast casual restaurants and they're all in the DC metro area and they're doing well. What do you remember, Brett? What was the kind of the tipping point where you were like, let's go big? Let's go out and raise money and make this into a much bigger concept?
57:21 Speaker 03 Well, there was an interim step where we raised another friends and family round because we felt like we had something that was starting to work, but we didn't have clarity that this was going to be a huge opportunity. And so we did another small friends and family round to open a couple more locations. And I think the tipping point really came when we opened the fifth location. So this was in February of 2013 in a new mixed-use project in Fairfax, Virginia called Mosaic. And we did our community day. We did a free lunch and a free dinner. And we had two-hour-long lines. And the restaurant opened for its regular service the next day at twice the revenue
58:05 Speaker 03 run rate of the other restaurants that had opened. And the other restaurants all started to grow in concert with it.
58:14 Guy Raz? Yeah, but I mean, the lure when you're successful is to really expand quickly. And that can sometimes really damage a business. That can be a death knell for certain companies, especially if they can't manage inventory, they can't manage efficiencies. So did you think methodically, or not, about, look, let's expand this slowly? Or I don't know, were there moments where you thought, let's just go all out?
58:41 Speaker 03 Well, when we knew we had something, or we felt like we had something after Mosaic, we really wanted to expand further and we started looking at new markets.
58:49 Guy Raz? Outside of the mid-Atlantic, you mean?
58:51 Speaker 03 Outside of the mid-Atlantic. So we had committed to a couple more locations in the DMV, but we started looking at new markets. And we had the brilliant idea, or I made the brilliant decision, to have our second market be Los Angeles, 3,000 miles away from home, where no one knew us.
59:12 Guy Raz? When we come back in just a moment, why expanding to LA feels like starting the business all over again, and why the Kava founders decided to buy another restaurant chain that's three times bigger but failing. Stay with us. I'm Guy Raz, and you're listening to How I Built This.
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1:04:21 Guy Raz? Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2015 and Ted and Brett are planning to expand Kava to LA, 3,000 miles from home base.
1:04:33 Speaker 03 Yeah, at the time, you know, we were thinking about the dips and spreads business alongside this business. And we were thinking about a hub and spoke model for our commissary production. Because we didn't have the shelf life on our dips and spreads that we do now. And we wanted to open in a large market and Southern California was a great customer profile, a really large market opportunity, which was the attraction of doing that. And so we actually opened a small commissary there. But it didn't open until after our first restaurant opened there. So we had to do the dips and spreads in that original Los Angeles restaurant. And the challenge of Los Angeles was so difficult already before we had even opened that restaurant.
1:05:17 Speaker 03 That I went to Ted and I said, what do you think about moving to LA?
1:05:21 Guy Raz? So tell me why, yeah, Ted, tell me why you moved out there. What was the challenge in LA?
1:05:27 Speaker 01 So I actually moved out there in 14 to start building that commissary and to build that restaurant.
1:05:35 Guy Raz? And the commissary, just to be clear, would be making the dips and spreads for mainly for Whole Foods?
1:05:41 Speaker 01 And the restaurant.
1:05:42 Guy Raz? And for the restaurant, okay.
1:05:44 Speaker 01 The commissary would provide the dips and spreads. So, you know, I moved out there. We thought the restaurant was going to open up much sooner. It ended up being delayed. And I was out there kind of doing the commissary. We had huge delays in construction out in Los Angeles. And when we finally did get it open, you know, Brett alluded that we were making our dips in the restaurant. This space was so small. I remember the door of the walk-in box opening and hitting the back of the chair to the office that I was sitting in. You know, in that tiny little space. So we were making the dips in there. And what a challenge it was, being 3,000 miles away, having no help, no one knowing what the brand was, no one knowing anything about CAVA. We could barely hire people.
1:06:27 Speaker 01 We could barely keep managers there. Had to have my wife come in and help me run that restaurant. But through it all, what I really noticed was how much the customers loved it. And if we were slow on some days and we couldn't keep up, whatever issues we were having because of the expansion being so far away from home, I noticed people coming back, people telling their friends and people really loving what CAVA was.
1:06:52 Guy Raz? But how did they know what it was? I mean, how did you get the word out? You just opened up the doors and just hoped that people would show up?
1:06:58 Speaker 01 This, this goes back to the community day that we first had at that Tyson's Mall, right? We were really slow there and we had that community day. And so we started doing that at every opening and I'll tell you what.
1:07:09 Guy Raz? Free food.
1:07:10 Speaker 01 Yeah, free food will bring people out. That line was, I remember going through the line and telling people, uh, this is going to be an hour from where you're at, and then this is going to be two hours from where you're at. And the line just, I have a video of it, just went down the block and it was really, really crazy. And so slowly, slowly the business just started to grow.
1:07:29 Guy Raz? And Ted, how did you like being out there? I mean, what was it like for you?
1:07:34 Speaker 01 Overall, I loved being there. I wish I could have stayed. My wife and I decided after about 18 months, uh, we felt disconnected from family. We felt disconnected from our friends and, and wanted to come back home. But I just kept traveling back and forth because, you know, I, I really believed in, in what we were doing out there. And, you know, we just, it was the same as building a business here. It felt like we were just starting all over again. I remember when we had, the first manager had, had resigned and I had to go in there and start running that restaurant again and getting into the dish pit and getting into the walk-in, ordering food again, making schedules again. And at times was brutal, but overall was, it was a really awesome experience that again, I look back on and, and miss those days.
1:08:20 Guy Raz? Yeah, Brett, as, as those LA, you know, locations started to grow, I imagine this is, you know, 2017, you're starting to think, okay, how big can we make this? Can we, can we make this as big or bigger than Chipotle? I mean, you have to be thinking. There's huge potential here.
1:08:38 Speaker 03 Yeah, at that point, we felt like there was real potential that this could resonate in most parts of the country, if not all. And as we built out LA, it taught us how to open a large new market. And it has become one of our most successful markets now in the Southern California region. So that really, again, was another validation that if we execute this right, this cuisine and our proposition is really resonating with consumers and can be something we take to communities across the country.
1:09:10 Guy Raz? So I'm jumping a little bit, but I want to get to 2018 because this was a very significant year, which is you guys raised more money that year from Ron Shaig, actually, but he was part of that, who was on our show many years ago, the founder of Panera, to acquire another kind of fast, casual, Greek-ish chain called Zoe's Kitchen. And I guess they were having some trouble, right, at that time?
1:09:35 Speaker 03 Yes, they were struggling as a public company. Their sales were declining. And I met with Ron, as I do a couple of times a year, and we were having lunch and he said, he talked to me about that Zoe's had approached him. And he said, you know, what do you think about if our investors put together the capital, we acquire it and give it to you, Brett, and your team? That's a big idea. That's not quite what we were thinking about. We're on this straight, organic growth path. We've got a lot of momentum. We're over 65 restaurants at this time. We've got New York open now, LA open. We're signing deals in other markets. We're just on this straight heading.
1:10:19 Speaker 03 And here is this left-hand turn that's being put in front of us.
1:10:23 Guy Raz? And Zoe's was kind of similar, I think, a little bit, right, to CAVA?
1:10:28 Speaker 03 Well, it was similar but different. It was a counter-service format, but it was more founded as Southern Fresh Market Fair with a Mediterranean flair. The brand, its original menu had like chicken salad, egg salad, tuna salad sandwiches, and then Greek salad and hummus. And as time went on and it changed ownership and went public and Mediterranean diet grew in popularity, brands like us came on the scene, they started to add falafel and harissa and tzatziki. Without losing the pimento cheese off their menu. And I think what happened was their guests got a little confused and the operations got over complicated and really started to deteriorate service.
1:11:14 Guy Raz? So there was an opportunity to acquire all their locations and they had, how many locations did they have at the time?
1:11:19 Speaker 03 Oh, over 240 locations.
1:11:21 Guy Raz? Wow.
1:11:22 Speaker 03 And 100% of Zoe's portfolio was in the suburbs and the Sun Belt. So we saw this as a way to accelerate our expansion in a large part of the country, the Sun Belt, that we were already trying to get sites in. We had a few Kavas that were across the street from Zoe's and we were doing almost twice the revenue and that emboldened us to make that decision and, and take Zoe's private.
1:11:45 Guy Raz? So all of a sudden, you've got all of these stores that can convert to CAVA. Did Kavas opening up in the southern areas, all of a sudden, did it resonate with people quickly or did it take a while?
1:11:58 Speaker 03 Well, it took us a while to convert them because we had to stabilize Zoe's first. We weren't able to get to those conversions right away. You know, Zoe's was three times our size and it was struggling as a public company. And I'll never forget, we closed on the acquisition the, the day before Thanksgiving in 2018. And I remember when we were looking at the deal, the metaphor we used is we, we knew we were acquiring a melting ice cube and we just had to stop it from melting. And I was on a plane from Denver to Jacksonville and I get the most recent month report of Zoe's sales. And when we were negotiating the deal, the, the sales were declining about three to
1:12:41 Speaker 03 4% same restaurant sales, you know, year over year. And I get this report just sent to my inbox and I open it up and it's minus 12.
1:12:50 Guy Raz? Wow.
1:12:51 Speaker 03 And I'm, I'm, uh oh, what, what, what did we just buy? And I remember landing in Jacksonville and calling my wife and said, I, I think I just undermined 10 years of hard work. Uh, I, I'm not quite sure this was the right decision. So, um, we, we get back home from Jacksonville.
1:13:11 Speaker 03 And we had our holiday party a few days later. And I pulled Tad and Dimitri aside at the holiday party and I said, "Listen, we've got this Zoe's location, actually here in this area in a place called Park Potomac." I said, "I need you guys to turn that into a test kitchen, figure out how we fix this menu and fix this business, "so it doesn't drown CAVA."
1:13:32 Speaker 01 Yeah, so we took over that restaurant in Park Potomac. And we just started to work on it. We started to figure out, you know, they were doing things like serving a full chicken. And it was taking 40 minutes to serve that chicken because you had to cook it from scratch. And/or you pre-made them and you end up throwing them away. So how could you get rid of items that were being wasteful? How could we reduce the pantry size? How could we make it easier for the team to operate without having 30 people in the restaurant? We started to look at all that and break it all down. We looked at quality of the food. We looked at how we serve it, how we cook it. Dimitri was hard at work in the kitchen with the culinary team. We had some of our operations team members come in and really help with that.
1:14:15 Speaker 01 Finance to really drive home what the number should be. So it took a big team effort to really try to fix that Zoe's menu that was hemorrhaging at the time.
1:14:26 Guy Raz? And basically taking out some of those things that were not quote unquote Mediterranean or Greek?
1:14:31 Speaker 01 Yeah, I mean, that's where we started. You know, we have this document called Concept Essence that talks about our food, our people, our design, our, you know, everything that we do, we look through the document. So something like pimento cheese, right? Tasted good, was delicious, but didn't really fit Mediterranean essence. Didn't really fit our concept essence. So it was gone. Chicken salad, things like that, right? And what we found out, which was a pretty funny story, on the day that we opened, reopened that restaurant after we had reworked the whole menu. And I was talking to customers and it was really funny. These Zoe's customers had been coming, a lot of them for just one item.
1:15:13 Speaker 01 Some people were coming just for like a tub of pimento cheese or a tub of chicken salad. And I had a few customers just go nuts on me, you know, and say, "What are you doing here? Nobody asked you to come here. Nobody asked you to change these recipes. Why are you changing the hummus to CAVA hummus? Why are you changing zaziki to CAVA zaziki?" We were obviously doing it because we could run them out of our commissary to make it easier for our team members. So it was really hard to explain.
1:15:40 Speaker 01 You know, why we were changing these things and what we were doing them for, because people just didn't want to hear it. And I think, you know, a lot of this work that we were doing, it was ultimately bringing us closer to the decision to convert all these Zoe's locations to CAVA locations. And ultimately, that was going to be what we were going to go forward with.
1:16:02 Speaker 03 And I think the turning point really came when, by January, we had the first positive comps in Zoe's business since 2017, a year before we bought it, and CAVA was comping double digits.
1:16:15 Guy Raz? Wow. I want to, I want to kind of digress for a moment and ask you about some of the sort of broader challenges related to, not to CAVA, but just overall to the food business, right? You, you mentioned many times hospitality, like, people love our hospitality and, and, and I get that. I mean, like, if I went to the CAVA, original CAVA restaurant, I could feel that. But, you know, yesterday I went to a Starbucks and I just happened to, you know, get a coffee from somebody who just was maybe having a bad day, or maybe they just weren't happy to be there. And like, it's very hard when you've got 300 locations or thousands of locations of a store to make sure that everybody is on board.
1:16:57 Guy Raz? You know, everybody's got that Mediterranean hospitality ethos. And so, tell me how you guys sort of think about employees and labor and, and why would somebody work at a CAVA versus a Sweetgreen or Chipotle?
1:17:11 Speaker 03 It ultimately comes down to whether the team members believe or not whether we care about them. And it's other things like hearing where they're struggling, you know? We had this thing, we go out and we visit the restaurants and at the end of my visit, I say to the team, okay, I have a magic wand and I'm going to grant you three wishes. What are the three things that I can grant you that's going to make your day completely better? What is like the bane of your existence when you wake up every day that you think about that's getting in your way here? And I remember, like, I would go, I had like five restaurants in a row, they're like, Brett. People love our pickled onions, but man, my arm is so tired from chopping and slicing onions. I'm like, I hear you. And I got with Ted and worked on Ted because we had been looking at
1:17:56 Speaker 03 pre-sliced onions, but they were dehydrating too much. And so Ted worked with our produce suppliers and got a vacuum sealed, pre-sliced onion for them to pickle in-house that they no longer have to do that. And so it's very powerful. We're trying to set them up for success. And if they feel that support, it goes a long way.
1:18:15 Speaker 01 You know, I think for me, being a founder, I really generally care about how they're going to grow their careers here. My mom was beat down in this industry. I don't want that for people. I started this restaurant business to change that. And look, are we perfect? Are we where we want to be? We're at almost 300 restaurants. Chipotle has over 3,000, right? Panera has 1,000. So as we grow, we have to continue to offer more to those team members to keep them, to bring them in. And those are things that we're working on. So I really honestly think, you know, to Brett's point, that we care about our employees and that we give them the opportunity for growth.
1:18:54 Guy Raz? Ted, as you guys were, you know, growing, tell me about how you saw you and Dimitri and Ike saw your roles. I mean, did you all kind of sort of feel comfortable in where you were in the company? Or did every decision still have to be made by the four of you in consensus? Or did the three of you say, look, we can't, we can't operate a business like this. We've got to let Brett make decisions without asking us for our, you know, opinion every time?
1:19:21 Speaker 01 Look, I think when we decided to bring Brett on and, you know, we gave him the keys of the kingdom, as I say, we believed in him. I definitely believed in him, you know, no matter what happened, you know, when he, when he felt like he chose that wrong location at the mall, I felt like we just had to work harder because there was a reason he chose it. And, and we had to work harder to prove that out, you know, where he felt like he had made a mistake with Zoey's he had mentioned. Again, I felt like it was our job to deliver on what he envisioned by buying that Zoe. So, you know, originally we had,
1:20:00 Speaker 01 in one of those investment deals, early on, one of these big VCs wanted to kind of buy the whole company.
1:20:08 Guy Raz? Wow. And then you guys would be left with a nice chunk of cash. I'm sure that was attractive.
1:20:13 Speaker 01 Um, yeah, we would have gotten some cash and, you know, whether or not it was a lot or a little depends on how you look at things. But we didn't start it for that, right? And I don't think we started the first restaurant for that. And I don't think cash has ever been the number one driver. I think I remember back to my mom working in this restaurant industry and how hard she worked. And, you know, at the end, there was nothing really left for her. And I wanted to create something bigger and better. And there were so many moments along the way of believing in Brett and believing in this business. He told a story of, you know, what, I think you asked the question, what did we learn from our first restaurant? And there were so many things within that restaurant that we learned, right? About operationally and how we can make it better.
1:20:58 Speaker 01 But what he left out was we ran out of money after two restaurants. And our investors didn't want to give us any more money. And so we went and took a loan out against everything that we had worked for. We took a loan against our full-service restaurants, against these fast casuals, really because I believed in Brett and what he could take CAVA to and what he could ultimately help me become in the end, right? And along the way.
1:21:22 Guy Raz? Yeah. You guys went public in 2023, actually. This is the year we're doing this interview and have had an amazing market debut. But tell me about the ambition. I mean, now you're a publicly traded company. So where do you see the future of CAVA?
1:21:44 Speaker 03 We see Mediterranean as the next big, large-scale cultural cuisine category. And we want CAVA to be synonymous as the defining brand of that category. And so we're just excited to have that opportunity to bring it to people across the country.
1:22:00 Guy Raz? Brett, you joined this group as a consultant in 2009, and then you were asked to become CEO and ran this dips business for a while. And then you guys started to expand this thing. And here we are in 2023, multi-billion dollar market capitalization for CAVA, approaching 300 locations. How much of where you are today do you attribute to the work you put in? Your intelligence, your strategic thinking? And how much do you think has to do with getting lucky?
1:22:30 Speaker 03 Well, I like the term. I saw the term that luck is the intersection of preparation and opportunity. And I really believe that. I mean, you can have all the talent in the world, but if you don't work hard, it will all go to waste. And I think we've had a lot of counterintuitive decisions along the way, going to LA as our second market, buying a company three times our size that was struggling and converting it. People used to ask me, like, you know, the baseball analogy, what inning are you in? And you say, well, we're in the early innings, but I still think we're coming out of the dugout.
1:23:03 Guy Raz? How about you, Ted?
1:23:05 Speaker 01 Look, I think that anytime you're successful in life, you got to get lucky. I mean, I was lucky that that banker walked through my door, but he saw the hard work that we put into that restaurant, and that's why he gave us that loan. I was lucky enough to meet Brett, but all along the way, we've had so much help. I had no way to take credit for anything that has happened in the last 16 years. We have had, people have busted their ass in the kitchens for us. People have busted their ass growing these restaurants, building these restaurants, doing a lot of the heavy lifting. I get a lot of the credit. People come and thank me all the time and say, your restaurant's amazing, what you do is amazing. But the people that work every single day in those restaurants,
1:23:47 Speaker 01 they are doing a lot of the hard work, and they have really helped us build this brand and make this what it is today.
1:23:57 Guy Raz? That's Ted Seno Christos and Brett Schulman, co-founders of CAVA. By the way, their other co-founders, Ike and Dimitri, are still with the business today. And that original CAVA Mesa restaurant, the very first one that they opened in 2006, it's still right where it started, an outdoor shopping mall in Rockville, Maryland.
1:24:18 Speaker 01 I tell people to visit that restaurant today, and you can still see a lot of the heel and shoe marks on the bar from all the dancing on it. So there were just crazy, crazy things always happening. But the craziness of the restaurant business is something that I've always been attracted to. So I kind of actually miss those moments.
1:24:38 Guy Raz? Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. This episode was produced by Sam Paulson, with music composed by Ramtin Arablouei and Sam Paulson. It was edited by Neva Grant, with research help from Rommel Wood. Our audio engineers were Gilly Moon and Patrick Murray. Our production staff also includes Casey Herman, Kerry Thompson, J.C. Howard, Alex Chung, Malia Agudelo, John Isabella, Chris Messini, Carla Estevez, and Catherine Seifer. I'm Guy Raz, and you've been listening to How I Built This.
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