#117 Kat Cole: The Power of Possible

Kat Cole discusses how "the power of possible" guided her from a part-time job as a hostess at a Hooters restaurant to one of the most respected business leaders in America. In this wide-ranging episode Cole discusses the dark side of gratitude and how it can keep you in place, defaulting to believing in people, leading with a heavy heart while navigating through tough times, adopting new roles at work, questions to ask to uncover the truth in business and personal life, and so much more. Cole spent roughly a decade in leadership roles with Focus Brands, the global multi-channel franchisor and operator of Cinnabon, Auntie Anne’s, Jamba Juice and others. She was named President and COO of Focus Brands in 2017 after she spent five years as the President of Cinnabon. She left the company in December 2020. -- Go Premium: Members get early access, ad-free episodes, hand-edited transcripts, searchable transcripts, member-only episodes, and more. Sign up at: https://fs.blog/membership/ Every Sunday our newsletter shares timeless insights and ideas that you can use at work and home. Add it to your inbox: https://fs.blog/newsletter/ Follow Shane on Twitter at: https://twitter.com/ShaneAParrish Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  The upside of believing in people is so high and not but and some will let us down and the frequency that I'm let down is so low compared to the frequency that I'm proven right in people's potential. And so it just feels like this tax. It's like a single digit percentage tax that is a small price to pay for getting all the upside that comes from looking at people as the great things that they are and the possibilities that they have in front of them.

• 0:47Shane Parrish?

  Welcome to The Knowledge Project. I'm your host Shane Parrish. This podcast sharpens your mind by helping you master the best what other people have already figured out. If you're listening to this, you're not currently a supporting member. If you'd like special member only episodes, access before anyone else, transcripts, and other member only content, you can join at fs.blog/podcast. Check out the show notes for a link. Today I'm speaking with Kat Cole, former COO and president of Focus Brands, former president of Cinnabon, where she led the turnaround during the financial crisis. As you'll discover in this conversation, Kat is a remarkable person and leader. We talk about the dark side of gratitude and how it keeps you in place, defaulting to believing in people,

• 1:31Shane Parrish?

  leading with a heavy heart while navigating through tough times. And we also go deep into turnarounds, adopting new roles at work, questions to ask to uncover the truth both at work and at home, and so much more. This is a conversation you'll want to listen to over and over and share with your friends. It's time to listen and learn.

• 1:57Shane Parrish?

  I was trying to think about where to start this and I think a good place to start is the dark side of gratitude. What does that expression mean to you and where does it come from?

• 2:06Speaker 00

  Yeah, it's funny. I'm definitely known for leading with gratitude. So it's an ironic statement from someone like me. But I remember when my mom came to me when I was nine years old and said, you know, that's it. I'm done. We're leaving. And what she meant was we were leaving my dad. My dad was and is a very good man, but at the time was an alcoholic. And he had a wife and three young daughters at home, nine, me, six, and three, my two sisters. And I had been in multiple car accidents with him, drunk driving by the time I was nine. And so I remember when my mom came to me and said, we were leaving. I did not cry.

• 2:50Speaker 00

  I did not get upset. I looked at her at the age of nine and said, what took you so long? And it was because I was close enough to the bad to realize that even a scary decision was a better one than the alternative, which was staying. But as I got older and I talked to my mom more about that decision, which turned out great for everyone, I asked her again, what took you so long? Because she started sharing with me how bad it was for how long. And, and what it boiled down to was the dark side of gratitude, that she

• 3:29Speaker 00

  was so grateful that she had a nice house. And she was so grateful that we had gifts for the holidays. And she was told by her family and my father's family and her friends, who were very poor, much more so than us, we would be considered middle class at that stage, that she was lucky to have all these things that she had. And that that was the alcoholism and the things that came along with it were a small price to pay for those other what appeared to be fortunes. And to me, it seemed that that was the perfect example of the dark side of gratitude,

• 4:07Speaker 00

  that sometimes we can be so humble, so grateful for what we have, that we forget that we have the right, and in the case of being a leader or a parent, the responsibility to work toward something better. And so I, I am a, an intense gratitudeist and lead with gratitude, but I have personally lived that we can be so grateful that we forget to look around at the opportunity and the responsibilities we may have for something better.

• 4:38Shane Parrish?

  Who is the first person to ever bet on you?

• 4:41Speaker 00

  Wow. Um, I would say my mom, maybe by default, I had to watch the girls. I was nine years old and she was working three jobs. She fed us on a food budget of $10 a week for three years, uh, which meant she wasn't home a, a lot. And so she trusted me. Outside of my mom, what feels like the first person to bet on me was Bonnie, who was the person who hired me at Hooters. She hired me as a 17-year-old hostess, uh, and she was the general manager at the store. She herself had been a waitress, a Hooters girl, and moved her way up to running the restaurant. And she is the one who gave me the ability

• 5:23Speaker 00

  to move into being a waitress. And she's the one that came to me when the corporate office called and said, we're looking for really great employees to travel around the world to go launch the franchise. And, and maybe as importantly, she's the first person to call me out and treat me like an adult. I was working three jobs in the early days, and I was late pretty often because I was working three jobs and it was impossible to juggle getting from one place to the other, given the shift time. And she sat me down. I'll never forget it. I remember the exact words. You're great with your peers. I'd love to give you more shifts. I would love to give you more opportunities, but I depend on you showing up on time. And if you're late, other people have to stay later.

• 6:06Speaker 00

  And I need to know that I can depend on you. And if this isn't enough of a priority for you, that's okay. We can scale back your shifts, or you can quit and work other jobs, but I need to know where you are on this. And it was the first time, I was 18, and it was the first time that I really felt like an adult, like a working adult. It was just a job. You know, these were just jobs up to that point. And she so skillfully, with so few words, said so much. And I quit my other two jobs after that.

• 6:39Shane Parrish?

  I think it's a good time to sort of pause and just give us a thumbnail sketch of your career. I mean, it's very narrative defying in a lot of ways. A lot of people work in hospitality, but not a lot of people have the trajectory that you had at such a young age. Can you walk us through some of your experiences and how we got here today?

• 6:59Speaker 00

  Yeah. Started working when I was 15, sold clothes in malls. I then started at Hooters at the age of 17 as a hostess, first person in my family to get accepted to college, became a waitress at 18, my senior year, then started college and kept waitressing. But then I also started cooking. The cooks quit one day, and I ended up picking up kitchen shifts. And then another day, the bartender had to go home, and she needed one of the servers to help her take over the shift. And so these things kept happening in the business that resulted in me working different jobs. And before I was 19, and before I even finished my first year in college, I had worked every job in that business. I knew

• 7:44Speaker 00

  how to run a restaurant without realizing I knew how to run a restaurant. But that was not my ambition. My ambition was to get my degree. I was a electrical engineering and computer sciences major, a psychology of women minor, and my plan was to get those degrees and go to law school. I thought I would be an attorney. And By the time I was 19, what I mentioned before with the story with Bonnie, she came to me and said, "You know how to do every job in this building. I trust you. I know you'll represent us well. I'd like to nominate you to be a part of the training team to go launch the first ever Hooters franchise in Australia." No question, no doubt, yes, I want to go to Australia and help launch a franchise, even though I have no idea what that means.

• 8:28Speaker 00

  I bought my first ever plane ticket that night to fly to Miami, stand in line with my paperwork, get my passport expedited, so I could legally exit the country and commit to what I had just committed to. Flew to Sydney, helped open that franchise, came back, made up my classes that I missed, and thought that was it. I just thought I was back on the path I was on. This was just a very interesting experience and diversion. And 60 days later, the company reached out and said, "We're bringing the brand to Mexico, the first in Central America. We want the best team possible to be put together. Will you be on that team?" And I said, "Yes," and this started to repeat itself every few months, until, one, I was leading the teams very quickly.

• 9:11Speaker 00

  Before I was 20 years old, I was no longer a member of the team. I was now going early, setting up the supply chain, getting things ready, managing and leading the team, getting the restaurant open, staying longer, and coming back. And I was failing college because I was never there. So at the age of 20, after having opened seven restaurants on three separate continents outside of North America, I dropped out of college. Really, I was, I failed. I failed out of college. But I made that choice to not double down and make up all the things I'd missed. And that was when I was 20. And luckily, a few months later, I was offered a corporate job in Atlanta. Moved from Jacksonville, Florida to Atlanta to take a corporate gig as a 20-year-old running the employee training department.

• 9:56Speaker 00

  And by the time I was 26, I was one of the vice presidents of the company, staying with Hooters for a total of 15 years. And then was recruited to go work in private equity, ended up running a private equity portfolio company called Cinnabon, helped turn it around out of the recession, built that team, got it growing for four years. Then again, as the company grew, I grew, became group president of the company, launched the CPG Omni-Channel Manufacturing and Ecom Division for all the brands. And then a few years into that, rolled it all up together, and I became president and COO of Focus Brands. And in that role, I had nine presidents reporting to me, over 7,000 locations,

• 10:37Speaker 00

  eight brands under that portfolio, like Cinnabon and Auntie Anne's and Jamba Juice and more, ran the business and had an incredible, incredible ride there. So that's the history up to, up to nine weeks ago.

• 10:50Speaker 02

  Bonjour, compadre. It's the

• 10:54Speaker 02

  How do I negotiate so many great travel deals? My greatest gadget, the Priceline app. It's got hotel deals, flight deals, rental car deals, all of those deals in a bundle, deals, game day deals, concert trip deals. No one deals more deals than Priceline. Hold your horses, there's more. The app lets you filter hotels by neighborhood, vibe, star level, and amenities like pools and spas and beach fronts. And, wait, I'm not done. Stop cutting me off.

• 11:21Speaker 03

  This episode is brought to you by Tic Tac. Lace up and get your game on because the Tic Tac lineup just got a new teammate. Dr. Pepper Tic Tac. This new double threat puts two of your favorite flavors into one box of mints. And when two iconic flavors come together, the result can only be iconic. Score big. Try Dr. Pepper Tic Tac today.

• 11:44Shane Parrish?

  Perfect. There's so many places I want to dive in. Let's start with when you're 19. Where did that confidence come from to do something you've never done before?

• 11:51Speaker 00

  It was this type of confidence that I hope to see more of in the world, but it's a humble confidence. I never thought I knew what I was doing. Never. Not once did I think, yes, I'm going to do that because I know what I'm doing. What I thought was, I can figure it out. And that is an important distinction, that this set of mindsets of humility and curiosity on one side, courage and confidence on the other, and any of them unchecked without the others, have typically been the source of my greatest mistakes. But it was, it was just this humble confidence. I knew I could figure it out. I knew I would be comfortable asking questions. I also didn't expect greatness from, from myself. You know, I just, I thought

• 12:36Speaker 00

  it would be interesting. And the idea of saying no felt so much more painful.

• 12:44Speaker 00

  Then the idea of saying yes and screwing up.

• 12:46Shane Parrish?

  You also believe in people and I thought that this was interesting. You called yourself a positive. No, it was an optimistic. What was the term you used?

• 12:56Speaker 00

  I've used a few terms, but either a pragmatic optimist or an optimistic pragmatist or a practical optimist, you know, any of those things that don't seem to belong together.

• 13:08Shane Parrish?

  I thought that was really interesting because I also sort of like by default believe in people and sometimes it comes with a cost. And, um, you know, you called it a tax earlier. I'm wondering if you can expand on that a little bit.

• 13:21Speaker 00

  Yeah, I really do believe humans are mostly magic and that, that we are all just unfinished magic and we're more likely to be the fullest extent of our magic if other people see us that way first. And, um, I've certainly learned that when I see people for their potential and their possibilities, that they seem to live up to that more quickly than when they interact with others. And I have felt that benefit of being looked at as my potential and felt the need and the ability and desire to grow into that. So the, the upside of believing in people is so high.

• 14:02Speaker 00

  And not but, and some will let us down. And the frequency that I'm let down is so low compared to the frequency that I'm proven right in people's potential. And so it just feels like this tax. It's like a single digit percentage tax. That is a small price to pay for getting all the upside that comes from looking at people as the, the great things that they are and the possibilities that they have in front of them.

• 14:31Shane Parrish?

  One of the stories that you told that I really want to make sure that we draw out when you mentioned the positive intent before was about chicken wings.

• 14:40Shane Parrish?

  And I love this story. So I'm gonna get you.

• 14:43Speaker 00

  I've only told it once.

• 14:46Shane Parrish?

  Yeah. So I want to hear this story again. I think everybody will benefit from this.

• 14:51Speaker 00

  Yeah. So I was a waitress at Hooters and there was a customer that started coming in with some friends every Friday and he would order 50 chicken wings, which is one giant plate of a mountain of saucy chicken wings and a couple pitchers of beer for he and his friends. And he would eat them all, they would eat them all, and then call one of us over and say, excuse me, there were only 40 wings here. And you need to take it off my bill or give us a discount. And I remember thinking, what do I do in this moment?

• 15:30Speaker 00

  Because if there were only 40, maybe we screwed it up. So having that default of, yeah, okay, that can happen. But then he did it again the next Friday and again the next Friday. And it became apparent that this was either a game or a scheme to get a discount. And so instead of fighting with him, which some managers and servers were starting to do, because there's no way that was happening so consistently to only him on a shift. Instead of fighting with him, I just decided before they finished the plate of 50 wings, I rang up with my employee discount, a plate of 10 wings, had the kitchen produce that, and before they were finished, brought them a plate

• 16:14Speaker 00

  of 10 wings and smiled and said, I'm sure we got it right this time. I'm sure there's at least 50 here. And his friends, who clearly knew he was being a bit of a difficult customer, all laughed and like, oh, she got you, man. And it was the first time someone didn't fight him. It was almost like customer service judo, where I was using his energy in a way to play the game back to him, but in a giving way. And he never complained again, and he gave me a really big tip.

• 16:47Shane Parrish?

  I was gonna say, I bet you that changed the behavior.

• 16:50Speaker 00

  Yeah.

• 16:50Shane Parrish?

  One of the other things that I think you went through is one day you're you're a part of a team, the next day you're leaving that team. And that's a really difficult transition for a lot of people to make. Can you walk me through some of the mistakes you made or some of the lessons you learned taking over?

• 17:05Speaker 00

  There's two things that I think have made every new role I've taken full of my most epic mistakes. One is that I'm often moving from peer to leader. And that's because I haven't hopped around to a lot of companies. So I'm literally moving up, leading within a company. I'm being chosen to level up and lead those with whom I have just worked side by side.

• 17:32Speaker 00

  And what's hard about that is none of us, you know, we're not perfect. And so all of a sudden, when someone is plucked out of the peer group to be a leader, then everything that you have done not perfectly becomes an excuse for others to not do it perfectly. And so I have been regularly confronted with my imperfections. And when you get called out, which I did, I remember the first time I became shift lead in the restaurant. And I was telling one of the fellow waitresses, she had not properly filled up her salt and pepper shakers. And she looked at me and said, well, you didn't do that consistently. Just sign my paper and let me go home. And it was this fork in the road. I'm like, oh, am I going to be cool?

• 18:15Speaker 00

  And be like, yeah, girl, you're right, you know, go ahead. And I said, look, you're right. I didn't always do it the right way. I will now, going forward, and you have to now as well. And that, over time, people start to respect that you don't, you're not suggesting that because you're now in a leadership role, that you are better than. You simply are in the role. It is always more important to do the right thing than to be right. Being confronted with my own imperfections as a peer caused me to level up faster, but it also caused me to experience a lot of conflict in each, each time I was promoted. Because it's natural, other people think, well, why, why wasn't I promoted?

• 19:00Speaker 00

  Or how is she going to tell us to do these things that she herself didn't do well? So that was just constant friction, you know, every time I got, I was promoted. But the other reason that I had these epic mistakes and, and one example that's coming to mind in particular, there is a reason often that someone is hiring a new person into a job. They want change. So I'm taking over a job or a role or creating a new role because the company needs change. And that means doing new things. And by definition, if it's new, the company's systems are not built for it. Innovation always outpaces the corporation and regulation.

• 19:39Speaker 00

  And I am typically taking over a role that demands innovation. And I remember distinctly when I became president of Cinnabon. I was 31 years old as COO, 32 when I became president of the company. It was in 2010, the heart of the recession. And the business was exclusively, almost exclusively in malls and airports. So just a lot of challenges from a demand perspective. Top line sales had been depressed for several years, starting to kind of get the business below break even. And these are small, independently owned franchise businesses. And again, in malls. So just a really difficult time. This was before the, whatever you want

• 20:21Speaker 00

  to call the retail apocalypse or e-comm boom. In addition, the brand had not been really invested in from a brick and mortar standpoint or innovation, because it was so beloved. It was in this situation that many brands get in that in an effort to protect what has made it special, that love for the past becomes an anchor. So I was inheriting all of these dynamics at once. A brand that was trying to protect, protect its legacy to its own detriment, an economic condition that was causing top line sales to decline, and then independent business owners that were not well capitalized enough to weather this storm. And when I took over that business, I did a few things really well, working very closely

• 21:05Speaker 00

  at the unit level, staying close to the employees, listening to customers, understanding what the brick and mortar business needed. But one of the innovations I and we leaned into was launching an omnichannel business, really leaning into licensing, grocery, and CPG.

• 21:23Speaker 00

  And some of that business was already there, but it was very single note. And it was clear that if the business took 25 years to get to a thousand units, I didn't have another 25 years to get to another thousand points of distribution. And so we leaned into alternative channels, licensed partnerships, developing versions of our product, co-manufacturing it with other producers and getting it to market with other distributors and putting it in the hands of other retailers like grocery stores. And when I joined, there was an existing product being developed for one of these alternative channels. And the the short version of a long and interesting story is that I told the franchisees about

• 22:05Speaker 00

  the product based on what I was told. And the reality was that it was turning in parallel path to a different product that would become, at least optically, very competitive with the franchisees products. And it looked like I had lied. So I go to the franchisees, I say, we're about to launch X product with Costco. And then a few days later, Y product shows up in Costco and it looks eerily similar to what they sell for half the price. And they felt lied to, they felt that it was an example, another example of a corporation capitalizing on the backs of these small, struggling franchisees.

• 22:47Speaker 00

  And and I really do believe outside of losing life and losing love, there is nothing worse than losing trust. And in an instant, after months of building their confidence and them believing that I would be the right leader for the right time, who really understood their business and their customers, that trust was gone. I had to clean up a big mess that I created. And and what was at work was the dark side of humility. That I thought when I joined the company, I saw some of these things going on and I thought, who am I to question them? I respect these people so much. They've been in business as long as I've been alive, or longer. Who am I to question these very mature, very seasoned

• 23:30Speaker 00

  people? I had the humility to ask that question. In that moment, I failed to have the courage to answer it. And the answer was, I am the president. And if I don't ask questions, no one will. And had I asked the questions that I definitely had in the back of my mind, I could have disrupted that chain of events, realized it was going in a direction that would need to be managed differently, and had the outcome be maybe still uncomfortable for the franchisees, but protect our relationship, the trust and the confidence. And so that now I'm in a position to clean up this mess, that yes, was a result of things in place before I got there, but absolutely was only able to become the mess that it did because

• 24:12Speaker 00

  I did not fully take up the space that my role demanded. Luckily, we have very high integrity owners. And when I came to them and said, we had the right to do this legally, but we didn't handle it the right way. The product just moved at a much faster pace than our existing systems were structured to catch. And we killed the initiative. We walked away from millions, millions in EBITDA. It was devastating for the company and the budget, but it was the only option to preserve the relationship with my franchisees, with whom I needed to build the business for many years to come. And a funny thing happens when you do the right thing for the right reasons. Just a few months later, we had

• 24:53Speaker 00

  the opportunity to put an even more optically competitive product, a mini-bond, in 7,000 Burger Kings. And when I went to the franchisees now with better systems and better communication to tell them about this opportunity, while they didn't love it, they said, because of how you handled Costco, we trust you. And that single opportunity.

• 25:16Speaker 00

  By multiples grew the EBITDA of the company. And I was able to take revenue from that innovation channel and invest it in the core brick and mortar business to accelerate the franchisees recovery in addition to the business growth they got from the marketing of that initiative. So very painful time. I was in tears, you know, every night during that time. But my, my reaction to it became legend in the company as an example of high integrity.

• 25:45Shane Parrish?

  Talk to me about how you message that to the franchisees because on one hand, you, you don't want to signal that if you, you know, you whine, you get your way and you were legally able to do this. And so I'm, I'm curious how that, the tension between those, those things went with the franchisees.

• 26:05Speaker 00

  Yeah. It's rarely about the event. It's almost always about the event after the event. Like every moment leaves a thumbprint. And I was really conscious that however this communicate, however this was communicated, however this was delivered, was going to leave a belief system in their minds. But still, because I had fractured their trust, that concern, although real of creating a monster and having them get what they want, was not the biggest problem. Like it was real, but the biggest problem was repairing the trust. And I would rather err on the side of creating a little bit of a demanding monster on a

• 26:47Speaker 00

  basis of trust than be so cautious that I don't feed their demands, that, that I don't fully repair the trust. That was very clear to me. And so I think they could feel that. When I had the conversation with them, first was letting them yell and cuss and be angry and threaten with lawyers and just hearing it. And I had, I was, I was hearing it for a couple of days while I was having these conversations and figuring out what was going on. And then I had to hear it as a group and oh, by the way, in front of my peers, my fellow presidents, because our CEO wanted to make sure the other presidents of the brands understood what can happen. And so I simply said to them,

• 27:33Speaker 00

  To be clear legally, while we had the right to the decimal, to the period, we had the right. While we had the right, just because you can do something does not mean you should. And we did not handle it the right way. And I said, let me be clear. This is exactly the type of product and business that we will be leaning into in the future. We will do more of this. But because we did not handle it properly, because you were told one thing and what showed up was another, the only option is to pull back. And oh, by the way, contractually, I can't just make it disappear from Costco. It is going to take months for it to disappear. I have to unwind inventory. We have to buy

• 28:14Speaker 00

  out of things. And so what we're going to do during that time is measure and learn and interview and see if it really does have the impact on your business that, oh, by the way, I know it's not going to have, but that you're scared it's going to have. And so we also used it as a learning opportunity. And so I think it was this balance of why am I making this decision? Because we didn't handle it correctly. And upfront in your face, we are going to do more of this, but we're going to do it better. And that, I think, created some bumpers in the bowling alley of understanding and expectation that

• 28:54Speaker 00

  when I did come back with not only more grocery and more retail, but QSR and Burger King, they were reminded that while this business is nothing without you, the business is nothing without franchisees, you don't own the brand. The franchisor owns the brand. That tension, which I think is, I have had this conversation with several founders that I advise in the last two days, this tension between leading and directing.

• 29:23Speaker 00

  And collaborating and when you take inputs and when it's time to make a decision and just being clear of why you're making the decisions that you are with what input or despite certain input and not only in a way that makes the best decision you can for the moment, but that leaves the thumbprint, the culture print of how we're going to work together in the future is like a major muscle to build in leadership.

• 29:50Shane Parrish?

  Talk to me about the tension between sort of the franchisees and then the omni-channel presence and the perceived threats and the benefits that to us looking from the outside in, we never think about.

• 30:04Speaker 00

  One, at Focus Brands, that second executive role I had at Focus as group president was to literally build a team and a business that did nothing but omni-channel retail business outside of franchising, which is not only unusual in restaurants and franchising, you could also argue at the time would be considered heresy because you're a franchise business. What are you doing selling versions of the branded product in any other channel? Many franchisees don't even like another franchisee opening around the corner, much less the branded product being in another channel. And as a result, there are very real tensions, but Focus, you know, at Focus, we figured out the magic sauce and it is

• 30:46Speaker 00

  very difficult to do. It is equal parts art and science because the tension is this perception of a misalignment of incentives. And if we are aligned in building sales together because franchisors make their money in most cases, you know, off of a percentage of the top line, in some cases also off product revenue, we are more top line driven, that if your goal is to optimize top line sales of franchisees, the question they ask is how could you possibly be doing that if you are creating alternative sales channels?

• 31:20Speaker 00

  And the obvious answer is that those sales channels are either A incremental and not subtracting from that business, or B may have some rare and occasional cannibalization, but have such a rising tide lifts all boats effect because of the brand building activity that it more than compensates for it. And the reality is that, you know, the first is more often true, that these channels are completely separate of each other. Someone's impulse in a mall or an airport is not compromised by if they buy Cinnabon cereal at the grocery store. But I learned to deeply respect the emotional element of that tension.

• 32:05Speaker 00

  And it is more emotion than it is fact. And so, part of the way to navigate that tension is to honor the emotion, to respect it, and yes, to show up with research and data and facts that evidences the incrementality of the channels. But more importantly than anything is to just put your money where your mouth is. And if it's supposed to build the brand, then it needs to be building the brand, to the point that they don't have a lot to complain about because their core business is doing incredibly well. And while a franchisee, even if their core business is doing well, in an omni-channel brand like what Cinnabon became, someone will always say, "Yeah, we're doing well, but we could be doing better, you know, if you didn't have Cinnabon coffee at Publix." But most of them don't.

• 32:49Speaker 00

  Most of them, when the brand is doing well, given the competitive landscape, and seeing how much branding and marketing happens as a result of these alternative channels, are smart enough business people to realize that is a level of awareness that drives trial, that the franchise business alone would likely not be able to accomplish. And we started connecting the dots of the ecosystem while getting smarter and smarter about communication and checks and balances and pricing psychology and retail partners and then eventually talking about the brand, not as a franchise business that had some grocery products, but as a branded ecosystem of which the franchise business is the heart.

• 33:33Speaker 00

  And then there are these concentric rings out of retail channels that provide versions of the core product and very different points in their life that are complementary to the occasions of the core franchise business.

• 33:47Shane Parrish?

  One of the things that you said there that was interesting, that it was more important to do right than be right. Can you elaborate on that and give me some examples?

• 33:56Speaker 02

  Bonjour, compadre. It's the

• 34:00Speaker 02

  how do I negotiate so many great travel deals? My greatest gadget, the Priceline app. It's got hotel deals, flight deals, rental car deals, all of those deals in a bundle. Deals, game day deals, concert trip deals. No one deals more deals than Priceline. Hold your horses, there's more. The app lets you filter hotels by neighborhood, vibe, star level, and amenities like pools and spas and beachfronts. Wait, I'm not done. Stop cutting me off.

• 34:27Speaker 03

  This episode is brought to you by Tic Tac. Lace up and get your game on because the Tic Tac lineup just got a new teammate. Dr. Pepper Tic Tac. This new double threat puts two of your favorite flavors into one box of mince. And when two iconic flavors come together, the result can only be iconic. Score big. Try Dr. Pepper Tic Tac today.

• 34:50Speaker 00

  When I was in Argentina with Hooters, I was 19 and it was only the second opening I had led fully. And I get down to Buenos Aires. And of course, the franchisee had gone through training and we had a menu and specifications and equipment that they were supposed to have for the business. And I get down there and they had done everything we told them. Bought all the kitchen equipment, almost identical menu as in the US. And as we started training the cooks, it became apparent that there was a problem. They were disgruntled, saying this food is bad and I can't believe we have to do this.

• 35:35Speaker 00

  And at first I was like, what's going on? I realized by talking to the cooks and the trainers that we had brought down. That Argentina, I would then learn, is the beef capital, one of the beef capitals of the world. And we had an embarrassingly low-quality ribeye steak sandwich that we were requiring them to cook on a flat-top grill, which was an abomination in Argentina. In the US, if you want a steak sandwich, take a ribeye, slap it on a flat-top grill, a little bit of olive oil, sear it, how do you want it cooked? Medium, medium well, put it on your Texas toast sandwich with some cheese and onions, and there you go. It was, it was so viewed as so low-quality that it was insulting there.

• 36:19Speaker 00

  Not only the choice of the beef, which should have been alternatively hyper-local source to be of the quality that is expected even in casual dining there. It was the equipment, it was that it wasn't on open flame. And I remember that fork in the road where I thought, what do I do? I'm here representing the company. These are the franchise standards. They clearly signed up for it, they bought it, it's here. Do I just toe the line and say, nope, sorry? This is the menu, get over it. Or do I listen and take that feedback and make a decision to change?

• 37:00Speaker 00

  Oh, by the way, this is before iPhones were really prominent, and I think I had a pager at that point, and we were still using fax to communicate any changes. So it was very difficult for me to communicate with the corporate office. And so I didn't have the permission or the experience with such a situation to know exactly what I should do. But I sat down with the franchisee and I said, here's all the criticism. And there is a pattern, it's not one-off. There were many other things, like having beans on the menu. Baked beans are really popular in the US. At that time, it was considered a poor person's food, a pauper's food in Argentina. And if it was on the menu, it meant you were a lower-grade restaurant.

• 37:42Speaker 00

  And so there were many of these situations that were clearly the result, now I can say, of us not having deep, local, cultural knowledge. And so I talked to him about it, I was very honest about the struggle, that I'm hearing it, I believe it, I want to do something about it. I understand it has financial implications, and I don't even know if it's going to be approved. And he looked at me and he said, anytime, it's one of my favorite pieces of advice, anytime. You are criticized. Assume first it's correct. Just allow yourself to digest that and then respond. And either you will reaffirm that the criticism is not correct and you can focus more on the why and a productive relationship, or you realize there's at least some grain of truth

• 38:25Speaker 00

  and you will work intensely to address that issue. And it was so helpful and so inspiring because the right thing to do for the customer and the employees, not necessarily the head of marketing of Hooters Restaurants at the time, who probably would have said no if I had asked. The right thing to do for the right people, the right stakeholders, was to make the change, was to get in a new piece of equipment that was a flame, you know, an open flame piece of equipment on which to cook meat, allow the franchisee to help us locally source better cuts of meat, make some changes, take beans off the menu, do a few things differently, reprint the menus, and open with that new menu. And that's what we did.

• 39:09Shane Parrish?

  Is there an example where you ever did that and you got in trouble after?

• 39:12Speaker 00

  Oh, I got in trouble for that. The head of supply chain and purchasing, who managed the food specs, he let me know that that was not my job, that I was out of line, that this is not, I do not own this brand and do not have the right to make these changes. I mean, it made me teary, you know, like, I'm a young employee and I thought I was doing the right thing and I had some reinforcement from some executives, but the one who's like approving the specification sheet and who, by the way, when I come back to the US, I need to keep working with, was angry, was audibly angry. Luckily, I leaned on the vice president of training, her name's Cheryl, and I remember calling her and I was upset.

• 39:55Speaker 00

  And I felt comfortable being upset with her. And I was like, I'm so sorry, you know, I thought I was doing the right thing. I know you support it, but this other executive is really upset and I don't know what to do because I can't, I'm down, I'm down here, you guys aren't. I can't undo this decision that I still think is the right decision. And just, you know, allies and advocates and mentors and all the words you want to use are so important. She said, "Don't worry, he's just crotchety. He'll get over it. You're doing the best you can. We'll get better at this as we do more of it." The company was growing and I was caught in the crosshairs of the company growing faster than it was ready to grow.

• 40:39Speaker 00

  And having those human-centered executives can really keep top employees kind of in the game, despite the fact that they're causing friction. And because I was the one going into these countries, I was known for friction. You know, I got to the point where after I did it enough, I was mature enough to go, "Look, you guys need to be better at this, right? I'm down here dealing with this reactively." And then when I became an executive at 26, now running these departments, I had the drive and the mission to get much, much better proactively as a result.

• 41:13Shane Parrish?

  Talk to me about the psychology of pricing.

• 41:15Speaker 00

  I think at first, the psychology of pricing is rooted in a really important choice. Are you going into the value commodity game? And if so, it really is a race to the bottom because you're competing on price and not quality. Or are you choosing to be more on the aspirational or luxury end of your segment? And even though some people might think, "Well, I wouldn't consider Cinnabon luxury." And look, Cinnabon's not LVMH, but relative to donuts and baked goods and any of those, it is absolutely luxurious. It's enormous. It's expensive. It's complicated to make. It's made from scratch. And so where you choose to play as a business has a lot to do.

• 41:58Speaker 00

  It is the important first choice from a brand perspective in pricing psychology. And then there is this sweet spot, this range of pricing in whatever space you're choosing to be in, that will optimize trial and repeat. And if something is super highly priced, it could get unintentionally relegated to being a gift. If you are building a gifting company, that's okay. But if it's... Food, beverage, consumption, and you, you need frequency, you need volume, then there is a certain price at which you're literally taking yourself out of the game.

• 42:41Speaker 00

  But there's also probably a broader range than people realize if you want to protect premium pricing. And then there's pricing psychology of beyond the thing. Bundles, subscription, you know, what are the other ways that you create value for those who want to lean in to your product or service? And those are some really interesting levers to pull, but it all starts with brand positioning. Like, what does the brand stand for? What is it about? And where are the bumpers in the bowling alley? Like, where are the guardrails for if you cross it? If you jump the shark, you're literally competing with completely different businesses.

• 43:17Shane Parrish?

  How, how would you test a price increase?

• 43:19Speaker 00

  In the early days, it was far more scrappy than, than when I left because now, you know, businesses, even franchise and restaurant businesses have so much more access to technology and more sales every day are, are digital. And so you just have different mechanisms to A B test, different dynamics. And so I'll, I'll at least, at least honor what it was like before. That was true because you're talking a physical menu board with a franchisee in random markets. And oh, by the way, in franchising in the United States, in most cases, it is illegal to mandate pricing. You can give them guidance. You can say, this is the range that is right for the brand.

• 44:03Speaker 00

  And certainly if a franchisee makes a decision, including pricing, that is harmful to the brand, then you have a lot of rights to respond. But there's a lot of room to do damage before it's like legally harmful to the brand. And part of the thing that I inherited when I took over Cinnabon in the recession is a lot of the franchisees, as small business people do, struggling with foot traffic and transactions raised prices. And the faster you raise price, the faster you accelerate a reduction in transactions, like the curve, you know, they, they go like this. And so testing in those early days was about managing the extremes.

• 44:45Speaker 00

  More than it was optimizing and being scientific. It's like at a certain point, it is obvious that your sales drop. And at a certain point on the low end, you're positioning the brand is too cheap and you're leaving money on the table that you shouldn't. And so, you know, as unsophisticated as it sounds, that was the reality in those days. You're just trying to keep people from being too low and too high. And then for the franchisees that have a lot of locations, you try to work with them to get more scientific and specific, learn from them and then share that expertise with the other franchisees. Managing, optimizing sales and frequency while also optimizing margin and profitability for the franchisees.

• 45:25Speaker 00

  And an example is I remember we clearly, franchisees had taken up price so much. I mean, $5 for a giant cinnamon roll in the recession is exorbitant. And it was becoming difficult for me to tell what was affecting sales more, the recession or the inflated prices. And it was obvious we needed an entry level price point item. We needed something that either allowed people who no longer considered us viable for pricing reasons to occasionally try. And we needed something that was cheap enough, you know, inexpensive enough that they would want to add on a drink because we saw drink sales disappear.

• 46:07Speaker 00

  Often happens in snack businesses during times of crisis, difficult times. And so that also causes, even though the price of the single thing goes up, the check average is still down because you're not getting the add on. And so I remember going in and saying, after a lot of research and some really funny stories of other things that were in the works to help the business, it was apparent that we needed to launch nationally a smaller cinnamon roll that a few of the stores had carried for a while, but was not national. And when I went to the franchisees and said, we need to offer a tiny cinnamon roll that's half the price. We need a $2.50 cinnamon roll.

• 46:47Speaker 00

  While that still protected the margin per ounce, there was massive resistance to adding a smaller, less expensive item to the menu. Even though it was obvi- like so obviously from a marketing perspective, what was needed. For, for not only price reasons, but caloric reasons, giving people more permission to indulge. It was smaller and the franchisees were afraid of trade down. Why would I put a $2.50 thing on my menu when I'm barely making it with a $5 thing on my menu? And, and when you're on the outside, the answer is also obvious. I have an answer to that question. Why should I sell a cheaper thing? Because the universe of people who want the big expensive thing is shrinking.

• 47:29Speaker 00

  And the universe of people who would buy and buy again, a smaller, less expensive thing is growing. And so go to where the puck is going, launch the smaller thing. We're keeping the same ingredients. You have no inventory risk. It's a little bit of labor risk and a little bit of product waste risk if you don't sell it. They were so afraid. Their top line was, it was like a, their roof caving in on them. And I'm coming in saying, we need to go tell people about the roof. You know, it just was very difficult. And so I, that experience in particular, really helped me hone the muscle of how to get people to change, even when they don't want to.

• 48:06Shane Parrish?

  So let's make that real. I mean, the first 30, 30 days as president at Cinnabon, you talked up your hair. You went in the store and you, you started working there. What did you learn through those questions? How did that change your, your first like hundred days? And how did it guide you? And what did you find out?

• 48:25Speaker 00

  Yeah, I did nothing but work in the bakeries for 60 days. And I mean, I hired a few people. I fired a person who needed to be let go. I had some meetings, but other than that, I was in airports, in malls, taking out trash, rolling cinnamon rolls, hours at a time in a store, not shaking hands, kissing babies, showing up to be seen, like working alongside people, enough time for the facade to sort of fade away and to really see what they're experiencing and to have quality conversations. And when I asked, what do we throw away?

• 48:58Speaker 00

  There were two answers, two buckets of patterns. One had to do with a lot of employee training materials and uniform items and just things the company still had on their checklist as a franchise that were in a bucket, but when the auditor would come show up, they would pull it all out and act as if they were using it. So we were making franchisees buy, do and use things that were not relevant to the business anymore. They had been a few years prior. And implementing technological solutions for training would end up being the answer for that. But the other one was people buy these giant cinnamon rolls. And then they're throwing it away, like they're, they're, they're either taking it home or they're not finishing it. And that directly correlated with the answer to the second

• 49:42Speaker 00

  question. When do we say no? We say no when people ask us for smaller portions. And when you find something that is a pattern across all three questions, I have learned you stop everything, everything. And you make that happen right away. And so when I said, what do people throw away? Like, what are we making you do that's not always adding value, only having this giant size? What should we start doing? Their answer thematically was smaller portions. Then if you were me, what's one thing you would do differently to make the business better? Give us more snackable, more portable. Like you put all that together and it's like, why are we doing anything else? Why are we doing anything else at all? And we stopped

• 50:26Speaker 00

  everything, which made some of the team members very upset. But it was so clear that if I, I would have failed, I would be failing the company if I didn't put a stop to these other things that had nowhere near the likelihood of maybe not positively transforming the business, but at least stopping the leaky bucket. Like the first way to get out of a hole is to stop digging. Like, let's, let's give the people what they want. It is worth it to take the verbal beatings and have the debates and get people to change, even though they don't want to by confronting reality. So what's going on in the market and what happens, offense and defense, you know, what

• 51:08Speaker 00

  happens if we do this, the positive, and what happens if we don't do this, a continued negative trend?

• 51:15Speaker 00

  Find the coalition of the willing. So who are the people already doing it who already believe and really lean into them being a part of architecting what this looks like? And then shining a light on them and letting them tell the story to roll it out and rinse and repeat. That is my change formula for rolling out anything that is unpopular.

• 51:34Shane Parrish?

  You've said in the past, chaos is your jam. Talk to me about leading with a heavy heart while navigating through tough times.

• 51:42Speaker 00

  Yeah, chaos is definitely my jam. We have to look out for ourselves. You know, the whole put your oxygen mask on first is an important reminder. That is a little tougher for the ultimate leader to navigate because when you look over your shoulder, there's not a lot of other people there who can do what you do. At the same time, all these terms we're hearing more of, you know, self-care and mental health and physical wellness, like these things are the foundation of being able to lead when we are called to lead at exceptional times of change and difficulty. And so that's just a plug for take care of yourself as best as you can when you can, because you want to be there as strong as

• 52:25Speaker 00

  you can be for that rainy day. First, being in the game is a choice. Sometimes I need to take myself out of the game for a moment. And, and what makes that easier is having a great team, being able to lean on them. But when I was an executive at Focus Brands, president and COO of the company and just had a lot of back-to-back travel. I had a keynote I was doing for a company. We were in peak diligence for an acquisition to take a public company private. I was pregnant. I'd already had one child. I was now pregnant a second time and had a miscarriage while I was traveling. And I had a keynote the

• 53:07Speaker 00

  next day and then a big meeting in another city 24 hours after that keynote. And so it was like four flights in 24 hours or 36 hours. And I remember asking myself some questions. One, am I physically okay? And I I I knew what was happening. It was not my first miscarriage. I was physically okay. I knew what was happening. I called the doctor. I talked to my husband. I'm physically okay. Am I emotionally okay? I'm not okay. But I will be.

• 53:39Speaker 00

  And then the more tactical question, will it be a positive experience? Is it right for me to keep calm and carry on, right? To do the speech the next day and go to the meeting? That is a very personal decision for which there should be no judgment. And my decision was that if I'm physically okay, I'm emotionally struggling, but I talked to my husband. I'm feeling better. And I I know because I've been through this, I will be. It's going to make me feel good to feel normal for a minute and give a speech. And so I decided to give the speech. I cried on most of the flight from that city to the next cities for the meeting. And I had a cocktail, a cocktail appointment that night with coworkers.

• 54:22Speaker 00

  And I just sent them a text and said, just got in, not feeling great. You guys go ahead without me. I'll see you in the morning. And that was this example of in one case, I chose to put myself in the game. In the other instance, to manage what was a natural emotional, intellectual processing of this, I chose to take myself out of the game. And then the next morning,

• 54:44Speaker 00

  one of them pinged me, and me again, the power of having a great team. Hey, how are you feeling? Do you want us to start the meeting without you? And I said, why don't you guys go ahead? I'll join, you know, a few minutes, a few minutes late. But just that feeling of I was able to tell them something going on, but not all the information I wasn't comfortable with sharing, and giving them the opportunity to step up to support me, whether I needed it, wanted it or not, it gave them that opportunity. And these decisions of taking ourself in, putting ourselves in the game or taking ourselves out for a moment. And then communicating with our team so that they can offer whatever help or support

• 55:25Speaker 00

  they can provide is a part of the secret sauce of navigating, whether it's your own difficult moment, or it's a macro difficult moment, whatever's going on in the world. And then I have become very comfortable with being incredibly open and vulnerable. And as a result, I think my team reciprocates that openness and it allows us opportunities to offer help for each other to even say, I know you wouldn't take yourself out of the game or out of this meeting, but it's actually no big deal if you do. You know, just those, those permissions to let us be, let us live where it feels like this living, breathing, you know, organism in terms of the team dynamics is incredibly

• 56:09Speaker 00

  powerful. And then we can give things the energy that they need.

• 56:12Shane Parrish?

  I like that a lot. You mentioned your husband. One of the things that you guys do are these monthly check-ins. Tell me about those and what kind of questions you ask each other.

• 56:22Speaker 00

  When we first met, we were both out of long-term relationships. He was out of his last one for about a year. I was out of mine for about six months. Neither of us were planning on finding romance, long-term commitment. And we met each other and, you know, it was pretty instant. And because we very quickly appreciated what we had found in each other, we both acknowledged that in our previous relationships, even though we were so happy they didn't work out because we found each other, that we actually had a role in the devolution, that's a word, of our previous relationships. And that I couldn't remember in my previous long-term relationship ever saying or thinking, I want to be a great

• 57:06Speaker 00

  partner. I remember thinking, I want to be a great human. I want to be an awesome leader. I want to be a great business person. And I'm really happy with this person. I don't remember ever prioritizing my role as partner at home in an intentional way. And, and my husband said that, my now husband said the same thing. And, and we both quickly came to the conclusion that we want to be different this time. And we want to be as good, if not better, at home. As that we are in business. And so then the question was, well, how do you do that? And the answer was intentionality. And he had read an article about a couple that had a tradition of having champagne on their monthaversary, no matter where they were in the world. And that was the inspiration for doing something on our monthaversary.

• 57:49Speaker 00

  And we ask each other a series of questions back and forth. The first question is, what's been the best part of the last 30 days? And, and the answers need to be related to the relationship. If they affect the relationship, but are about work or something else, that's okay. It's just what affects us? What's been the worst part of the last 30 days? What is one thing I can do differently to be a better partner for you? It's sort of like my three questions, but for business, what's something I should stop? What's one thing I could start or something that you really want to make sure I continue? Next is, what if, what has worried you the most related to our relationship in the last 30 days? What have you been the most grateful for?

• 58:33Speaker 00

  What are you most proud of? And then we'll typically ask a question about goals related to the family. And that is every month, we do a little tiny version every week. That's a bit more tactical, functional, schedule oriented. But that discussion of asking each other with a desire to go deep and a challenge to the other person, if they're being on the surface, like the last part of the, the best part of the last 30 days is just being with you, right? You can't get away with that. You have to, it's why the questions are what they are. They force the extremes and something can be the worst and not be that bad. Right? It's just the worst. And so we have done this every month since we met.

• 59:15Speaker 00

  It has been a, an incredible enabler to our relationship. And, and then reverse engineered it to have a similar practice for my business. It was rooted in one-on-ones that I already had with my team, but my one-on-ones with my team got better as my check-ins with my husband became more refined and consistent.

• 59:34Shane Parrish?

  Is there a particular bit of feedback that you've received from your husband that was hard for you that you'd be willing to share and completely understand if you, you don't want to do that?

• 59:43Speaker 00

  No, no, no, I have to, there's, most of it hasn't been hard, but I, I want to think of one that has been more emotional. I mean, I remember. After the second miscarriage. And in our check in, it became apparent that I had been acting as if it was much, much worse for me than it was for him. And not that he was saying it was as hard or harder on him, it was just apparent, he made it clear that my processing was different than his processing and that he was much more devastated than I had realized. Because he talked about, when we asked the, what's been the worst part of the last thirty days? It was all he would talk about.

• 1:00:29Speaker 00

  And I, he didn't say, you've been belittling my grieving, right? He didn't say that. It was apparent to me that his, what was lasting, right? It's like whatever shows up at the end of the thirty days, and we do review the calendar because it's helpful, the thirty days is a long time.

• 1:00:48Speaker 00

  Whatever makes it to that one question is relatively momentous and actionable. And when all he talked about was that this was sad and this was difficult and I realized that I was not, and I didn't criticize myself for it, it was just real, you know, that I was not recognizing how he was thinking about and processing this loss. And it was so helpful because it allowed me to then ask questions and I was much more sensitive and probing in the weeks that followed. It was really powerful. And there have been a few moments like that, that actually, I would say the common theme

• 1:01:30Speaker 00

  of when I'm hearing something difficult has to do with moments where we process something very differently and we're moving so fast in our lives, I didn't realize it until we paused to have the conversation.

• 1:01:45Shane Parrish?

  True to form, I emailed you beforehand saying I could probably talk to you all day and I would never run out of questions and I have millions of questions left. We're gonna have to do a part two. I do want to end this with a question that I've started asking people, I'd be interested in your take on this, which is, how do you want to be remembered when you're ninety?

• 1:02:05Speaker 00

  This is very easy for me. I want to be remembered as, as someone who helped people realize that they're capable of more than they know. And when I say people, I mean, everyone, but the priority is those I love most. Like that, that is my purpose. I want to help people realize they're capable of more than they know. And, and no one is more important in that group than my family and my closest friends. And it is what I hope is the lasting impression, the thumbprint, you know, after I'm gone. It's what I hope people are left with. And they, they get a little more creative,

• 1:02:48Speaker 00

  like the chicken wing story, or they are more open to coaching and criticism. So they grow faster. And, you know, in the way that I've shared, they realize their mistakes are just a first attempt in learning because they've heard me share my mistakes so comfortably. That, that trail of possibility, like the power of possible, that is what I hope I'm looked at as now, when I'm 90 and long after I'm gone.

• 1:03:21Shane Parrish?

  That's a beautiful answer. Thank you so much for your time today, Kat.

• 1:03:25Speaker 00

  Yeah, my pleasure. Thank you.

• 1:03:32Shane Parrish?

  The Knowledge Project is produced by the team at Farnham Street. I'd love to get your advice on how to make this the most valuable podcast you listen to. Email me at [email protected]. You can learn more about the show and find past episodes at fs.blog/podcast. To get a transcript of this episode, go to fs.blog/tribe or check out the show notes. Can you do me a small favor? Go online right now and share this episode with one friend who you think would love it. Thanks for listening and learning with us. Till next time.