How I Built This with Guy Raz - Culver's: Craig Culver

Episode Date: October 17, 2022

Craig Culver says that when he opened the first Culver’s restaurant in a small Wisconsin town, there were three cars in the parking lot on a good day – and two of them were his family’s. Those early years of selling frozen custard and ButterBurgers were hard, but the business was in Craig’s blood. He grew up working in restaurants run by his parents, and Culver’s was a family affair too—one that was more challenging to run than a typical burger joint because of its large menu, with pot roast, soups, and fried fish. The restaurant wasn’t supposed to grow into a behemoth chain, but it franchised quickly, and today there are nearly 900 across the country. On a per-restaurant basis, it’s one of the most profitable quick service restaurants in the country.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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walking distance from so much of the city, made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca. slash host. There was an event, a McDonald's event in Madison, and a friend of mine, a McDonald's guy, came up to me and said, Culver, you're as far as you're going to go. You had about 15, 16 locations about that time, maybe 18.

Yeah, that's right. And, you know, I wanted to punch him in the nose. I never said anything, but I thought to myself, baloney with that. Did that kind of feeling ever motivate you, that feeling of like, I'll show you? Did you have some of that inside of you? Yeah. Yeah, I do. Welcome to How I Built This, a show about,

about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Craig Culver turned a struggling family restaurant into Culver's, one of the most profitable fast food chains in the United States. You've heard me talk about the concept known as the paradox of choice. It was first identified by the psychologist Barry Schwartz. In his book, Barry argues that the more choices we have, in life and as consumers, the less happy we actually are. Now, apply that concept to a place like Chipotle or In-N-Out Burger or Raising Cain's Chicken.

And you understand what Barry was talking about. Burger, Cheeseburger, Double Cheeseburger. Chicken tenders, fries, slaw, toast. Taco, Burrito, Bowl, Casidia. Simple and efficient. Restaurants with fewer items can create a better. economy of scale because there are fewer menu items to make and thus fewer ingredients to buy. And this is a great way to build a successful business, especially in food.

Except if you're Craig Culver. He's the founder of a fast food chain called Culvers and he built it into an empire of now almost 900 stores with a menu that includes at least 50 different menu items. Burgers, chicken sandwiches, fried fish, porkloin, pot roast, chopped steak, salads, soups, cheese curds, and on and on it goes. Culvers practically thumbs its nose at the idea that choice shouldn't be vast and abundant. Everyone should be able to get what they want. And that approach has made Culvers one of the 10 most profitable fast food chains in America on a per-restroft. basis. On that basis, it's more profitable than Burger King, KFC, and Taco Bell. Craig Culver started Culvers with his first wife and his parents back in the mid-1980s in Sock City,

Wisconsin. At the time, it was one restaurant, and really, that was the goal. In the early years, just keeping the lights on at Culvers was hard. It stood across the street from two huge competitors, a dairy queen and a hardy's. But over time, people discovered Craig Culver's now famous Butterburger and also his frozen custard. And slowly but surely, Culver started to expand, first inside Wisconsin, then to neighboring states, and eventually to much of the United States. Craig Culver grew up in Sock Prairie, Wisconsin in the 1950s and 60s. His dad was a dairy inspector until 1961. When he came across an opportunity, he couldn't pass up and bought an ANW burger restaurant.

Yeah, A&W drive-in. Exclusively a drive-in. The little shack of a building had the bathroom on the outside of the building, gravel parking lot, five and ten-cent rip beer, 15-cent hot dogs, hamburgers, and French fries. We sold cigarettes, of all things. And car-hop service, there was no insight. seating. It was all car hop service. When the cars would come on to our lot, they'd literally

park around the building with no markings on where to park. They just park wherever. And so the car hop would go out and she'd put a number on the windshield and take their order. And I shouldn't say she because we had males as car hops as well. This was, I mean, this was like the heyday of the car hop era. I mean, people think of the 50s, but really it's the 60s, the early 60s that they're thinking about, which is like the golden era of going to the car hop and having a waiter, a waitress or on roller skates sometimes coming and surfing new food. You were 11 years old.

And from what I understand, it was you, you had a brother Kurt, a younger brother and a sister who was older Georgia, and basically it was a family business. You were expected to work at the A&W from the time you were 11. Is that more or less true? That is very true. And I compare it to farming. Everybody's expected to go to work.

And that's, you know, because our parents owned the place, it was okay for us to work there. But otherwise, it would have been illegal. Would your parents leave early in the morning? You'd make your way to school. And then after school, you would come to the restaurant work? Yeah. But it was a seasonal business. So basically, oh, April 1st or so, April 15th, we would open.

and then we'd close shortly after Labor Day. So after Labor Day, my parents then would have to get another job to get through the winter months. What was your dad like as a, I mean, because from what I understand, he could be tough, right, and tough on you guys and high expectations. You're right. Dad was a tough guy. And yeah, he expected a lot of us. And we were, you know, we were just kids. but one of the things about dad was, you know, he'd get mad at you. He'd react very, very quickly. And but then it would be 10, 15 minutes later, and he'd have his arm around you. You know, sounds like through most of your time in high school, you were working at the family business.

Yep. Do you remember being in high school and just feeling like I, all my friends get to do, this and I have to be here. Like maybe even feeling resentful when you were a teenager working all summer the restaurant? Very much so. We were working when other families were off on vacations and those families were coming to our place of business as a matter of fact. We were serving them while they were enjoying their friends and stuff.

But, you know, saying that, I mean, still, my parents, I don't want to. want to make them sound like they were driving us crazy with work because they were good parents. What can I say? They were great parents. So, all right, so I guess 1968, they sell that restaurant. And was there a reason behind it? Do you know why they sold it? No, I, you know, I really don't know why they sold it, but my dad was an entrepreneur and he saw something else that put a sparkle in his eye, and that was the farm kitchen resort. That was in a place called Baraboo, which wasn't too far from where you were. Now, it was 13 miles, 13 miles north of us, and it was at the north entrance of Devil's Lake State Park.

And it was a sit-down restaurant. Well, it's more than a restaurant. It's a resort. 24 cottages, a swimming pool, you know, the shuffleboard thing, amusement barn. We had miniature golfing, horseback riding, which dad leased, yeah, dad leased out to other people. In between the two dining rooms sat basically our living room because we also lived there in the winter months. Again, a seasonal business. And then we had a big kitchen and everything was made from scratch. It was a wonderful place to dine.

Huh. And so you would work there during your college breaks because I think this, This is when you were at college, you were at the University of Wisconsin in Oshkosh. And you would go down there and do what during the wait tables, cook in the kitchen. What would you do during the summers at the resort? Whatever it took, we'd wait tables. My brother and I, we were washing dishes. We'd take care of the lawns, the gardens.

Sometimes we were cleaning the rooms out in the cottages. And, I mean, there was a lot of work there. But you know what? I loved the place. I did. And I'd usually stick around the place on my day off. Don't ask me why I guess I just, I did like the place. Yeah.

And I think while you were there, you actually met a woman named Lee who would become your wife. Became my first wife, yes. Yeah. And so you were both college students at the time, I guess, working there? Mm-hmm. Right. And you studied, you studied by. biology in college. So it seems like you were kind of exploring things a little outside of the restaurant business. But I guess around 1973, which is when you graduated, your dad was having some health issues. I guess he couldn't keep running the farm kitchen. And I guess the story is he kind of sat you down and said, hey, would you take over become the general manager of the resort? What do you remember about that conversation?

It's when I talk about a great deal. It's one of the great regrets I have is saying no to my father. But, you know, I watched my parents and so many others in the industry. I mean, lots of hours, lots of hours. And I'll tell you what, seven days a week. I just, I didn't want to be my parents. I didn't. You said no.

Yeah, here I am. A graduate from UW Ashgosh with a degree in biology seemed to be going, nowhere, you know, sending resumes out everywhere, not getting much of a response from anybody. And my dad sat me down, as you said, because he recognized something in me that I didn't know I had, a passion for people, a passion for the food service industry. So, yeah, when dad asked me to take over the farm kitchen, be the general manager, what an opportunity thrown right at me. And I told my dad no.

Was your dad disappointed? You know, dad and I had arguments about many things, and I thought for sure he would blow up. But he didn't. And he just said, son, you go find your dream then. He said, I'm going to sell the place. And I said, okay, dad, you do what you got to do. I'll do what I have to do.

And, you know, I love you. And it was a mistake of my part. I mean, a mistake, I guess, because it could have given you, well, it depends how you look at it, of course, because we're talking about. Of course. I didn't know the future. I've got to say this about my parents. And I didn't realize this until years later, you know, my dad barely got through high school, handicapped with loss of hearing in both ears, eventually goes blind. My mom, sure, she got through high school, but no.

college. And I looked at, look back at them and I said, wow, mom and dad were smart people. And what they were so good at in the business world was they were so good with people, people that know how to say, please, and thank you, and my pleasure. And it comes from the heart. That's who they surrounded themselves with. And that's what any great leader certainly wants to do. He wants to, or she wants to surround themselves with people like that. So I guess you decide to pursue your own path and you've graduated college and nothing's coming through for you. You're down in Madison, Wisconsin. And I guess your sister, your older sister, Georgia says, hey, I want you to meet my friend, Tom, who works at McDonald's,

because he might have a job for you. That's right. Why don't you meet him? Is that because you just had no, you just didn't have a job? You didn't know what you were going to do? Well, Georgia, my sister is Georgia, and she knew I needed a job.

Georgia said, why don't you go visit with Tom, see if you can get a job with a McDonald's? And that's what I probably did with Georgia. I just laughed. And I said, Georgia, you know, I don't want to work in the restaurant business. And I sure don't want to work for McDonald's. And she said, Craig, you need a job.

Get over there and visit with Tom, see if you can get a job. You know, informally, we did meet. And eventually they offered me a job as a manager trainee. So you started as a management trainee at a McDonald's location in Madison. Yeah. And I became a general manager with them within a year. And, you know, you think, okay, McDonald's big deal. Well, it was a big deal.

I mean, in 1973, they were the king. Yeah. And I learned a great deal. And after almost four years with them, I decided I wanted my own place of business. And I had all these years of training with my family and with the McDonald's people. I could do this. And, well, I kind of was becoming my father. I was becoming the entrepreneur that he was.

And I knew where I wanted to go. I wanted to move back from Madison to my hometown of Sox City in Pradesh, and buy that A&W back now for the second time. Wow, the one that your parents used to run. Yeah. But I had no money. So that's when I visited Mom and Dad, said, help me out. You were, this is 1976. You're, I think, 26.

newly married. You and Lee are newly married at the time. Yeah, we are. And I mentioned Lee because she will factor prominently in the rest of the story of Culvers, which we'll talk about later. But you essentially go back to your dad and say, hey, you remember that A&W that you sold in 1968? Why don't we buy it back and operate it? Is that essentially what you said to him? Yeah. We were both living in Madison. at the time. And I went over to visit and the story goes, mom's on the couch, reading the newspaper and watching TV and dad's at the kitchen table playing his favorite card game of Solitaire. And moms with an earshot of what our conversation is going to be. So I sit down with dad. I said,

Dad, help me out here. Let's buy the NW back in Sox City. Dad, the entrepreneur, he immediately said, let's do it. Mom, on the other hand, not a risk taker whatsoever. She was crying, holy hell. And I tell the joke that we took a vote and she lost two to one. But the ANW, the original place that burned down that little shack and the new prototype was built in its place, was seating for 74 inside. a canopy off the back with electronic ordering stations.

So we bought something different than what we originally had. But we bought it back from the same gentleman dad had sold the old place, too. Right. So you're now operating an A&W franchise. It's burgers and shakes and sodas and stuff. And your dad was essentially retired at that point. He was. So was he, basically, did he help put up some of the financing and you kind of operated it?

Or was he also in there running it with you? Mom and dad were both in there as well. Lee, too. And I didn't put up any money. And, you know, eventually dad gifted me a portion of it and just sweat equity type of thing. But, yeah, Lee and I ran the place. But mom and dad were certainly there as well. And how did it do?

Did it do pretty well? We were successful. We cash flowed immediately. And as a matter of fact, the first year, we closed for six weeks in the winter months to take a nice vacation to Florida. And that was the last time we did that. We didn't do that again. Yeah. So what's so interesting about this is that history kind of repeats itself, right?

Because it's a second time that your dad and you are involved with an A&W, this same one. and then like six years into running this thing, once again, you guys sell it. Your dad makes a decision. You guys make the decision to sell it to some investors. Why? Was it, I mean, it's going well. It's doing pretty well. Why did you guys sell?

Was it just the price was so good that you couldn't say no? We're entrepreneurs. We can buy low and sell high. Honestly, that was kind of our mindset. And we can go find something else. and we decided to sell to these two gentlemen from Madison. And part of the deal was I had to stay on for two months training them in the business. And the other part was we sold it on what's called the land contract.

And that's where we're the banker in the deal. You're basically giving them the loan. We're financing it. Yep, we are. And so if something goes awry, well, we could get it back. When you made the decision to sell, I mean, you guys had bought it. it for, I mean, roughly, how much would it have cost in 1976 to buy that A&W? Like, 500,000? Oh, no, no, no, no, no. I'm guessing maybe we bought it at maybe 200. When we sold it to these two

gentlemen, I believe the number was 350,000. We sold it at. Got it. So a nice, tidy profit, 150 grand, you know, six years on. And most of that money was going to your dad. But you had to find an accident. next thing that wasn't going to be enough to sustain you for, you know, the rest of your life. And I guess, again, history kind of repeating itself was you guys, with your parents, you use the profit to buy like a little supper club once again in Baraboo, Wisconsin. Is that right? Called the Ritz Supper Club?

Yeah, this story is full of circles. And you're absolutely right. It's full of circles. Yeah. It's unbelievable. It was called the Ritz. And like all the other businesses, even the NW, even the Farmers. kitchen, we always attached our last name to the business. So it was Culver's Ritz's Supper Club.

And Wisconsin is famous for supper clubs, which basically are independently owned restaurants, not fine dining, but steak restaurants, prime rib and Saturday night, fish fry on Friday night. It's like a religion here. Salad bars, martinis, Manhattan's, and the state drink is a brand, old-fashioned sweet. But yeah, we bought the little ritz for the first time, and we ran it again as a family. It was Lee and I and mom and dad, and we did quite well there. But we only had it two years because the people that bought the ANW from us were failing. And remember, this was bought in the land contract.

It's our money in there. And eventually one day we got a phone call saying, please take this thing back. We don't want it. Wow. And honestly, I couldn't wait. I wanted it back. So basically what happened was they were paying you essentially a mortgage fee, right? You were the financier.

And they said, we can't pay it anymore. We're done. And you guys can have it back. So it's almost like they rented the business from you for two years. That's true. You can look at it that way. But when you did take it back, you didn't want it to be an A&W anymore. I mean, you basically wanted to, like, I guess, defranchise it, right, to kind of start your own place, your own restaurant?

Yes, we sure did. And we didn't think that we needed the A&W. We like the idea of doing something different and, you know, being independent. And so that's what we did. I remember we got rid of all the oranges. and browns of the A&W and everything became blue and white. I mean, this is interesting because on the one hand, of course, it worked out well, which we're going to get to.

But starting a new brand, Craig, is really hard. That is the eternal theme on the show, right? And you already had a brand. A&W is a national brand. So, I mean, was the idea at the time to start a big brand, or were you thinking this is just going to be our next fun, project, our next one-off business for the next few years? Or did you have a bigger vision at the time? I'd love to tell you we had a big vision. That would be a lie. No, it was we get to move back to

our hometown of Sox City and Prairie Sack and get an opportunity to have the business. Hopefully it's successful. And we never dreamt we could fail. That never entered our minds. We're on We don't fail. Well, yeah, entrepreneurs do fail, by the way. So, 1984, you decide, this is not going to be named A&W, this is going to be your own restaurant, and it's going to be called Culvers. And the basis of this restaurant was going to be two things, frozen custard and something called the Butterburger. And here, I've got to tell a little backstory. One day while I was at the Ritz in the afternoon, not much going on, sitting down with a friend of mine, and he was from Milwaukee, Wisconsin.

And he was telling me about when he was a kid, there was a little custard stand called the Milky Way. And they served the Butterburger. And when he said that to me, man, a light bulb went off, and I attached the two together. custard and butter burgers. How can you possibly go wrong? When we come back in just a moment, how things in fact do go wrong after Culver's opens and how they eventually start to go right. Stick around. I'm Guy Raz and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1984 and Craig has just decided to take his A&W restaurant and turn it into his own place. His new establishment has indoor dining and a carport

for car hop service. And the menu is going to center on two things, butter burgers and frozen custard. So let's start with a frozen custard. Frozen custard is basically soft served, but with egg, right, like a custard-based ice cream has egg in it versus a milk-based ice cream. It does have an egg yolk added to it. You're right. There are ice creams as well, premium ice creams that also have egg yolk added to it, but not too many. But yes, custard is served at about 18 degrees, has very low air beat into it. So it's denser. That's denser, you're right.

If you take a quart of vanilla custard and a cord of vanilla ice cream, the custard is going to weigh considerably more because you're right. It's denser. It doesn't have the air beat into it. I mean, I don't think frozen custard can be beat. I'll call it the best premium ice cream in the world. All right. So you had that idea. And then Butterburger, which was going to be not a burger slathered in butter.

Basically, just a buttered, the bun had like was buttered and toasted, right? That's what a butter burger is? Yeah, that's a, we buttered the bun. It's a tavern burger is what it is. Yeah. We grill the bun. We use all fresh meat. And we pressed the meat out on the grill.

It's not pre-pressed like paddied meat. And we got the butterburger. It's become very fashionable in the last 10 years, but what is now called a smash burger? You guys were doing it in the early 80s. We did it well before any of those people did it. Yeah, because it's basically you get the burger, the patty really thin. You get it crispy. Anyway, just out of curiosity, did you have to put a big amount of investment capital up to get the machine for the

You know, because I imagine a custard machine isn't that isn't cheap. It was $19,000 back then. Wow. That's a lot. Today it's considerably more. But, yeah, we had to, we sold the Ritz Supper Club to the same people that had bought the farm kitchen from us years prior. So you made a little bit there. Yeah, we had a little money there.

But we still needed a banker because we remodeled the place inside and out. And you used, from what I understand, you didn't have a big budget, so you basically kind of used the oval of the ANW, right? And you just kind of used that. You already had the oval outline of the A&W in the restaurants. She just like poked out the middle and put culvers in there. That became our logo. You're right. All right.

You were going to be, I guess your mom and Lee would be front of house, sort of check out and taking orders. You would be in the, you'd be cooking. You'd be, you know. Primarily in the kitchen, yes. And then your dad would help out too. And then you hired some people, of course. Of course. Restaurant opens July 18th, 1984, summertime in Wisconsin.

Really nice. Mm-hmm. Warm. A very busy highway as well. Highway 12. Busy highway. All right. And that first day had a dude.

Was it packed? No. No. Nobody knew what a butterburger was. Nobody knew what frozen. custard was. So there was an extreme learning curve. Right across the road from us was Hardee's. 1984, the fastest growing burger chain in America. Their parking lot is full. Also across the street from us was the Dairy Queen. 1984 is a year the Blizzard was invented.

Their parking lot is full. And I like the joke that, you know, here we sat with two or three cars. I drive a car, my dad drives a car. And so if you do the math, we maybe had one customer. I mean, did you think, all right, but we're different than Hardee's, or were you able to explain to people, our burgers are different than Hardee's, or our custards are different than dairy queens? Or was it frustrating because you couldn't get that message across at the beginning?

Well, we didn't have any marketing funds. So where that came across, what was if they visited our place and had a burger or had the custard. Because custard, again, I'll never say anything negative about any of my competitors, but frozen custard is not dairy queen. Clearly it's not dairy queen. And, you know, my dad and I, we are, when it comes to quality, we may have to charge more, and we do at Culvers,

but we're not going to cheapen something to get to a bottom line easier. And by the way, at the beginning when you opened up, and we're going to, I mean, the menu today is very extensive, but then was it just burgers and custard and fries, or did you have other things in the menu from the beginning? No, we had other things. We had an extensive menu. Chicken, bone and chicken, and pork tenderloins, and, of course, our cod filet sandwich, which really was a carryover from the Friday night fish fries. at the supper clubs that we had. That's a lot of menu items. I mean, we've done, on this show, we've talked to the founders of Chipotle and of, raising canes and five guys.

And they don't have that many things in their menu. No. You had a lot of stuff. And that's tricky. I mean, that. Well, you got to remember where we came from. We're in a small town, small town in Wisconsin. And, for example, a Taco Bell, you know, has a pretty deep.

defined audience. Yeah. Their audience is maybe 18 to 30 or 16 to 30. Well, in a small town, you've got to attract everybody. Young people, the middle-aged people, the seniors. And coming from the supper club business, we were used to big menus and things like that. But thinking back, I mean, I would have loved to have a simple menu like in and out or something like that where, you know, it's just basically a bird. I mean, it's so much easier to operate.

But again, in a town of, you know, five or six thousand. You had to be everything. We had to attract everybody, and including all those people going by in the highway. Yeah. We needed them in the worst way, and we needed the townspeople as well to support us. All right. So you opened up 84, and you're right across from a hardy's and a dairy queen, which is tough because of our national brands.

And so how did you do, I mean, were you sustainable by year one? Were you making a profit? No. No, we lost lots of money during that first year. How did you survive? How did you pay your employees? I mean, was it just loans, bank loans? Yeah, we had a banker that believed in us.

He didn't believe in the concept of Culver's necessarily. He believed in the Culver family. He had worked with us and other businesses that we've had. and he knew how hard our family worked, and he knew that we would do whatever it took. But saying that, midway through that first year, man, if I didn't have my family around me, I would have thrown up the white flag

and got out of there and done something else. But my family was there, and that second year in business is when we started to, the business started to work. What changed? Nothing really changed. It didn't. What changed was we had a marketing program.

And you know what the marketing program was? Our guests were telling other people about this little place in Sox City with a blue roof that serves butterburgers of all things. And so our business started, people were coming from 50 miles around to have frozen custard or a butterburger. And it was a third year. when we made money. Craig, one of the things that I'm curious about was I know there was an emphasis on customer service. Like when you go into a chick filet today, it doesn't matter where you go.

They have a reputation for just being incredibly friendly. Same with In and Out Burger. But having great food isn't enough. Like to be treated well and kindly goes a long way. And how did you get your team? How did you get people to understand that to really make people feel. welcome when they came in. You know, I'll take that story way back to my mother. Mom was one of those people. When you walked into her place of business, she just made you feel warm and fuzzy.

And she made you feel like she knew you like family, like she knew you for years and years and years. And what a competitive edge that is. And she set the example for us kids and for the other team members and like the farm kitchen, the Ritz, and also the guests, when you go into a restaurant and you know who the owners are, don't you watch them? I do. Totally. Totally. What are they going to do? Do they do whatever it takes? Do they bend over and pick up, you know, some trash that might be on the floor or clean the floor or do whatever? Do they carry bus tubs back to the kitchen? That was my mother. It's also such an easy, well, I shouldn't say easy, but it's a fairly simple hack. It's not expensive, right? You can, if you have a restaurant that is in a competitive environment, like a pizza place or a burger place, you can really differentiate it with customer service. You can really, if it's exceptional and people come in there and walk out of their feeling like they were treated really well, they'll go back. Absolutely. I mean, I want to go where I'm treated.

with respect and kindness and they fuss about you, heck, why wouldn't you want to go to that place? But man, if you can add great food with great hospitality, that's a powerhouse. I don't want to compete against people like that, as a matter of fact. Yeah. But how do you get the people in the restaurant who are hourly workers, hourly employees, to do that, to believe in that in the same way?

It's very hard. When it's yours and your, Sure, it's hard. And you're cleaning the floor, it's yours, is a little different than when you've got an hourly employee who, you know, for a variety of reasons, may not have the same incentives to be like that. Well, that's why the hiring process is so important. And just to hire bodies, it's not the right answer. I'd rather go without than hire, you know, people that just don't have a heart. And then once you bring them on your team, do you have a training program in place?

Not only the operations, but also on hospitality. Yeah. And then the leader has to set the example for everybody around them. All right. So sort of a year and a half in, you start to see the light. Like you're starting to turn a corner. By year three, you start to see a profit. But from what I read, there was a really important decision that you made,

which was to, right, you put in a drive-through that year. That was a scary time. And that was something you originally did not want to do. You liked the carport idea because it was still a like A&W style carport, right? Like you would go out and they'd take your order. They'd bring the food to you. Very nice, very personable. A drive-through seems could be a bit more impersonal.

Right? Was that your feeling about it? It was. Yeah, it was. And it was just too difficult to have the carport. and a drive-thru as well and the inside dining. I just thought that would be way too difficult.

But a friend of mine who sold us our custard mix at that time said, Craig, if you put a drive-thru in this business, I think we did like $600,000, the prior year. He said, if you put a drive-thru in, you'll take this place over a million dollars in sales. And at that time, that was a milestone. to have a million-dollar restaurant.

Yeah. And so we made that decision. And yes, it was a tough decision. Because I remember, you know, the local TV stations from Madison coming out and do stories about us, frozen custard and carhop service and all that stuff. But we made the decision. And we took it over a million dollars in sales, just like that gentleman said. And so just to put this in context, a million dollars in sales in that year,

You still had a lot of employees, 16-17-employees, so still a small business. But a big milestone, was the, I mean, I'm assuming drive-through just infinitely more efficient than the canopy in the car-hops. Is that right? And you can just, you can cycle through customers faster. Well, we weren't very good at it, certainly to begin with. And still yet today, I mean, we're still in the kind of the car-hop service. Right. You don't get the food from the window.

You only get the drinks. and then you've got to park your car, and then somebody still brings your food to the car today, to this day. So you can call that person a car hop if you want. Right. But why was it so much more profitable than the canopy and car hops? Is it just because it was more efficient? Oh, we were doing more business. Yeah.

Play more business. And not all through the drive-thru, the dining room became much busier as well. Back then, I mean, our drive-thru was maybe 20% of our sales. Today it's in excess of 60% of our business. So it energized our business even more than what it was. And Craig, I mean, here's, I mean, this really was, it was a family business, right? Because it was, of course it was. It was your parents were involved.

Yeah. It was you and Lee, your wife. And she was all, you also had kids too. And she was also working at the restaurant. Well, tell me a little bit about what, what Lee was doing at the restaurant. Well, Lee was a full-time mom and also working, I don't know, 30, 40 hours at least in the restaurant. And one of the most difficult things, and probably for any business, is balance of life. And, I mean, my balance was totally out of whack.

And Lee's was not easy. And I got three great daughters. And if it wouldn't be for Lee, you know, know, don't know because I wasn't always there. Yeah. I mean, as somebody who runs a business with my wife, it can be really great, but also tough because, you know, everything's integrated, work, life, it's all, it's all the same thing. And did you, I mean, from a business perspective, I mean, you know, your dad was involved, your mom was involved, you, Lee, how did you all decide who did what?

It just fell in place. And Dad counted the money in the morning. I'd take care of ordering the provisions for the restaurant. Lee and I were both involved with hiring our staff. But Dad took care of the back office with the financial stuff. And you were ordering, presumably, I know you weren't ordering like pre-made patties, but probably some things made more sense to have delivered frozen, like French fries, I imagine, right? Oh, yeah.

French fries weren't, it didn't make sense to us. We looked at cutting our onions for onion rings and flowering and batter dipping them ourselves. But other than that, I mean, you know, as far as the produce and stuff, it all came in fresh and we sliced and diced everything. We made our own soups. We made the chili. The pot roast, we used to buy inside rounds. They were about 20 pounds of big chunks of beef roast. And we'd salt and pepper it, put onions over it, leave it in the roaster overnight, and then come in in the morning, and it would be at a stage where it literally would fall apart.

And I mean, when you came into the restaurant in the morning and you'd smell that beef roast cooking, man, did it smell good? But today it's different. We've got suppliers that probably do a better job at what we were doing back then than what we did. So, Craig, for the first few years, it seems like it was clear to you that this was going to be a standalone family business, Culver's great, you know, community restaurant, and that was going to be it. That was it. But four years in, you did get somebody who was interested in in opening a franchise, and I guess you agreed to do it. After our third year, Dad and I looked into the possibility of franchising, and we hired a company out of Chicago. And they got us licensed to franchise in a few of the surrounding states in Wisconsin.

We really didn't do any marketing on that, but family approached us. I won't mention the town because one year later, we got a letter in the mail from them saying, you know, we don't want to be part of this story. They could not make it succeed. I won't say that. They decided they didn't want us. involved in it. And in other words, they, you know, they have to pay a royalty and things like that for the name and everything else. And they decided they could do this on their own. They didn't need us.

So they hired an attorney. We negotiated out of the deal. And I said after that event, I'll never franchise again. Yeah. Sounds like you didn't get along. Well, you didn't see I die. There was not a lot of chemistry between you and them. That's the way it turned out, yes. Yeah. Okay. So, You vowed not to franchise again, but of course you did. In 1990, you decided to give it another try. Yes. And why? What was that because your vision for what Culver's could be changed? Or were you starting to think it could be a national business? Or were you still thinking, no, it's going to be, you know, maybe just a small number of locations? Yeah, I still wasn't looking, you know, on a grand scale whatsoever. How could you? How could. Would you? I mean, we weren't successful in the first one, but now we got a shot at a second one. What I did learn is we've got to put together a formal training program if we're going to be in the franchise business, which we really didn't have before.

For the first franchisee, I think we, it was two weeks. Well, you can't learn this business in two weeks. Today it's a 17-week program at Culver. And the other thing with an extended training period is you really get to know the franchisees, the trainees. And that's a culture-building opportunity for your company. The stronger the relationships are the stronger your culture. So, but I'm curious, I mean, you had a successful business. Then you've got the first successful franchise.

And after that, you really, I think you opened many, about 14 of them in the next year, 1991, 92. do, but you still weren't, I mean, what was limiting your ambition and scale of this thing? Like, why weren't you thinking, we can be the biggest fast, like today you meet an entrepreneur, right? And I'll say, and they have one shop. And they might say, we're going to be the biggest taco place in the world in 10 years. You know, you hear that a lot, right? And of course, it doesn't always happen. But you understand the ambition.

But it seems like you were very, you weren't really that interested in becoming that big. Am I right about that? That's true. And still yet today, I mean, yes, we continue to grow, and I know growth is important, but, you know, I'll never forget. One of the things my dad said to me early on, he said, Craig, it's not important how many restaurants you have. What's important is how many good restaurants you have. And you need strong leadership in every restaurant to make it work. Yeah.

So early on, yeah, we did grow by about 14 restaurants. restaurants in a year's time in the early 90s, and we couldn't handle that growth. It was too much for us. We didn't have the infrastructure in place, meaning we didn't have the people in place to open those restaurants, to train those people. But so what happened is we decided to close down franchising for about a year to get the infrastructure in place. And what I found out was when you tell somebody, that's interested in a franchise that they can't have one, they want it even more.

Yeah. So when we finally reopened, about a year later, I mean, we had a lineup of people that wanted a Culver franchise. When we come back in just a moment, how somebody from McDonald's belittles the business and how that just motivates Craig to grow faster. Stay with us. I'm Guy Raz, and you're listening to how I built this.

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So it's the early 1990s, and after one bad experience trying to franchise Culvers, Craig decides to try it again. Franchising is a quicker way to grow, and it's not all your money going into each location. Yeah. In order for us to grow that way, it would have been very slow. and eventually we would have probably had to go public to get more funds.

Or take on a lot of outside money. Yeah, and really be leveraged. And that wasn't how we thought. And we assumed, or I assumed back then, that franchising is easy. You just find somebody like yourself and it'll work. Well, that's not how it works. The first franchise experience we have was went sour. And it isn't as simple as just finding somebody like yourself that's going to work every freaking hour of the day.

It just doesn't work that way. This is the thing, right? Because you're running your own restaurants at the time. And now you're starting to franchise in Wisconsin and then throughout the 90s more and more even outside of Wisconsin. Now you are the mayor of a city, right, essentially. You've got a constituency of franchise. who have their own views on how things should run. And now it's not just you and Lee and your mom and dad in the kitchen.

You've got a lot of cooks in the kitchen. You've got all these franchise owners saying, you know, down here in our part of the country, people don't want this. Or the cheese skirts don't work here. I mean, you must have started to get some of that. Early on, had a gentleman from Chicago that he wanted to change the name of the Butterburger to the Better Burger. You can't call it the Butterburger. My God, what are you thinking? He said to me...

Transfat, butter. Butter went out of a certain time. And I remember that meeting. Finally, I slapped my hand down on the table. I said, we're not changing the name of the Butterburger to the Better Burger. It remains and will retain the name Butterburger. And he stormed out of my office and eventually they sold short time late. But I wasn't going to change the name at the Butterburger.

No way. Boy, I'm my glad I did. Yeah. But, I mean, it requires a lot of handholding, a lot of management, a lot of, presumably a lot of travel, too. Like, now you're running a network of Culvers. You are in charge of preserving the brand integrity. Did you ever go into any of the restaurants early on, you know, in the 90s? and just get frustrated.

Like, no, you're not, this is not right. This is, you're not doing this right. Of course. Of course. And yes, that's very frustrating. But today, and I visit a great deal of restaurants, and I'm not going in there to be an inspector. I'm a cheerleader.

But obviously, if I see something that's definitely wrong, I'll change it on the spot. But that's not why I visit the restaurants. That's the job of other people in our organization. They're the so-called inspectors. But it's a partnership. It's a collaboration between everybody in our organization. How did you – I've read that you have said in the past that your approach to the business was early days or earlier.

You know, you focused really on the customer. The customer was king, which is certainly not a bad way to approach it. But you realize ultimately it was your employees who had to come first. I mean, it sounds like that maybe there was a, you know, it was a hard lesson to learn that maybe you were not focused enough on your employees as much as you should have been, certainly in the early days. That's correct. And I think that was a mindset of most people back then. The most important person in your business, it's the customer. stupid, it's the customer. No, it's your team members. And if they know that they're that highly

regarded, they're going to take care of our customers or our guests, as we like to say, as if my mother was taking care of them. So yeah, I learned that after enough people tapped me on the back and said, I'm going someplace else to work or going to go do something else. I always hated that tap in the back because I knew what it meant. Craig, the business really begins to take off in the 90s, right? And, you know, I wonder when it started, because, you know, now we think of Chipotle or Five Guys or ShakeShack as just these ubiquitous brands that have been around forever and they haven't. But I wonder if as you were expanding in the 90s, do you remember ever getting any skepticism from the bigger players in the industry, you know, the kind of thinking or maybe kind of signaling to you that like, hey, Don't, you know, don't get ahead of your skis here.

You're still small potatoes. Yeah, there was an event. It was a McDonald's event in Madison, a fundraising event for them. Ronald McDonald's house. And I went. And as I was exiting that evening, a friend of mine, a McDonald's guy, came up to me and said, Culver, you know, you're as far as you're going to go. And when was this, roughly?

Probably 93, 94, something like that. You got about 15, 16 locations about that time. That's right. Yeah, that's right. And, you know, I wanted to punch them in the nose. But I never said anything, but I thought to myself, baloney with that will be just fine. And I'll never forget that. I'll never will.

Did that kind of feeling ever motivate you? that feeling of like I'll show you. Did you have some of that inside of you? Yeah. Yeah, I do. Yeah, I do. So, Craig, did you have a particular strategy about how you expanded? I mean, presumably you start in Wisconsin because you're known there.

And then was it, okay, then we'll go to the next state, and then we'll go to Minnesota, and we'll go to Illinois. Or was it just whoever wanted a franchise? No. of our philosophy on how we were going to grow. And it was kind of like within the 50 miles of the last restaurant that we opened. And we stuck to that until we opened in Texas. And my sister wanted to open a restaurant in the Dallas area.

And another gentleman who was originally from Chicago was living in Austin. He wanted to open a Culver's there. And me, forgetting how big Texas was, said, okay, if I got two, two, we can do this. Well, it's so difficult when you don't have any scale. So I made that mistake many years ago, but we continue to grow in concentric circles. So we take our brand along with us, and that's very important because that takes a lot of the risk out of it for that operator open. just outside the last restaurant. As you really start to expand rapidly, right, in the 90s and in the 2000s, I imagine you were on the road all the time.

Did you go to pretty much every new franchise opening? I did. I know that by 2012, you had something like 470 locations, 20 states, mainly in the middle of the country and of the United States. And this is important, Craig. You know, we talk about everything on this show because what happens in business. has an impact on personal life and professional life and oftentimes are intertwined. And I wonder, I know that you and Lee split around this time. And, you know, she helped you build this business up for sure.

And I wonder if, I mean, there are always personal sacrifices that happen when you pursue your work, right? And I don't know. I mean, were you on the road all the time? Did it mean that you, in some way, some senses, couldn't focus as much on family? Balance of life was very difficult for me because my life was culvers, culvers, culvers, and I wasn't the best spouse and I probably wasn't the best father either. And nor was I probably as good to myself as I should have been.

And I also talk about spiritual life as well. I believe it's very important to find time for your spiritual life. And I'm not saying don't work hard. Yeah. But I find, if you can find more balance in your life, you're going to be better at all walks of your life. I believe that. And so I probably should have stayed home more than what I did. I should have told my wife I loved her more than what I did.

I should have gone to more of the volleyball games and soccer and stuff with the children. You know, I can't take it back, however, but I can be a better person going forward. Yeah, it's interesting because the way you talk about your dad, right? I mean, your dad was always working, and he was not around all the time, but you talk about him with incredible fondness. He was tough on you. He was tough on your brother. But it's also almost as if you're married. memories of him have changed and shifted as you've gotten older and you've kind of seen

life through your prism and understanding his better. Am I right about that? Yeah, yes. I mean, dad and I and mom too, I mean, we were business partners. They were my parents, but we were also great friends. I mean, we'd get together at least once a week. So, you know, dad mellowed as he got older. Mom was always as sweet as she always was and had a lot of great times together. Craig, you eventually got remarried. And then came another major change in your life. In 2015, you stepped down as CEO of Culver's.

I mean, I know you're still involved with the company, but how much? I mean, have you slowed down? or is your day still kind of focused around Culver's? Ask my wife that question. Okay. She says, I've failed miserably at retirement. So I guess that's the answer there. This was an entirely family-owned business.

And by the way, over the years, you must have gotten a lot of offers to buy you out or to just take it over or private equity coming in, seeing the success of this business, kind of happening under the radar. Yeah, we've had many, many offers and people calling and where you're going is we sold 30% of the business to work capital. Right. Minority share. Family still has 70%. So we truly own the company.

But you decide to sell a percentage of it in 2017. And that was because I guess you couldn't really take money out of the business, too much money on the business until that point. Well, it was. It was taking some money off the table. Not that we needed to do that, but I'm glad we did it. And I'm glad that we did it with Roark. They own a bunch of, I think they own parts of Jimmy Johns and they have stakes and Arby's. Yeah, they own a lot of our competitors, as a matter of fact.

But I'll tell you what, they're a silent partner and they're a great partner. Hmm. The pandemic happens, right, comes down. Now, you're not obviously the CEO, but still very much involved. I'm assuming you were anticipating this is going to be like 2009 or worse. Didn't know what to think. Nobody knew what to think. And I think the first thought that went through many people's minds was we got to lay everybody off.

And I thought about that for a day or two. And I said, wait a second. We can't do that. We got to keep our people. We have to. For one, we've got to keep them working. But the other is we've got a drive-through, and let's take care of our guests going through our drive-thru, as if they were coming into our dining rooms. In other words, hospitality. Let's keep our hospitality going strong.

And like most people in the QSR segment, we had positive years. We were up during the pandemic, we opened 101 restaurants, and we were up a combined, like 26% in comp sales. Wow. And I think most of our competitors would probably tell you similar stories. Craig, over the years, you've seen other chains, QSR, Quick Service Restaurant chains, flounder and some disappear. I mean, Hardee's was a huge threat to you earlier in a career,

and I don't even know where Hardee's is today. I mean, steak and shakes or disappearing. There's a bunch of them, right? The burger chef. used to be one of the biggest chains in America doesn't exist anymore. So tastes, tastes do change, right? I mean, of course there are McDonald's around, Burger King is around, but taste do change. And chains, even big chains, can go out of business. How do you make sure that you guys are innovating and staying competitive, especially when you see, I don't know, people moving, for example,

to, like, chickens really taken off in the last 15 years, right? With raising canes and Chick-fil-A, it's a huge, I mean, even Taco Bell now has chicken, like everyone's doing chicken. So how do you stay innovative and make sure that that doesn't happen to you? It certainly is innovation is very, very important. But just because you bring in a new product doesn't make your business necessarily stronger. New things, I mean, it's great if you hit a home run and it's on your menu board forever or whatever. but usually give it six to eight weeks and it loses interest. So innovation is important, but being a leader in the business, that's far more important

and continuing to attract the right people to your organization. That's far more important as well. All right, Craig. So Culver's has, I think they're like 850 more than that locations in 25 states in the year. 883. 883, okay. As of this recording, probably more. once. True. You started this business with your dad, you know, really 1976, sort of. And, you know,

it came from a tiny place in Wisconsin. And here you are. The guy who's started this business with eight, almost 900 locations, one of the most profitable quick service restaurants in the U.S. on a per restaurant basis. High demand to open. new ones, and it's made you very wealthy, you know, whether you had anticipated that or not. I mean, it's a pretty remarkable, right, especially given that you came from a tiny place and some butterburgers and frozen custard turns into a national chain. Yeah. How much of that, of everything we've talked about, do you think has to do with just how hard

you worked and how much you grinded away and how much of it do you think is connected to just getting lucky and just the world being what it was at the time and it kind of bringing your business to cruising altitude. There was a lot of work, a lot of hard work, a lot of care, a lot of love. Lucky, I'll take lucky anytime, but, you know, as the golfer says, you know, the more I practice, the luckier I got, it's the same thing in the business world. Yeah. I take our business so personally, because I do love it. so, so much. But I think if you don't take it that way, you may not care as much about it. So I can't just let it go. I can't. It's who we are, who I am, who my family is. And yeah, I have sleepless

nights. I had a sleepless night last night, as a matter of fact. I'll always have a fear of it going in the wrong direction. I will. That's just who I am. That's Craig Culver, co-founder of Culvers. By the way, the restaurant's fans are pretty serious about their cheese curds. Last year, as a joke for April Fool's Day, Culver's announced a new menu item called the Curder Burger, and the response was so huge that Culver's actually made it a reality. For one day only at Culver's, you could get a burger topped with a massive fried cheese curd,

and they sold 136,000 of them. And most culvers sold out of Kertrugers before lunch. Hey, thanks so much for listening to the show this week. If you enjoy our show and want to show your support, please spread the word. Tell a friend about how I built this or send out a message on social media. If you want to contact the team, our email address is hibt at ID.wondery.com. If you want to follow us on Twitter, our account is at how. How I Built This, and mine is at Guy Raz.

On Instagram, we're at How I Built This, and I'm at guy. dot Roz. This episode was produced by Alex Chung with music composed by Remteen Arablewee. It was edited by Neva Grant with research help from Sam Paulson and technical assistance from Patrick Murray. Our production staff also includes J.C. Howard, Casey Herman, Josh Lash, Liz Metzker, Carrie Thompson, Catherine Seifer, Elaine Coates, John Isabella, Chris Messini, and Carla Estabez. I'm Guy Raz, and you've been listening to How I Build This.