How I Built This with Guy Raz - Kona Ice: Tony Lamb

Episode Date: November 6, 2023

Kona Ice founder Tony Lamb had a knack for sales since he was a teenager - a skill that served him well when he decided to sell Hawaiian-style shaved ice in Kentucky, where people had barely heard of it. After thirteen successful years as a vacuum cleaner salesman, Tony launched his first shaved ice truck in 2007. Fueled by a bad experience buying freezer-burned popsicles off a battered ice cream truck, he built a custom-made vehicle with a tropical vibe and a built-in “Flavorwave” that let customers dispense their own syrups. Two decades after surrendering his salesman’s suit for a Hawaiian shirt, Tony has grown Kona Ice into a sprawling franchise with 1500 trucks across North America.This episode was produced by Casey Herman with music by Ramtin Arablouei.Edited by Neva Grant, with research from Katherine Sypher.Our engineers were Ko Takasugi-Czernowin and Robert Rodriguez.You can follow HIBT on Twitter & Instagram, and email us at [e-mail] 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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at hibt at id.wondery.com. And we'll share your favorites right here in the ad breaks in future episodes. Thanks so much. You guys are the best. You know, everyone knows that guy or you've read about that guy that just he can't get out of his own way and he just entrepreneurs until he dies and he never hits anything big. And you had that in your mind? You thought, am I going to be that guy? Yeah, I mean, there's times that. But, you know, the responsibilities I've got four kids and a wife. And I'm sitting there with one truck thinking, can I scale this? But, you know, I was having a great time. My kids thought I was the greatest because I'm driving an ice cream truck. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Tony Lamb went from a door-to-door vacuum salesman to founding Kona Ice, a franchise empire of shaved ice trucks that now number more than 1,500 across North America.

If you've listened to this show long enough, you'll know that we've had some brands and products that start. started in places that didn't really seem to match. For example, famous Dave's barbecue. Dave Anderson started his barbecue empire in a remote part of northern Wisconsin. I mean, I don't know about you, but when I think smoked brisket or babyback ribs, I just don't think Hayward Wisconsin. But somehow, it worked. Same with uni pizza ovens. This brand has transformed home pizza making.

And yet the ovens were invented by a man from Finland who now lives in Scotland. And let's be honest, when you think of a great Neapolitan pie, you imagine the warm sun of Naples, not mid-afternoon darkness in Edinburgh. Now, today's story is about a guy named Tony Lamb who lives in Kentucky, the home of Hawaiian shaved ice. Okay, I'm kidding. Hawaii, of course, is the home of Hawaiian shaved ice. that fluffy, snowy cup of ice drowning in colorful, fruity syrup. Tony Lamb figured out how to turn it into a huge business, a business called Kona Ice. It now has more than 1,500 shaved ice trucks across the U.S., Canada, and Mexico.

The brand generates over $400 million in annual revenue, and it was started by a guy who, for much of his adult life, sold vacuum cleaners. Now, if there's one secret, one thing that every successful entrepreneur has in common, it's the ability to hear the word no and just keep plowing ahead. And that, in a nutshell, is what it takes to sell vacuum cleaners and Hawaiian-style shaved ice in Kentucky. Tony Lamb was born in the late 1960s. He grew up in Parkersburg, West Virginia, youngest of four kids. Tony actually shares a birthday with his dad Tom, and growing up, he watched and learned a lot about entrepreneurship and sales from his dad, who also sold vacuum cleaners for a brand called Rainbow.

In fact, Tony describes his dad as, quote, the greatest vacuum cleaner salesman to ever put on a pair of alligator shoes. My dad just got this bigger-than-life personality, and I had the weirdest perspective ever growing up, because my dad did very well selling vacuum cleaners, and he drove nice cars. We had a nice house. And then I had buddies who their dads were doctors or lawyers, and they didn't live as nice as we were living. And they're like, what is your dad do for a living? I was like, he sells vacuum cleaners. So my perspective was, you know, okay, on the hierarchy of life, you've got vacuum cleaner sales and then doctors and then lawyers and bankers. So I always aspired to be a vacuum cleaner salesman because I thought that was the road to Mercedes and, you know, quality of life. Tell me about like he was going door to door, selling them like to, like were these for industrial use?

Were they for home use? What kind of vacuum cleaners? No, it's the rainbow vacuum cleaner. So it's it's an in-home door-to-door. They use referrals more so than they go door to door. So if someone buys a rainbow, they'll send you to four of their friends so they can get a free share. And he started out, you know, when I was little, I think he was a regional or a district salesperson or whatever. So, but then as I got older, he promoted up to the company. And when I was in high school,

he was the president of Rexair, which is the company that produces them. And they're sold in 80 countries around the world. And it's still a thriving business. So all right. So you're kind of growing up with just watching your dad do this and become quite successful in this business. And I guess you also kind of had a knack for selling because in high school you did sales jobs, right? Like you worked, I think you worked at the gap at a certain point. I did. I'm always surprised when people know details of my life. Yes, I worked at the gap was my first W-2 job. I detailed cars for a long time. And then I wanted to get a real job. And I took this job at the gap for $3.35 an hour, which was minimum wage at the time. But the lesson that I pulled from the gap, and I'll never

forget this was I was at the gap and they said hey they're announced this big Christmas contest and whoever sells the most and I'm like well I'm I'm gonna kill everybody and I come in and my schedule has been cut and I'm I'm scheduled for like 20 hours this week and Charlie McKay is scheduled for you know 36 hours I'm like how am I supposed to beat them and so I'm asking the manager and she says well I'm trying to give make it even because you sell more and I'm like well how is that fair and I remember going home to my dad and I'm fussing around and and he said Tony, listen, when you work for somebody, they're always going to tell you when to work, how to work, and basically establish your worth as a person.

And I'm like, wow, that's, you know, very, very sobering as a sophomore in high school. But it stuck. And I thought, yeah, you're right. So eventually I just moved back into detailing cars. And I had a pretty good little car detailing business for the rest of my high school career. Tell me what was it about sales that, you know, what was it about your personality that made you good at sales? Are you just somebody who can talk to anybody? I think that was it, Guy.

I think ego is checked at the door when you're in sales. I have no inhibitions, and I say that, and I don't say it boastfully. I say it almost apologetically. In the fact that I'm not an extremely attractive gentleman, so, but when I was asking, you know, girls to go out, I was. never offended when they would say no. And I would just go on to the next one because it's a, it's a numbers game. It's just like, just like vacuum winter sales. So, okay, so, so when it's time for you to go to college, I guess you go to the University of Kentucky and you study marketing. And I guess, I guess to earn some money during that time, you're also selling rainbow vacuum

cleaners like your dad. Right. But what, you're, you're also thinking like after graduation that you'll interview for like an office job, like a professional job working under fluorescent lights? Yeah, I was a fairly good student in UK. I got the grades. And the big job interview that came on campus was a pharmaceutical rep, Merck Pharmaceuticals. And everyone in my little peer group was talking about it. And they said, Lamb, you know, you should do this because you've got all the sales experience. You've got enough chemistry background, you know. So I go, I, you know, get a suit. I go to the interview. I sit down with the guy. And, man, going to tell because I sold vacuums all the way through college and I was actually pretty good at it. So I'm in there telling this pharmaceutical rep that, you know, a good salesperson, da-da-da-da-da-da, and we're having this conversation.

It's going good. And he said, man, I'm really excited about this interview. And I said, I am too. Because you got any questions for me? And I said, yeah, how much do I make? And he said, I'll never forget this. He said, $36,000 a year and a company car. And I said, what kind of car? What kind of car? Because my God, it better be a Ferrari because I make $36,000 in a summer selling vacuum cleaners. He goes, well, because you have to transport a lot of samples and things, it's usually a minivan. And I'm like, for the love of God, man, I look like this. I can't drive a minivan. I never get married.

Oh, man. All right. So I guess you walk out of that interview and decide to stick with selling vacuum cleaners after college. I mean, you're good at it and you were making good money. Tell me about what you would do. Like, sell me a vacuum cleaner, right? I'm in, let's say I'm in the market to buy one, right? And I'm looking at this brand and at that brand and then you come to my house.

Oh, guy, nobody's looking to buy a vacuum cleaner. That's the whole thing. So you knock on the door. You've got an appointment because Mary Smith has bought a rainbow, so she gives four of her unwilling friends names. And so you call their friends and say, hey, Judy, I was wondering if I could schedule a time to come in and show you and John the Rainbow. I'll be quick about it. I'll do it fast.

You guys get a little three-day, two-night vacation package, time share presentation. We didn't say that part. But get a little three-day, two-night vacation, pays for your hotel accommodations. So let's schedule a time. And she's like, my husband's never going to go for this. I know, but tell him I'm fun. It'll be a good time. I'm never going to pressure you guys.

I just want to show it. get the credit and I'll be out of your hair. All right. Lord forbid the husband answers the door because he's pissed at me immediately. And they all start announcing, we are not buying. And I'm laughing, having a good time. I come in and just, and I just try to disarm him a little bit. But, guy, there's so many nuances of selling.

And I'll give you some fun, fun things. If at some point you can figure out whether the guy's got a hobby or not. So let's just say, and I'm always looking in the cars, in the garage, when I come in and say, man, you guys got a beautiful garage. Why don't you show me your garage and he'll take me out? If I see a set of ping golf clubs or a John Deere riding lawnmower, and probably most wives don't realize that a set of ping golf clubs cost $1,500. Yeah.

But I will announce that at some point if I'm not getting the sale. And the guy who just like sits back and smiles real big. And I'm like, you know, John, if this was a set of golf clubs or that John Deer riding lower, and I could talk about this all night, but it's not. This is a product that's going to make Judy's job a lot easier in a house. And all we really need to know is if she won it, would you help her get it? And I think she wants it. So the question comes down to what you help her get it?

And of course you would. So what's your middle initial? Wow. Because you just ask for their middle initial. You pull out the sales receipt and you put your head down. If you get T or S, you've got the sale. But you got to do your, you got to do the presentation right. You got to bring them all the way through the journey.

Wow. There was this, there was an old Zig Zig Zigler. And I, and Guy, God help me if I don't quote Zig Ziglar a thousand times today. But my dad, the joke was that I think he put Zig Ziglar tapes in my crib growing up because I, I can talk like Zig Zig Zigler and I can recite most of the stuff. But his great line was timid salesmen have skinny kids. And so I wasn't going to be timid. I was going to ask for the order. That's how I married my wife 31 years ago, was I asked.

I didn't assume. I just asked for the order. Wow. So one of the things that I've noticed in all the hundreds of interviews I've done the show is that when I talked to people who started out in sales, the thing that sales really helped them to learn was how to, how to move past no, right? Like, for a lot of people, they hear no and that's it. That's the end of the road, right? But then, if you can figure out how to hear no and understand that, that's just the beginning of the road. Well, it's all in how you interpret no. And the way I was always taught or the way I believe is the answer is no based on the information that I have right now. So the no is not going to change by you pressuring me. The no only changes if you get,

give me more information. So, okay, why would you not purchase the, well, it's just too much. You can buy a $200 vacuum cleaner at Walmart, where I can buy a $1,500 vacuum cleaner from you. Well, let's break that down. Let me go ahead and do a 15-year cost study. So these vacuum cleaners that you buy from Walmart are going to break down every three or four years. You've got to buy bags. You're not getting the job done. Or you can spend 1,500. You've got a product that will last 15 years, but most importantly, you're going to get the job done. So let's make it to the point where it's just an obvious yes, and you'd feel almost stupid, saying no, before you get there.

All right. So meantime, early in your career, you are selling vacuums, and you, help me understand. I mean, you were a rep for the Rainbow Systems, but you had your own team. It was sort of like a real estate agent that eventually, when they become good, they build their own team around them. Is that how it works?

Yeah, you basically, I was in Lexington after I graduated. I stayed there for a year, and then I moved to Northern Kentucky, and I started my own office. And very magically, I mean, I don't want to take too much credit for it, but we built one of the largest offices in the region within a year. Wow. So, yeah, I mean, I'm, again, I'm 23, 24 years old. I'm making, you know, $10, $20,000 a month. Yeah. And I ended up with six offices.

This is by the time I was 25. I had 300 salespeople. I was running a multi-million dollar business at 25, selling vacuum cleaners and started door to door. I guess when I say it like this and I'm having this revelation, I'm like, hey, that's not too bad. It's amazing. So, all right. So you grow this regional office to quite a big business. And I guess what around sort of the early 2000s, you decide.

to leave, to retire? I mean, was that what happened? It was. My dad had stepped down from the company. I thought he was treated very poorly. They rewrote the history of rainbow. And my dad, who I feel like, was responsible for a massive part of this growth. All the programs were running, they were my dad's ideas. And he got like two paragraphs in the in the history of Rexair. And I was like, you know, I'm done. You know, I'll go do something else. Little did I know how much money I was making in comparison to the real world. But I did. I got very discouraged. I didn't like the new management coming in. I, you know, I got a couple other opportunities. And I just started slowly disassembling the organization. I would

start selling the offices off to the managers. And it slowly just, you know, all went away. It's interesting because earlier you talked about how, you know, sort of checking your ego at the door is a really important quality in being a salesperson. I think it really is. And just in life, right, in general. But it sounds like in this case, it did kind of challenge your ego or your families. It doesn't sound like the same Tony Lamb that, you know, that didn't really care what people thought about him. Listen, nothing will build an ego like, you know, success in that. And again, I'm a little. I will freely admit, you know, you get a little big for your bridges. I was very young and I was winning all the contest. And I was, they fly you to Hawaii, going all these trips.

And yeah, you get a little, you get a little bit too big for your bridges. And then like I said, and I was like, you know what? I'm going to quit this business. And my wife said, are you sure? Because we are living pretty good. And we get these trips every six months that we go on that are fabulous. And so she wasn't a fan. But I just thought I had some other options out there that turned out not to be as, you know, wonderful as rainbow was.

So at this point, from what I understand, you start to do some consulting work. Like I guess there was a friend of yours that you were helping out this guy, Ed, Ed Reynolds. That's it. That's exactly right. And I guess he had, Ed had this struggling furniture company in Louisville. And what was it exactly? Do you have just one furniture store? Was it several?

It was he had several, but the what we did in Louisville transpired into his whole, all of his furniture shops. Got it. Okay. And so we turned it around and fairly quickly. It got going pretty good. But then they were taking those. How did you do it? He had finance people running a sales operation. Yeah. And so you really needed sales people and you needed some marketing. And I was, I'll tell you this real quick. I didn't have a marketing budget, so I would come up with these yard signs. Now, remember, it's buy here, pay here furniture. So it's not... What does that mean? So it's not bank financing. So

you come in and you want a couch and you put $200 down and you pay them $50 a month until the couch is paid off. And they charge you some interest. Oh, yeah, charge you interest and they make the profit on the couch. So yard signs. And I produced like a thousand yard signs, buy here, pay here furniture, you know, no credit checks, blah, blah, blah. And I started putting them all over Louisville, Kentucky. Like, like signs of people when they're running for office, like those kinds of yards. Exactly. There's 18 by 24 signs. I put them at every intersection. Business started going up. The city of Louisville calls the furniture store and said, we're getting ready to find you for all these signs. You can't put signs up. And I'm like, we paid some high school kids to do it. I'm so sorry.

We'll get them down. He goes, so a week later, they call back because there's more signs now. because, you know, and he goes, we're going to find you $1,000 a day. Well, we were making probably $5,000 a day. And I was like, I'll take the fine. I read that at a certain point you bought billboard trucks on eBay? I will give you credit, guy. You have certainly done your research. I could not get billboard space in Louisville where I wanted it.

And I'm on eBay. I'm looking, you know, trying to do maybe temporary billboard or signage or something. and I came across a billboard truck and I thought, huh, and I bought a billboard truck. And then it became its own business on the side. Oh, you would rent the truck out, or you would basically rent the billboard out on the truck and have somebody drive it around. Yeah, you go get a retired guy and say, hey, go get stuck in traffic. It's brilliant.

Slow down. You're going too fast. I ended up with a bunch of those trucks, and that's kind of a segue into Kona Ice because the billboard truck business was turned into a really nice side. But my wife still loves the billboard truck business because it saved us. You know, those were leaner times in the in the Lamb family. Why were they leaner times? I mean, you sold your vacuum business to your managers and it was a good business. So I have to assume that you did pretty well out of that. Well, if they would have kept going, I would have done really well. But, you know, they slowly, they're going to pay me $100 over

for the sales for the next five years. But, you know, then they started shutting down. because they didn't have all the skill sets to keep running it. So I got about probably a third of what I was expecting. And, you know, all the other little things that happened in life, you're like, oh, well, that didn't work out. Well, okay, that didn't work out. Did you, I mean, the billboard truck idea is a great idea, right? Because it's, it is almost like, not quite, but almost like a passive income business, which is, you know, as you say, you find some people who want to pay for the bill. And by the way, how much would it cost to place an ad on a business?

billboard on the truck per week or how did you price it? Yeah, you want to charge, because you've got it inherently, you've got gasoline and labor, so you've got a couple hundred bucks a day in expenses. So you're going to need to get $500 to $700 a day, you know, for it to be profitable. So I started selling each individual side of the truck. The truck holds, looks like a big TP or whatever, and it has two sides to it. So I started, what I would do is I went to the, all the casinos in Cincinnati and I, because they were the biggest media buyers at the time. What happens in casinos when they come to towns, you know, after a while they stopped buying all the ads, the revenues go down and this thing kind of petered out. But then Kona had started up.

I want to ask you about Kona just a minute, but before that, I mean, were you looking for the next thing like that, like an anchor that would be that thing for you? Yeah, I mean, what I hated about rainbow was the lack of residuality. Truly, you have to sell another vacuum cleaner every single day. I had buddies that were in insurance and they worked their butts off for a couple years, then coast for the next 20. And I'm like, you know, I want some of that. Yeah.

And so what was so fabulous about the ad truck was the $500, $600 a day, but it was you're at the mercy of the ad media buyer. You're at the mercy of, you know, how much can I generate. I ended up with, you know, multiple billboard trucks, but it was all on me. You know, how much can I sell? But I was always in the back of my head looking for I want to be able to sell something and make a little bit of money on it for the rest of my life. Yeah. But you didn't know what that was.

I did not know what that was. Yeah. All right. So the idea for what would become Kona Ice really started a few years before you launched it. So let's first talk to about the idea. I guess this is around 2004. and it's as simple as like a bad experience of an ice cream truck? Yeah, the origin story, and this is true, no embellishment.

I moved into a subdivision. We're in the backyard with my kids. We hear the music, and my kids all look at each other and take off running to the front yard. And I remember it varies distinctly. My wife and I kind of jog behind them. Here around the corner comes a 72 Chevy van, Blue Smoke rolling out of the back of it and, you know, this funky music playing. And I was like, oh, my gosh, it looks just like a child predator.

It's just screaming. And this guy sticks his head out the window. And he doesn't have a shirt on. He's got a beautiful array of fresh prison tattoos. Okay, maybe I'm exaggerating that. But he was heavily tattooed. So they got their popsicle. and I'm paying the guy.

And they're opening up, their freezer burnt, ice-encrusted popsicles, and they are disappointed. However, I know for a fact, if the guy would have turned around and come back, they would have had the experience all over again. But it's an ice cream truck, ice cream truck. And so that became, that is the true origin of Kona Ice because I said, can you imagine if that truck would have been beautiful? Can you imagine if the product would have been good? And this is almost a two-week conversation that I just kept obsessing over where I'm sitting there.

And I'm like, what about if that truck would have been all glass on the side and you could have looked in? And it would have been a high school girl or a college girl driving it with a uniform on. And you can see what she was doing. And the products would have been, you know, fair and reasonable. And the experience would have been engaging. What would have happened? And my assumption would be as you started to research this, you would quote, come to the conclusion that this was not a good business. Like ice cream consumption in the U.S.,

for example, has dropped considerably from like the 80s to today. And the ice cream truck business, you know, depends on the price of gas and like the repairs. And there's just so much evidence to show, certainly at 2004 when you were looking that that business was in decline. It was like getting a taxi medallion, you know, in New York City. Like that was not the business that you would naturally think, oh, yeah, there's something you could do here with this. Right. But let me tell you another story that kind of helped that. So when I sold off the rainbow business, my personal secretary, as her severance, I bought out a video store in Cincinnati because they were dying, but we moved it to Warsaw, Kentucky, which is a small town but rural and country where they're still renting videotapes at the time. So I moved this video store down there, and we get it all set up. She did a great job. I was there. I was there. one time and customer came in and she was trying to turn it over into food and uh where she was

selling ice cream and different things like that was a customer came in while i was there and she sold a shaved ice tool so she was doing shaved ice at her her video store basically yeah okay and she put some flavoring on the guy walked out and she made three bucks or four bucks or whatever the number was and she said i love that and i said why she goes because i made it's all profit it's just ice it's just shaved frozen water yeah and she says even if i buy the best flavoring that's out there, the most expensive flavoring that's still wildly profitable. You know, you make a milkshake, you sell for $3, you've got a buck 50 in it. He said, I sell a shaved ice for $3. I've got, you know, 20 cents in it. And that's 10 cents for the cup. Basically pure profit.

Yeah, it's pure. And again, being a serial entrepreneur, you only have to hear that that one time. Yeah. You know, bing, my ears, my senses go up, spidey senses start tingling. And I was like, huh. When we come back in just a moment, how Tony builds a tropical-themed truck for selling shaved ice, and then changes out of his salesman suit and into a Hawaiian shirt. Stay with us. I'm Guy Raz, and you're listening to How I Built This. How I Built This is supported by Crucible Moments,

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new podcast series to discover how some of the most transformational companies of the modern era were built. Crucible Moments is out now and available everywhere you get your podcasts and at crucible moments.com. Go listen to Crucible Moments today. If you want a business, then Squarespace is your one-stop shop for engaging with your customers and building your brand. With Squarespace, you can easily design a website that stands out from the competition, and that's just scratching the surface. With Squarespace Video Studio, you can create pro-level videos effortlessly, helping you tell your brand story, reach new customers, and drive sales. Squarespace also allows you to easily display posts from your business's social profiles on your website with just a few clicks. You can automatically push website content to your social media channels so your followers can share it too.

And Squarespace offers tons of analytics so you know what's driving web traffic and sales and, can adjust your marketing strategy accordingly. Check out Squarespace.com for a free trial. And when you're ready to launch, use offer code built to save 10% of your first purchase of a website or domain. Hey, welcome back to how I built this. I'm Guy Raz. So it's around 2007 and Tony Lamb is leaning into a new business idea based on two recent experiences. The first, a not-so-fund time buying ice cream for his kids,

a truck, and the second, watching someone make a very tidy profit from shaved ice. And then a third thing happens. The guy that Tony's been working with on the furniture stores, Ed Reynolds, he happens to buy a Mr. Softie truck. I actually thought he bought it just to sit at his house so he could eat it, but he ended up putting a guy in it driving it around or whatever. One time he said, you know, hey, the ice cream truck's not making money. What's your thoughts on it making money? Because I had turned his furniture business around a little bit. So you look at the ice cream truck and you're like, well, it's complicated. It's expensive. It's the product is too much. You've got to have a mechanic and a salesman. It's got to get down to a one person operation. Your food costs are too

high. You've got way too much waste. You fill the entire ice cream machines up. If you can't sell it all, you know, what about shaved? You know, and we just back and forth, back and forth. And this became a very big conversation between us. Yeah. I'm working for them. My contracts are kind of coming to an end. We were sitting. We were sitting there. at Stringtown restaurant in Florence, and he goes, hey, we've talked about this to we're blue in the face. What do you think? And I said, I think I want to go do it.

You would pursue this. You would see if you could turn ice cream trucks into shaved ice trucks, basically. And he goes, you want a partner up? And I'm like, nah, I don't want a partner. And he goes, I'll back it. And I was like, you know, I do want a partner. I don't want to spend the last of my family savings. But yeah, your money.

And by the way, I guess I should mention, the reason Ed could back you is that in addition to the furniture stores, I guess his primary business was that he owned a finance company, right? And I think he gave you like half a million dollar line of credit to get things going. Yeah. So you were going to pursue this. And as somebody who grew up with a Snoopy snow cone machine, what was the difference between what you were going to do and what were called snow cones that you would get at like, count? county fares. It's all texture of ice. The snow cone, I mean, the way I picture it, my upbringing, was you get it from a truck or you get it, and then you either have to let it melt, or you just take the chance of just ruining the roof of your mouth and possibly busting some teeth off.

Because it was like a ball shape, ice, and you would put some syrup thrown on it. Right, and you go at it like crazy, and then bite the, end up biting the bottom of the cone off and letting all the syrup drain out into your mouth. taking me back to Little League. Yeah. Yeah. Okay. So that's different.

First of all, for people who have had shaved ice, either in Hawaii or wherever, like, these are specialized machines. It's like, it's almost like a vice, right, that you put a huge, like, round ice block in. And then it twirls around, like, to get that really nice shave. But I have to imagine you had to spend some time, like, learning about that whole thing. And, like, what is it? Where do you get these machines? How do you make it? 100%.

If I would have had to rely on, I think it's a swan that does the big block of vice, like you're saying, a vice that forces it into an open razor blade that spins on an axis and shaves it off. It produces a very fluffy product. I don't think I would have pursued all the way through because the speed of service is slow, the danger, the skill that you have to have. You can't just let an 18-year-old go in there with a spinning razor blade. I mean, you're going to have to train this person to be able to do that. And I didn't want that. I don't want to have something so proprietary that we just can't duplicate it on a large scale. So I found an ice shaving machine.

It produced very acceptable, not snow cone, very acceptable shaved ice on a very quick time frame. You know, in a couple seconds, you have a cup full of pretty fluffy snow. Yeah. So we're now talking about, you know, we're going back to 2006 where you really are jumping into this and you are starting to really figure out how to make this work. Because we weren't going to, it wasn't going to launch until 2007. But at that time, and even to some extent today, unless you go to Hawaii, they're probably huge parts of the United States where people aren't that familiar with like shaved ice. Correct. You know, it's not, it's certainly in 2006. So what? What made you think that that was going to be a winner? The fact that I've never seen a kid turn down a sugary treat. I get a little grief for that, too, because I used to make the statement, hey, it's not hard sales. We're selling sugar to kids.

And, you know, now that's the worst thing you can possibly say. You're an animal. Like, everything in moderation, lighten up, you know. But you really thought that it was just a matter of time. And I guess because the margins were better than selling popsicles or ice cream. Yeah, because you can handle the, you're basically, you've got your own manufacturing in your truck. Yeah, yeah. So.

All right. So you start, let's talk about kind of like breakdown how you started to think about this. First of all, you want to remake the experience. So starting with the truck, how did you start to think about that? Well, a lot of the ice cream trucks I saw, you know, people are hunched over, running back and forth in the van, opening up freezers, passing out stuff. So you want to be a comfortable experience for the operator. Yeah. And I started getting the visualization of what I wanted pretty early on.

You look at an ice cream truck and it rolls through your neighborhood and you're like, oh, my gosh, it just, it looks terrible and it looks disgusting. But your kids are screaming and you're trying to, you know, you lie to your kids and you say, well, when it plays music, you know, that means. it's out of ice cream. And, you know, so you lie to your kids about stuff like that. Let's get the presentation down to where you can't say no. You know, a truck drives through it looks like Disney World and your kids are losing their mind. You can't say no to that. I mean, what can you say no to on that? Yeah. All right. So you have this line of equity to start, you know, half a million dollars. You've got to start with a truck. So, you know, you bought these off-the-shelf billboard trucks, were you just going to buy an off-the-shelf, like, an off-the-shelf, like, used ice cream

truck and repurpose it? No, I was going to go strict custom from the ground up. I got it. So you, and where at that time could you source those from? Well, I was sourcing my billboard trucks out of, I was having them built up around Elkhart, Indiana. Okay. Elkhart, Indiana is this mecca in the United States for the RV industry.

They build all RVs of it. That's right. That's right. Yes. And so there's all kinds of fabricators up there. went up there. I spent a couple days. I went around and visited several fabricators and introduced myself, told him my idea. I was probably the fifth person that day that walked in and had a screwy idea. So I found a guy that I was really going to go with. He was very professional. It was a big operation.

But then one guy was a very small operation, but he was, I really liked them. And so I actually, I called him to say, hey, I'm not going to go with you. I'm always respectful when I get bids. Hey, I don't think I'm going to go with you. And he said, why not? I said, said, well, you know, I told him why. And he said, Tony, neither one of us are going to make a lot of money if we only build a couple of these things. He said, but if we get in there and figure it out, because you're going to need somebody to go through the ups and downs in the beginning, but if we can figure this out, because this is what, I don't want to just build you a truck. I want to get in business with you. And, you know, I just loved that attitude. And his name's

Tony Marquetti and, you know, doesn't have to sell me too hard, you know, his name's Tony. My name's Tony. I'm like, is this God talking to me? And did you have a design scheme for what you wanted to look like at that point, or not yet? I did. I had a really close friend, Tony Guard. Another Tony. Another Tony. Wow. And he's an industrial designer. And then Tony was so talented. He was also able to kind of help me, you know, map out the look of the outside of the truck. I want a tropical truck. I just don't want tropical colors. I want a scene on the truck. I want the escapeism, And when someone comes up to that truck for 10 minutes, I want them to be on a tropical island. So you wanted it, like, painted, like, because, I mean, I'm describing the truck today,

but you wanted it, like, to look like the ocean and sort of the sand on the ocean and almost like a painting on the side. It's got, like, you know, a bamboo hut, basically, selling shave ice. Yeah, some palm trees, some little characters in the sun, you know, in the sand for the kids to like. And then tropical music plane, calypso music plane, and just these ideas just kept coming. And you're just – but it all, again, comes back to you want this experience. All right. So you're working on the truck with Tony in Elkhart, Indiana. And I guess you also wanted it to have like a self-service part.

Like when you go to a fast food place, you can fill up your soda yourself, right? Which my kids unfortunately love too much. Right. as much as I prevent them from drinking all that soda. But you wanted a way for, I guess, for kids to what, to flavor it themselves? Well, if you start talking to kids about snow cones or even shaved ice in some way, either you go to a hut or you buy a pre-made product, and the complaints are there's never enough juice on it. Or it's not exactly the flavor combination that I wanted, blah, blah, blah, these different things.

And so the idea was, hey, can you get the economics right to where you can turn it over to the customer to put as much syrup on as they want. But here's the moment that I had it. So I'm talking to Ed, and he's got two sons that are hilarious. And I think they were nine years old at the time. And I said, hey, boys, let me ask you a question. I said, a truck comes down the street. It's a shaved ice truck, snow cone truck or whatever. And it pulls up, and they hand you a cup of fresh, unflavored snow, and you get to go to the side and put as much flavoring on as you want. What's your reaction to that? And they both, I mean, you're giving me the keys to the magical syrup. Yes, give me more of that.

That was a moment that I thought, this has to happen. So you work on the economics, you figure out the flavoring and how you can dispense it in a way that it's not crippling financially, where kids, you know, are putting, you know, sticking their mouths under the spout and pulling them on. So you've got to design the flavor wave to where a kid's head, an eight-year-old's head won't fit in there. This is the dispensers are called flavor wave, and it's like 10 or whatever. I don't know how many flavors. But basically, the idea was you could take your own, you get to shave ice in a cup, and then you could just put the flavors on, whatever you want to put on,

which is, as you say, I mean, presumably before you had the prototype, you had to ask yourself, is this a good idea? Is this going to get out of hand? Is this going to break? I mean, would it be better to just have, like, bottles, like, ketchup bottles of syrup? I don't know. Oh, yeah, and the variations are legendary.

The very first flavor of way would fold out from the truck. Okay, so you picture this thing folding out from the truck, and it's made out of aluminum. So, in essence, Guy, there was a two-foot aluminum-edged sickle, as I like to say, driving through neighborhoods. What could possibly go wrong with that? Then the next generation, we had a handle where you could close it from the inside, but no one closed it. So then it would drain into the – and all the flavors, the excess flavors would drain. And, you know, variation, variation, until let's work on embedding this into the truck. I hate to say stuff like that because then people realize how maybe unintelligent that I am.

All right. So the other thing I'm wondering about is – You had some savings, right, but you weren't financially secure for life. Like, you still needed to work. And this was a risk. I mean, you had some of your money in this. And obviously you had an investor who believed in this idea. Did you have any doubts at all going into this that maybe this might not work?

Or were you 100% confident? You know, I guess you would say progressively, I'm 100% confident. You know, the more meat you put on the bone, the more you realize this has got some legs. So the truck shows up. You start working the truck. The customer reaction was so good. You're like, okay, there's something magical here. We've got to figure everything else out.

But at the core, it's working. I've got a winner here. Now, just don't screw it up. So this was June of 2007, and the first trucks are ready. First truck, period. First truck. And you were going to be the first truck. driver of this truck. I was the only guy, I say employed, but I wasn't being paid. So I was the only

guy in the game. So this is what you have to do as an entrepreneur. I mean, if you see the movie The founder like Ray Kroc was in his 50s trying to sell ice cream machines and getting the door slammed his face. You had run a really successful business selling vacuum cleaners. You had 300 people working under it. You had a really very successful business. Here you were. Here you are almost 40 making shaved ice and selling shale. Like I don't, was any part of you like, I used to oversee 300 people and now I'm like an ice cream man. I'm not saying, and I hope this doesn't sound condescending. I'm just trying to get into your head. Like, oh no, I listen, my buddies you know, kids loved me, but my buddies were harassing me. They were heckling you. Oh my gosh.

I pulled into one of these cul-de-sacs. And as soon as I turned down and I thought, oh, for the love of God, Jim lives at the end of this cul-de-sac. I go down to the end of the street, and he comes out. I'm like, ah, gee, many Christmas. And he's like, Lamb, what are you doing? And I'm like, you know, he comes out, and he's just in an Armani suit. And he's like, lamb, you used to drive a nice car and wear a nice suit. What's happened, brother, is the economy just?

And I'm like, Jim, this is a pretty, I mean, I'm wearing a Hawaiian shirt. This is not the worst thing in the world. You were in a cheeky van with a painting of the ocean on it in a Hawaiian shirt, which is awesome. And you're living the life. But you've got to explain it a lot. You've got to tell them how good it is. They don't see how good it is. But this is a good story, actually, because why Jim and I are sitting there talking and probably 15, 20 kids come up.

They're all buying Kona's. I'm serving them out and, you know, collected them. I probably made 50, 60 bucks or whatever just sitting there for, I don't know, 10 minutes. And he goes, well, you didn't do bad here. And I'm like, you know, we're laughing or whatever. And I drive away. And, of course, it was a little bruising on the ego at that moment. But I thought, tech on it, you know, I'll just, you know.

But, you know, I'm sitting there with one truck thinking, can I scale this? Yeah. But, you know, the responsibilities I've got four kids and a wife. And, you know, everyone knows that guy or you've read about that guy that just he can't get out of his own way. And he just entrepreneurs until he dies and he never hits anything big. And you had that in your mind? You thought, am I going to be that guy? Yeah, I mean, there's times at it, but, you know, I don't know.

I was having a great time. My kids thought I was the greatest because I'm driving an ice cream drive. And so when you started to drive around your neighborhood, you would just drive down streets and then as you would see kids run out of their homes, you would just pull up on the sidewalk and stop? Yeah, it's, it's, I took this fellow out by the name of David Jones, and I was training him to be a driver. I think we had three or four trucks at the time. And we pulled into this cul-de-sac, and I said, David, here's the trick. We got to get those two kids right there off that porch. Drove around.

I said, go real slow. I said, I said, ah, we're not getting them. I said, let's stop and go out and clean the flavor wave. So we stopped the truck. And this is early on because not everyone knew the Kona truck. So I went out and so these kids come wandering down off their front porch. And they're like, hey, what do you got there? I said, oh, this is shaved ice truck and da-da-da.

And they come in. And then people start, because I'm stopped. Music is playing. Lights are flashing. here comes some people. And I've got a picture of this somewhere in my phone because I remember getting back up on the hill and taking a little picture.

It was about 60 people gathered around the truck with lawn chairs. I mean, it looked like something out of Norman Rockwell. They're skipping ropes. They're drawing hopscotch on the ground with chalk. And David remembers this. And he said, you remember the time we got stopped in that cul-de-sac

and it turned into a block party? And I was like, yeah. I wonder when you, I mean, what did you have to make? What did that truck have to sell per day for it to be worthwhile? What was your goal? In northern Kentucky, we have a 210-day season. I remember these numbers. And I said, well, for inclement weather and blah, blah, blah, you've got about 180 days to sell.

If you can make $1,000 a day, you make $180,000. You've got food costs and labor costs and operational costs. You can make, you can net well over $100. thousand dollars, even debt service meant to pay the truck off over a five-year period of time. So I remember calling Ed and I said, hey, I've done the math and I think I can get the truck up to about $150,000 a year. And he's like, no way. And I'm like, yeah, I think I can. He said, well, that's you. How many, by the way, how many hours a day would you have to work to hit thousand bucks a day? You really start making your money after schools. In the summer, you make money

all day long, all the way till night time. As soon as school starts up, you really start making your money about three or three-thirty. We were primarily neighborhood sales. That's what the business model was. And I was trying to get neighborhoods up to $1,000 in night. I got a couple neighborhoods up to $1,000 in night through some techniques that we were doing. Techniques meaning what? Well, it's all about consistency and it's about knowing. So I would go to Crystal Lake subdivision. I would sign it all up in the morning. So cone and ice is coming tonight. You put signs up in the neighborhood, okay?

Oh, yeah, yard signs. Just like the same playbook from the furniture shop. Okay. I don't have many aces up my sleeve, brother. I keep going back to the well. No, it's a good playbook, yeah. Okay, keep going. So now as kids are leaving and parents are leaving, they see the big signs.

Conan's coming tonight. You make a little deal with the houses at the edge of the neighborhood. Hey, if you keep this sign up, you know, I'll give your kids. free Kona when I stopped by. So the signs go up. You do the same path. So you're basically at the same house or the same street almost every once a week. So I got this subdivision in northern Kentucky to an easy thousand dollars a night. This is 2007. 2008. You remember what happened in 2008. Massive financial crisis. Yeah. My neighborhood sales start dropping precipitously. During the financial crisis, you saw sales drop, even though some people still spend money on

like small pleasures like ice cream. They do. And so it doesn't take much to drop your sales in a neighborhood. I mean, you saw a lot of people not in homes. You know, you think about, you know, there's more for sales signs, especially at that socioeconomic level of starter homes with a lot of kids. And, you know, someone says, do you do good in country clubs? I'm like, no, because the houses are too big, too far away from the road and the kids

are in the basement. But yeah, you get a little starter homes or something where, you know, they're full of kids. And the parents want them outside. You know, get outside. You're driving us all crazy. So that's where you do the best at. But those kids, there's not crazy amounts of disposable money floating around out there. So, yeah, we saw it tick down.

Yeah. But we have these amazing margins in Kona. So we are responsible with the amazing margins. Because the margins, I mean, your costs were frozen water and syrup. And obviously the cups and gas, but in general, like, your overhead was quite low. Oh, yeah, just crazy low. And so how long did it take you before you hit profitability? I paid the equity line off this in 2008.

So I had ran it all the way up to about 400. Yeah. How did you pay off a half a million dollar equity line in less than a year? Well, we spent a lot of it buying the trucks, and then we were able to sell the trucks. We were... Oh, you sold it to other people. Correct. Right. So, all right, let me go to this.

Let's talk about selling the trucks, right? Because was that the idea that you would basically franchise this out to other people from the beginning? I didn't know whether to franchise or license or just sell the truck as a commodity and, you know, let people just do what they want. Yeah. Franchising is wonderful because it helps maintain the integrity of the brand. It helps make sure that you can control the brand. You can control the brand. Rather than just licensing it or just selling the trucks.

Yeah. So we decided to go down that road. It's expensive. We spent some more money. You and Ed decided to do this. And just to be clear, it's expensive because of what, legal fees and registration fees? Yeah, that's exactly what it is. It's writing the FD is, I'll say, $50,000.

And then all the registrations and all the states, the attorneys that are involved. And it's no easy task. Yeah. So you decide to start small, presumably in Kentucky, to sell some of these trucks. And how are you going to structure that? Ridiculously. The model out there was, you know, Mr. Softie would sell a truck for whatever. I would say back in the day they would sell a truck for $150,000, make a lot of money on their trucks.

But then the royalty was $3,000 a year. and you had to buy all the cones and the cups and stuff from them, and they were marked up pretty substantially. So that was kind of the model to go after whatever. It's an all-cash business. So what I really don't want to get involved in is... Percentages.

Yeah, percentages. I thought, let's just keep this all in the up and up. Let's charge a very minimal royalty. And we'll sell the trucks as close to costs as we can. So we just get the trucks out there. Let's just build the brand. and then just like Amazon at some point, we'll look around and say, hey, do we have something that we can parlay on, so to speak. Yeah. So you start out with a couple of franchisees driving their own trucks. This is in 2008. But it's also the financial crisis. So people still had to pay, I think, $15,000 for the franchise, which is nothing, you know, compared to other franchise opportunities. And then royalty fees. But they had to buy a truck and the truck was going to cost them, you know,

$100 plus,000, given that we were in the middle of a financial crisis, was it harder to attract franchisees? Well, let me quote Forrest Gump. When the hurricane hit Biolabatri, and he said all the shrimpin boats were all busted up, and he said, after that, shrimpin was easy. Ed Reynolds owned a financial institution, a finance company, and he was my partner, and so I had financing. Wow. So after that, shripping was easy. So I could find somebody that I would approve and I liked to be in business with. And I'd say $15,000 down. Eagle finance will finance

the product for you. And again, I'm back in everything. So if the deal were to go bad, I get the truck back and then I'd have to resell it. Yeah. But that was probably if there's anything that just set us apart in the early days is the fact that we had financing and nobody else did. When we come back in just a moment, how Tony grows Kona Ice from a few trucks into 1500 and then lands on another idea which he thinks could be even bigger. Stay with us. I'm Guy Raz and you're listening to How I Built This. Raise the bar of your entertainment with Sonos Beam, the compact smart soundbar for TV, music, and more. Enjoy panoramic sound for shows, movies, and games when the TV is on.

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I did it myself. It took like, I don't know, five minutes. There's speech enhancement mode, which is perfect for when you're watching a movie and the characters are whispering or the action intensifies. Or there's night sound, which can tone down loud effects when others at home are trying to work or sleep. Visit sonose.com to learn more and find gift. for every listener on your list. Hey, welcome back to how I built this. I'm Guy Raz. So it's around 2009, and with financial backing from his partner Ed,

Tony is able to move past the financial crisis and to start growing the business by franchising. So we started getting contacted. I did a little bit of marketing, put it out there on the franchise portals, as they call them, you know, franchise.com. That, hey, this is available, these franchises are available. Right.

And the leads would come in and people would call and we'd talk through it. And I've got so many funny stories from franchisees that are doing unbelievably now, but they were some of the early adopters. I'll tell you this one real quick. Mark from down in Georgia called me. He was out of work 2008 or 2009. He got laid off. And he decided he was going to get into Kona. And he sent us the $20,000.

and then plan to come up to pick up his truck. And he tells the story, and I didn't necessarily know the story, word for word, but he tells the story. He goes, I sent our last $20,000. And my wife, who's a school teacher, is just pounding me that you have been taken by a man on the internet, a slick-talking vacuum cleaner sales on the internet. And so he drives six hours from Atlanta to come up to northern Kentucky, pulls into my warehouse, which was nothing to look at. It was a little tiny house

with a couple garage doors on it and I had some trucks parked out front. And he said, and I pull into the prestigious world headquarters of Kona Issa my wife looks over at me and says, I told you you got scams. So he comes in, he gets,

and he's nice as he can be and we are who we say we are. And then Mark and his wife get in that truck and drive back to Georgia. And we talked almost every day. And he was, you know, I did $300 a day. I did $350. And then he does, he did some festival or some event. And he made $1,000. So, you know, if you add those numbers up,

he's doing $300 a day, he's working seven days a week. He makes $9,000 a month. He's got expenses of about $3,000 probably back then. It's profitable. So he took off. And Mark's still in the business today. He owns multiple franchises. And his entire family is in the business. business. But that origin story of a person coming up saying, I got scammed is my favorite. And what was your criteria for accepting a franchisee? I mean, I have to assume initially in the first couple of years, it was like, you know, you needed the business. So maybe the criteria was a little different or not. Like, who were you looking for? I was very discriminating in the early days. I would stick a mirror under their nose. And if it fogged up and their check cleared,

They had themselves a brand new Kona Ice truck. No, I was looking for, and I'm real proud of this, I have talked to every single person that owns a Kona franchise. They cannot get into the Kona franchise business, to this day, unless we have a conversation. I'm looking for someone that has that, you know, nothing turns me off more than the R-O-I question. I was on a call, I think this year, and someone was, I'm looking at his application. The guy's got tons of money. And I'm like, what are you, what are you wanting to get into Kona for?

He said, well, I, you know, I sold a rental house. I was going to put it in the market. I think the market's on the way down. I'm looking for a good rate of return. I thought I've been investing this. I got some friends that I can get to run it. I couldn't be out faster. There's no interest whatsoever for me to be in business with that guy.

Yeah. When a husband and wife calls me or whoever, just they call and they say, we love our, our community. We've lived here for 10 years. Our kids have grown up here. We want to give back or our kids are involved. Something along those kind of lines. I'm looking for someone that I want to be in business with. And you've got to understand a lot of my franchisees are first-time business owners. So let's get quick book set up. Here's your chart of accounts. Let's get you an accountant. Let's form your entity. You know, these kind of things that we kind of handhold all the way through. Tony, I want to talk to you about money for a moment because obviously this is a business show and, you know, business is about creating something sustainable.

And, you know, money is, doesn't necessarily have to be the end goal, but it certainly is important. There's nothing wrong with making it. And your business model is interesting to say the least, right, because you have the franchise fee is very low, the initial fee, the cost to buy the truck. It's a turnkey truck. you sell that, and then it's about, I think, $3,000 a year per franchisee, right? Correct. So I guess per truck. So for every truck, they pay you $3,000 a year.

And so I have to imagine that a very small portion of your revenue actually comes from franchise fees. Right. Most of your money is coming from selling the trucks or selling the supplies to the franchisees. Yeah, not even much in supplies. I mean, at scale it is. I mean, you sell 50 trucks. everyone's paying you $3,000. It's $150,000.

I've got five people working in the office. Payroll's about $450. Right. You know, you're like, you know, they say franchise systems have to get to 100 franchises before they can float. Yeah. And I'm at 100, and I'm not even close to float.

No. But, you know, the reality is this. We make enough money on, you know, we've gotten at scale and manufacturing scale to where we can make more money when we do sell the product. This year we sold 276. trucks, basically. So that's the lion's share of the revenues that come into them. But we're at the

point now. You're making, you know, I don't know, five, six, seven million in royalty. But it's, it also, it makes us a good steward of the resources. And it makes us very lean. But you add up the flavoring. You add up the truck sales. You add up the royalty. You add up the cups. You add up to this. And yeah, we've got we've got enough revenue as long as you keep your expenses low. And you don't even require the franchisees to report revenue at all. So you don't know how much each one is making necessarily. We can do the math if we want to. You know, you do the cup sales and the flavor sales and you work it backwards and then you realize how stupid you are because you're charging not enough royalty. So. Yeah, I mean, I read that like just, I'm just jumping ahead for a sec,

like in 2023, the system-wide sales will be like $370 plus million. Correct. That's not your revenue. That's what these entrepreneurs, these small business owners who are franchisees, this is what they're selling in shaved ice. Right. And you're only getting a portion of that, a small portion of that. Yeah, one or two percent. And so really, I mean, the business model is, in your view, like it works because they're incentivized to work hard. They're loyal to the brand. And you guys are doing well enough?

Yeah, we're doing well enough. But let me turn the tables on it. I was talking to an executive at a big franchise system, and, you know, they've got probably 20 franchisees that pretty much run the company. You know, whatever those people say goes because they're the ones generating a lion share of the profits for the company. And I don't have anybody doing that. So if a franchisee gets out of line, and I say out of line, just against the code, I don't need them. Right. It's not like, you know, someone's going to threaten, hey, I'm going to get out of the business.

And I'm like, all right. Go ahead. So there is that double sign to that where I don't get too needy to a franchisee that's pumping in hundreds of thousands of dollars of revenue to the company. Tony, in terms of like getting the word out, right? Like you talked about early on, you know, you had the lawn sign approach, which is so smart. You know, hey, Kona truck is coming this week. I remember first seeing a Kona truck up here in Sonoma County in California, just driving on. around. I thought, oh, that's cool. That looks interesting.

Right. So I imagine that you don't really need to spend that much money on advertising because the trucks are like your previous business. They're like moving billboards. It all comes together, doesn't it? Yeah, it's, I've got 1,800 billboard trucks driving around. Yeah. And I always make this comment when a truck pulls up for the first time in a line of kids form on the side of that truck, every kid in his mind says, man, I want some of that. And every adult that sees the truck and the line of kids says, man, why didn't I think of that? Yeah. Because they do the, and I mean, the testimonies from franchisees are like, I saw a line of kids,

I did the math, and here I am. And a huge part of the business is school events, right? Essentially, you go, you pull up at a school or some kind of fundraiser and the franchisee is going to make a lot of money, but they can also donate a portion of the money and still walk away having made money. Yeah. And it's, it's, and that's changed the industry tremendously. as far as, listen, you're making a great margin.

Let's figure out how to, you know, revenue share, give back and be communal about it. You guys had more than a thousand trucks and moved into a new office space in Florence, Kentucky in 2019. Things are looking great. Then COVID hits 2020. I mean, you are an events-based business. Like, that's most of your business is doing these school events or, charities or fundraisers or parties, whatever, office parties, that's over all of a sudden. It was over in like three or four days. Listen, I don't want to, you know, there were people losing

their lives, but the businesses were, I mean, this is traumatic, I think. But we pivoted. What did you do? I had a staff meeting. I'll never forget that at us. At a staff meeting, brought everybody in and said, hey, everybody's okay. We got reserves. You're not going to lose your job. You're not going to lose a paycheck. Stop worrying. Our job here is to service and save the franchisees.

So let's get to work. And we had a very multi-pronged approach. I had some great people that just went after all the stimulus things that they could possibly get. The PPPs. You know, our franchisees were just not skilled. at being able to go through. And we had a hotline and we had multiple people just,

we went after all the financial institutions that have loaned money to Kona franchisees. They were all still looking to collect their payments. And so we went after for stallments and deferments. But probably the biggest thing that we did was able to develop a program called Curbicide Kona. And it was an ordering platform for mobile. And it was very archaic,

but it worked for us. So you could go online, order it, and then the truck would pull up and hand it to you. Yeah. And, you know, we developed our flavor wave to it operated with the end of a spoon, not your finger. And we just went out at hard. And the franchisees just came and bored and ideas were flowing. I had guys working here, I think sometimes 20 hours a day, you know, talking franchisees through this fairly complicated software to teach everybody how to do it. When you came out of that and now you are fully out of that and growing, one of the things that you started to do really in the last two years really in earnest and maybe even more recently is a coffee business.

Can you tell me a little bit about that business? This is called Traveling Tom. This is a totally separate business or is it part of Konaise? Totally separate. Same concept though, basically a mobile truck that but does coffee. and coffee drinks. Mobile coffee cafe. So tell me what's going on.

What's the status of it right now? It is flourishing. This started on March 18th, 2020. I looked at my team. From that staff beating, I told you where I said everybody's okay. Well, you start having to reallocate people around. But you started the business in March of 2020 or the idea came to you in March of 2020? No, the idea has been with me for years.

I have behind my desk was just, I don't know, 20 renderings, artist renderings. of different coffee trucks, cafe trucks and things like that. Wow. So October of 2020, we rolled a prototype of a very elaborate coffee truck that hit the streets. And just a couple of them. And they started doing really well. We put them in a couple other franchisees hands. The following year in 2021, I think we sold 20.

We sold 30 more in 2022. And then this year, we've already got 90s solo. We're only selling, we're only selling the DeKona franchisees right now. Right now. You have to be a corner franchisee to buy it Tom's traveling. Yeah. When you look at the economic, do you see the coffee business eclipsing the shave ice business eventually? Yeah. I don't think I would have said that a year ago, maybe not even six months ago, but some of the results that are coffee people are having are pretty spectacular. It's amazing because there seems to be such a mass proliferation of good coffee.

You can go to remote parts of the United States and find great coffee in Alaska or, you know, right. Well, that's what makes everything so hard about that except for the fact that we're mobile and we'll go places where no one else will go. And I don't have the same economics. That truck doesn't have to do $1.6 million to service the debt and the 18 people that are working behind the counter. Yeah. It's just a different mousetrap. And right now you're only in a few states. No, we're in probably, I think, 13 states right now. Right. And Tom is your dad, I should mention.

Tom is my dad. And he's the mascot, too. It's his head, right? That's him? He is. He is. The orange sunglasses? Yeah, and the orange sunglasses. It's been great. Tony, when you think about, like, you know, this journey that you took, I mean, you know, from being a very good salesman to kind of leading that behind. and kind of just trying to figure it out.

And then going into shaved ice and now here you are in coffee. And in all of the things that have happened, the growth of your business, I mean, you've got 1,500 trucks just in Cone Ice, $375 million in system-wide sales in 2023. That's a really great business that you started from, you know, an idea. Yeah, thank you. How much of where you are today do you think has to do with just the hustle, the grind and your, you know, your talent as a salesperson? How much do you think has to do with luck? I listen there's a lot of smart people a lot of people that work hard you know so luck plays a huge role in it you know i don't know i think i'm a good student of life i pay attention i see where the problems are what's the solution to fix the problem i wish this for my kids i i admire this in other people

is who's a good student of the game or good student of life um yeah i'm glad i was there i'm glad my sleeves were rolled up. I'm glad I was working my butt off. But, you know, I've been so lucky to get around great people and have a family that, you know, that has been involved and stuck with me. And, you know, I've been married 31 years. And, you know, you're a serial entrepreneur. A 31-year marriage is probably my greatest accomplishment because the ups and downs of that is remarkable. That's Tony Lamb, founder of Kona Ice. By the way, kind of kind of of like the vacuum cleaner business back in the day. Kona Ice is very much a family affair.

Tony's two older brothers work in the business, as well as Tony's wife, Susie, and three of his children. And Tony's dad, Tom, he's not only the mascot for the new coffee truck business. He's also been working with Tony since the early days of Kona Ice. He gave himself a special title, The Founder of the Founder. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show.

And as always, it's free. This episode was produced by Casey Herman with music composed by Ramtin Arablewe. It was edited by Neva Grant with research help from Catherine Seifer. Our audio engineers were Co. Takasugi, Chernobyl, and Robert Rodriguez. Our production staff also includes J.C. Howard, Carrie Thompson, Alex Chung, John Isabella, Chris Mussini, Sam Paulson, Carla Estabez, and Malia Aguadelo. I'm Guy Raz, and you've been listening to How I Built This.