This Week in Startups - Nick Kokonas of Tock & Alinea, flipping the low-margin restaurant model | E1262

Episode Date: August 10, 2021

Nick Kokonas joins to discuss his his company Tock (10:50), his world-class restaurant group Alinea (0:54), how restaurants can improve their operating leverage (18:05), digital experiences augmenting hospitality (39:41), why tipping needs to be replaced (44:50), the labor supply (56:16), inflation (1:00:27), employee health and more!

This week in startups is brought to you by Our Crowd helps you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join Our Crowd for free at OUR, CROWD.com slash twist. Pipe, SaaS companies, this is for you. Pipe helps you unlock your recurring revenue as upfront capital. Sign up in minutes and start trading on Pipe for free for 12 months at pipe.com slash twist. And Drata. Don't let requests for SOC2 compliance reports slow down your business.

Use Drata to stay ahead of the curve. Go to drada.com slash twist for 15% off. All right. Really excited about our next guest. His name is Nick Kokonis. He is the founder of Talk. which if you are in the restaurant business, you know you can follow Talk on Twitter, their T-O-C-K, and you can go to the website Explore Talk.

They were acquired by Squarespace for $400 million in March of 2020, just a couple of months ago. And if you don't know about Talk, it's kind of the anti-open table. It's a seating and a reservation system built by the co-owner of Alina Next. the Avery. If you don't know these restaurants, you're not from Chicago or you're not in the restaurant business because Alina is a three Michelinia, I've never been, but is a three Michelin Star restaurant and was named the best restaurant in the United States. So welcome to the program, Nick.

Thank you very much, Jason. Great to be here. You and I are recent Twitter buddies. We follow each other on Twitter. I was asking about hot dogs because I don't like hot dogs, but I kind of had a hankering for one. and you put me on to these Chicago ones, the Vienna. Vienna.

Yeah. My God, did you nail it? Vienna hot dogs are fantastic with a proper bun that's poppy seeds. Poppy seed bun steamed. Steamed with the relish. There is this relish they have that is like a neon green relish. It's not natural. There's nothing natural about this.

I mean, it is radioactive. And then they have green. great mustard, but they have a powder they put on it. Yes. And celery salt usually as well. Celery salt. That's the power. Yeah.

Yeah. Oh, my Lord. I ordered this off of their website. And I ordered like whatever. So it probably cost me five bucks of franc or something all in. But it was so. It's so funny to, it's so funny to hear you say this because like if you're in Chicago,

that's just like what you had when you were a kid. That's just the normal stuff. It's your standard dog. It's your standard dot. Standard dot. And in Brooklyn, we had some standard ones like that as well that you would get from like a dirty water or whatever. It was a same brand. So you were a derivatives trader.

Then you became a restaurateur and then a software entrepreneur, which makes you, I think, a complete renaissance man here on the shows. I want to start with the booking platform that you built. You were in the restaurant business. I understand that open table is absolutely. hated by restaurateurs second only to Yelp in terms of content That is probably accurate. Yes, you've done your research. That is about accurate, yes.

And you and I both grew up in the restaurant business where both Greeks, if people couldn't tell from the last names. My name is actually with Kay's as well. But you grew up either your dad or your uncle's owned restaurants. If you grew up in Chicago, man, you know Greeks, Greek cousins. There's always Greek cousins that have a restaurant somewhere or whatnot. I definitely did not really grow up. up in the business.

But I was always, it was like one, it's one Kevin Bacon away from, you know. I literally grew up in it. You didn't work in the restaurants of your own. I never did. The first day I worked in a restaurant was the day we opened a Linnea, which is pretty crazy. And you came to the restaurant business with the knowledge that every single person you talked to said, this is the worst business.

Do not go into the restaurant business. And then you made the top restaurant in the country. Tell us how. that came about? Yeah, it was, I mean, that's for sure true. And I spent over a decade as a derivative trader, loved it, started investing in the internet as an angel investor in 1996, and had just a diversity of interest. I studied philosophy in college. And when, well, I grew up in a home where my mom, wonderful woman, great mom, terrible cook. And so, wait, your dad was the Greek in the family? Correct. Yes. Yeah. So he cooked. He had,

Like my dad, he had to take the duties. Yeah, but he was busy too, right? And he also didn't want to offend my mom and all that. So there's a lot of complexity there. But just suffice it to say I grew up, I grew up a very picky eater. And it wasn't until I met my wife and her family who are ethnically Latvian, who are very Euro and love good wine, good food, trying new things, trying new cuisines, trying ethnic cuisines, all that.

And it was genuinely at 22 years. years old, it was terrifying for me. And that's the irony of this. It's often the people who I think didn't have exposure to something that become the most passionate about it, whatever it may be, because you're exposed to it at a point where you're like, how did I miss this for the first 22 years of my life? And so I started doing what I always do, which is I started reading books, MFK, you know, Fisher and Ruth Reichel and all these kinds of great writers. There was a renaissance of food writing in the early 2000s. And I started reading all that. Kitchen coffee,

Marshall. Michael Rollman, all those folks. And we traveled a bit and we ate and I got more and more passionate about it. And this is all my wife will always laugh because this is all her doing. And I get somehow the credit for it. But it really was her doing in that it exposed me to all these wonderful experiences. And then we went one day to lunch at Trio restaurant in Evanston and Grand Acids had taken over there.

And it was just different. It was better than almost anywhere we'd been in the world. And we'd been very fortunate to eat all over the place. It was 10 minutes for our home. It was in suburban Evanston, which made no sense. And whenever you find something like that, it's like finding an indie rock band or something like that, right? Where you go, how does the world not know about this? Right.

You want to immediately evangelize it. You can't shut up about it. And you want to go deep. You want to find all the deep tracks, all the live stuff on. YouTube, et cetera. I remember when I was about 14 years old, I found the jam. And the cool thing then is that like, you know, some guys got all the vinyl and you go, oh my God, they've put up 18 albums and you dig through.

And it's kind of what I did with Grant and with the food. And, you know, I didn't know anything about the business, really. But I found myself as I would sit down in a restaurant counting chairs and tables and just doing the basic, very basic map. What is the total potential revenue of this place? How many people can they put through? Anybody could do this. This is back of the envelope sort of modeling.

And eventually, you know, after going there for about a year, I asked him, you know, what are your goals? What do you want to be doing? And I had backed some, like yourself, I had back some small angel startups. And that's often the first question I ask when I do. And is what? What's the goal here? What way do you see in 10 years? Not even what's the goal for the business?

What are your goals? What do you want with your life? Because this may or may not be a good fit for you, even though you're the one creating it. And, you know, he was very, very singularly focused on I grew up in a diner. When I was four years old, I started cooking eggs. I worked for Charlie Trotter for eight weeks. I hated the environment there. He quit.

Trotter told him you'll never amount to anything. He got in a car, drove to the front of him. French Laundrie, Thomas Keller was his mentor. But then he had this experience where he just worked for three days at El Bouille when Fran Adria was there in Spain, in Rose's Spain, and saw, like, oh my God, like, I can take these traditional techniques and apply them in ways that are emotionally resonant with people in a totally different way. The rules get cast aside. And so as a young chef, this was very liberating for him. And we found him at that moment. Like he was 26, 27 years old. He was given control of his first kitchen. And I just said to him one night, you know, what do you want to be doing?

And it'll probably not be here, I'm guessing, in the long run. And if you ever want to do something, I'd like to help you build a restaurant for yourself. And he asked me what kind of restaurant I wanted to build. And I said, how should I know I've never built a restaurant before? And that was it. Like literally two weeks later, we started planning for what became millennia. And a year to the date of that conversation we opened, which is genuinely crazy everyone along the way to answer your question in a long verbose way. Everybody I knew said, okay, yeah, you made a bit of money. Don't flush it down the toilet with a restaurant. Did you make the money from the angel investments in that dot-com era? Is there any big leader in that? Yeah, there was one big winner in that, which was funbrain.com,

which was a children's entertainment website, which I invested in in 1997 when it was doing, a couple hundred thousand page views a day and our options trade our option software guys that I found and hired Hi Mike Sirks and Paul Hudson They They made this This game up math baseball for his

Wife's fourth grade class and all of a sudden dial-ups You know, this is dial-up modem days From around the country, he started going to the site Even though they weren't advertising it outside of her classroom So Bill built that up and sold it as part of the Family Education Network, which was a $275 million purchased by Pearson PLC.

I was the only person that had to say a vote in the matter that voted against that, because I remember some greeting card company sold for $500 million. I remember that. Yeah, yeah. What was that company? It was excite at home. Something mountain greetings or something like that. A blue mountain.

And I was just like, and we had like, we had eight million students signed up and millions of teachers and all this sort of thing. And the metrics of the days, as you know, are eyeballs. So I was like, but we have more eyeballs than them. Hey, everybody, it's time for another Our Crowd Deal of the Week. Right now, you can join Our Crowd's investment in Boat Setter. According to the deal memo, Boat Setter is the largest and only insurance-backed, boat rental marketplace that connects owners, renters, and licensed captains.

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birthday card. But like a primitive version. Very primitive. And people were sending birthday cards. So when it was somebody's birthday, you went and you emailed them a digital card. There was no social networks at the time. Yes. And these things were getting tens of millions of people.

What was the valuation like at the time when you invested? dollars or something. Oh, no. When you invested as an angel, what were the valuations like back? So I had a very low net worth. Yeah, yeah, less. I think I put in $100,000 at a million dollar valuation, maybe, maybe two at most. So, and then the trading firm did very well.

We were doing 4% of daily volume of the MECs at one point. I developed the first closed-in-s seller network between the Merck and the Amics to RBTFs. ETSs were new and novel in 1998. And so I saw the arbitrage there. and, you know, I just kind of burnt out. I mean, I did that for 12 years straight, needed a break, merge with a firm in New York. And then I just kind of said, like, okay, well,

I'm going to take a year off and then I go back to trading. I'm good at it. I know what I'm doing, but I don't necessarily want to be doing it in a company of 100 people. I like smaller companies. I really thought that the building linea would be like, I'm going to help this guy build his dream restaurant. I'm an investor in it.

I'll get it off the ground. Then I'll hand it over to the experts and I'll walk away. way. Yeah. And what did you learn? Do the experts know what they were doing in the business or there are no experts? I think generally, like not just in restaurants, but more generally, like, you know, expertise is, in other words for tradition in some respects, right? Certainly there are, there's expertise. It becomes dogma at some point. And so, you know, early on, I didn't do much. I did the, all the marketing. I love to write. So I did all the marketing, all the written interviews, all of the PR for it. I did all the accounting.

I did it all on, you know, I just wrote spreadsheets of macros. I was good at doing that from the trading world. And, you know, I looked at POS systems and I was like, well, these are terrible and overpriced. And when the open table salesperson came, it was like watching a movie from the 1970s where he literally had the ERB, the electronic reservation book, in a suitcase. So I'm not making this up. Wow. And he was like, I could leave this bad boy here for you. So it felt like a 1970s IBM sale.

Wow. And I just come from something where we were building our own software processing hundreds of thousands of trades a day. It was pre-HFT, high-frequency trading. But it was still like there's a lot of throughput and a lot of information basket trading all of that. And I'm like going like, all I really need to know is like a cell phone number, who these people are, what their preferences are.

We need to track all those things. And I didn't at the time recognize that the reason that OpenTable and other reservation systems were like they were was because of the way they monetized it. So customers don't recognize that OpenTable charges between $1.25 and $750 for every person who sits at your table. Right. And that is, it doesn't sound like a lot. But if a restaurant has a $20 check average and they charge a dollar, that's a 5% Vig that they've got. And then most of the restaurants, correct me if I'm wrong, are operating at a 10 or 20% margin. Well, most operate less than that.

Yeah. But even if we were generous, 10% margin on a $25 cover price is $250. If you're giving $1.25 of it, you just gave half of your margin to open table for what reason? What did open table do? Well, what they claim, and this is what's the craziest part, is that they claim that they are the discovery network of choice for diners. So that's completely false Completely false. In my experience, that's completely false. I do not just...

Everyone govern restaurants on OpenTable at all. Everyone starts at search in social media. Of course. And so, and of course. Yeah, of course. But here's the thing. But Jason, if I actually said, you're the first person who said, of course.

I talk to restaurants every week. And they go, but OpenTable sends me this report every month. And it says that 92% of the people came through OpenTable. And what I say is open table is your front door. You only have one front door. It's your digital front door. Of course they came that way. If you rip that front door off and throw it away and put it in, forget talk.

Put in any other front door. 92% will come through that. Yeah. Put a phone number or an email. I mean, the phone number used to be 100% of reservations that came in. Yes. Totally ridiculous that their position on that. And so, but they did build a decent product, I think in terms of seating people or it became a quickly became a standard.

So therefore it's dog. I mean, everybody knows how to use it. They did a skeuomorphic design of an old. black book, right? And then a top down of the tables. Yeah. And yeah, there's a lot of muscle memory in the industry on that. And also, it is very much the case that they had a monopoly for 20 years. And so consequently, if you're a general manager at a restaurant, this is not true anymore, but when I started talk, it certainly was. If you go in and say, yeah, open table sucks, everyone goes, oh yeah, we hate it and it charges us way too much, but we can't take the, I'm not

going to get fired because I switched off of it. Like, No, one got fired for using OpenTable. No, it was the standard, so how could you get? Right. I mean, I guess before that it was Swirl or something was the POS system. Yeah, I mean, it was like, you know, OpenTable started in 98. Actually, with a Chicago entrepreneur. And, you know, it was literally started when Danny Myers, like, Black Book got stolen by

this grown employee. And he was like, I need a backup of this thing. Wow. So, you know, there's, there's like, I don't, I bash on them a lot. It served me well to do so. they did a great job for like 15 years. And then they just stopped innovating. And the innovation you had, if I, if I am correct, is that the nature of making a

reservation, people don't understand how painful that is for restaurants because a large percentage of reservations get canceled. People double book themselves. People book for, you tell people there's only four seats available. You only have a four top available. Then they show up with five people or six people. and sometimes people overbook their restaurants because they think that people are not going to show up and then people show up. And it's just basically chaos.

Correct. It's a chaotic system. It would be as if flights were booked without anybody having any skin in the game. Correct. What would happen to the flight to New York from San Francisco if I just said, yeah, I'm coming with four people and I show up with six where I have a reservation for six and I don't show up. Yeah. And the fact the matter is is that it's not just the consumer that's, lying often and saying like, oh, yeah, I'm coming with four people, but they have six,

or I'll be there at eight and they show up at seven instead because they really want in seven. It's also the restaurants that know that that behavior is happening about 15% of the time. And suddenly they're overbooking, like you said. So the reason that you go to a popular restaurant in New York City or San Francisco or Chicago or L.A. at 8 o'clock on a Saturday night, you have a reservation. They say, go wait at the bar for 45 minutes. It's because they lied to you knowing that they wouldn't have that table ready by 8 o'clock. and they just said like, but if we if we don't, the restaurant down the street's going to lie to them.

And that eight o'clock reservation is going to go to then, even though they won't get to see it to late 45. So I wanted to solve that. That was the initial thing. Now, a whole bunch of other stuff has come since then. But in 2010. You call that in poker leveling. Yes. When people are like, okay, I know that you think I'm here.

So therefore you're going to raise it. So therefore I'm going to shove all in so that you know this is the one out of five times that I actually did have it. And you're just leveling people. So literally the major idea is leveling. It's the Princess Bride, Sicilian. Literally, I guess. Yes. Yes.

So it is very much that. And it leads to really, really bad customer experiences. It's bad hospitality and it's inefficient for the restaurant on so many levels. It leads to food waste. It leads to extra costs. And that was the initial problem that I was trying to solve. And then we've got more sophisticated. At first we just started charging like tickets.

It's like going to restaurants, entertainment. You don't need to eat at a restaurant ever. So I think it's the biggest entertainment industry in the world that is completely miscategorized as non-entertainment. And it's because people are so culturally sensitive to it because it's part of our humanity. We have to eat every day as humans. And our cultures, we were talking about Greece earlier and our ancestors.

Like, if I say Japan to you, one of the first things that people think of is Japanese. Japanese food. That's a huge part of the culture. So as soon as you start having a conversation about the hospitality industry and any changes you want to make, you go down this rabbit hole of people. Very emotional. Very emotional, very guarded about. Trigger warning. Yeah. It is. Yes. And so there I was wanting to pre-charge for reservation. I mean, I made it into like business week and news week and stuff just saying, I'm selling a ticket to a restaurant. Yes. And people lost their shit for no good reason. It's like, who cares? Don't come. I don't care. Yeah. Like,

you know, it's like, it's just an experiment. But your restaurant was sold out and you did prefix. So just saying like, listen, you have to buy your tickets. And if you don't show up for the Knicks game, okay, you didn't show up. That was your choice. Yeah. Yeah. Right. Games over. You burn your tickets. Yes. And that was my theory. And it worked. And then people went, well, but what about all the current restaurants and casual places? And I said, well, what if we just charge of $5 deposit. And what's really crazy, and this is true for you, you've done very well with all of your investments, you put $10 down that you can easily afford to lose, you will change your

behavior. 100%. You now have skin in the game. You have skin in the game. And also, you're like, oh, but you made a commitment. It's way different than holding a credit card number. And then be calling you afterwards and said, oh, yeah, there's a $75 cancellation fee because you know showed.

and it's a penalty then. But it's not a penalty if you choose to put the $10 in and make a small down payment. And the no short rate goes to under 3% when you do that. And so we process millions of dollars now every day of deposits. And that was a behavior that took 10 years to get restaurants to start doing. Amazing. And what people also don't know, having grown up in the restaurant business myself, is my dad ran his restaurant basically on almost a cash basis.

He had a bowl with cash that he had in a hidden spot. He would come home from the restaurant with all the cash from the previous night, throw it in the bowl. Then he would hand it out to the different purveyors who he was buying from. He'd hand them cash. It was just like he ran it out of his little dish in our living room back in the day. My dad called that the three shoebox method. And the third shoebox put me through college. Exactly.

It basically is like, you know, cash-based accounting. So if you're selling tickets, you're getting the money in advance. Now, you have the float as the restaurateur, as opposed to you being chased by your purveyors who gave you 30 days to pay or two weeks to pay. This got to change the whole dynamic in terms of the funding of restaurants. Yeah. And one of the things that was frustrating is that when COVID hit, there was really well-intentioned, famous chefs and restaurant owners going on CNN every day saying,

but you don't understand. This is a business that we pay for last week's food costs with two weeks from now as revenue. And I was like, yes, and that's the whole problem. Yes. Like, there aren't doing businesses that do that. Like, that's a terrible way to do business. Even if you weren't selling tickets, let's just say you keep operating the way you are, accrue a cash reserve, get rid of your net 90 credit, haul up those purveyors and say, hey, what if I pay you for the next two months ahead? Yeah. And all of a sudden, your food costs aren't going to be running 34% anymore. They're going to be running 24%. Right. Like, these are business principles.

that I think the reason why I built talk, the reason why I had some success in the restaurant business is because I ended up looking everything as like an expiring option. Right. Like everything was a derivative to me. If there was a seat that was unfilled at the end of a night, I was like, we should have sold that for like half price. We could have even sold that under food cost

and had revenue that was incremental for food that was going to be wasted. Right. Yeah, you're preparing in a fine restaurant like that, the meals. I want to welcome Harry Hurst. You know him as the co-CEO and co-founder of the company Pipe. You've been on Twitter over the past year. You've probably heard me and my besties,

a number of which got their beaks wet, talking about all the excitement around Pipe and their fundraising and the product they're bringing to market. I thought I'd have Harry come on and explain it to y'all. Harry, welcome to the program. Thank you, Jason. The people who are buying these contracts, the annualized contracts, they're looking to make 10% on their money.

And the person who's selling that in advance believes they could put that capital to work that would help grow their revenues more than 10%. Is that a way to look at it? The simple math, if you take, for example, 95 cents on the dollar and you have a $100,000 trade. Can I take $95,000 today, invest that into, say, sales and marketing for growth and generate $5,000 in net new ARR as a result of investing that? If the answer is yes, which I hope it is for any growing company, your cash flow break-even on the trade, if not cash flow positive on the trade, and you have the net new ARR, and, you know, Bessima Cloud Index, not sure where it is today, but anywhere between 10 to 20x on that additional 5,000 can be seen as your profit on the trade.

So what we're trying to do at pipe is turn people from having a borrowers mentality where they would traditionally go to, say, a lender and borrow money to a trader's mentality where they think that their recurring revenue streams as an asset. All right. Thanks again, Harry for coming on the pod and explaining that with pipe.com, there is no debt, no loans, and most importantly to me, as an angel investor, no dilution. If you sign up at pipe.com slash twist, they'll eliminate all your trading fees for one full year. What a generous offer. Pipe.com slash twist so you can save up to tens of thousands of dollars. Happy piping, everybody. So dynamic pricing was the other innovation. And I know I had invested in reserve, I think, which was part of res. got bought by Resi, it didn't work out, whatever. And, you know, I've had a lot of people pitched me over the years on dynamic pricing.

And there were a bunch of restaurateurs who were like, this is against everything I stand for. How could I charge one customer more than the other? And I was like, this to me doesn't make any sense. Like you have a chef's table in your kitchen that you only allow pre-fix. Like, why is the Friday night table the same as a Monday night table? Resi and Reserve, the whole reason I started to talk

was because I watched Resi and, reserve serves take some early ideas both from their own admission like i talked to both those companies where they're being formed and essentially what they wanted to do was surge pricing and say hey like it's impossible to get into nobu on saturday night yeah so we're going to charge a 50 deposit from our app and we're going to give the restaurant 25 dollars extra and then you go there and you eat so it's basically a cover charge my whole thing was always like it's not about surge pricing It's about reducing the cost on Tuesday night at 930 when no one's going there. Sure, you can charge more on Saturday and then doing the differentiated experiences.

So you can imagine if you have three reservation types, free reservations, which are 80% of talk are free. Everything else gets talked about because it's interesting and innovative. But when demand is less than supply, you can't really, you can't press pricing very hard. That's just standard stuff. Free reservation, deposit reservations we talked about, prepaid experiences. If you have an inexpensive pizza place or a hot dog place that has a counter where everyone wants to sit to watch the chefs make the pizza, you can charge a $10 or $20 deposit for that because that's the scarcity. That's what everyone wants while having free reservations ever else in your place. That's not what they built.

They just built a cover charge mechanism. And then what happened was when people kind of pushed against that cover charge mechanism, they pivoted to just copy open table and went on price. Yeah. And so then it's a race to the bottom. And what we were always trying to do is say, like, no, no, no, we're going to give you incremental revenue to the restaurant. We're going to cut the no-show rate. We're going to provide a real utility.

And the way that we're going to make money is that we're going to process money. So we're actually taking that a little bit of the transaction away from POS systems, putting that up front. We process about a billion dollars a year and it's growing really fast. And that's the long game there. So you don't charge them for the software? There's no SaaS fee for restaurants? There's a SaaS fee, but it's nominal.

It's between zero and $699 a month. Oh, okay. So that's pretty cheap, yeah. Yeah, it's nominal relative to our competitors. It's way less. All right. Let me run by you. My two techniques that I used before talk existed or these other platforms.

You tell me ethical, not ethical, savvy, and as a restaurateur, what you think of these. I'm laughing because I'm guessing them, but I won't guess them ahead. All right. So here's my technique for getting into any restaurant by having my assistant. call ahead. I hate to give this out because now everybody's going to start using it. I have my assistant call. I know you're booked up on Saturday night, Nobu, whatever, blah, blah, blah, restaurant. My CEO is coming to town and he really wants to come. He's a big food eat it up. He's wondering if there was any way, if a cancellation happens to come in, and I wrote the script

for this. Sure. If, and I should have booked this earlier, and I'm going to totally do that for the next time. May I call. Pull me a couple up front. Pull me a cope out. Not trying to not do you know who I am, whatever. And by the way, Jason loves Bordeaux and I saw. He's going to spend money. You have two Bordeaux's. I know he would love.

So if you could put these two on the side, the 79 and the 84, if you put those on the side for him and if something opens up, call me back. And then they're like, wait a second, that's $700 in wine. And then we got another reservation coming and we don't know if they're going to buy wine. And what percentage of the restaurant business? So is this ethical, savvy, or unethical? I will say that it's totally fine.

Totally fine. Yeah. You wouldn't be offended if you picked up the phone. Oh, I've had that happen a thousand times. That's not that. Really? As much as I love you, it's not that novel. It's not that novel.

It's not that novel. What's the wrong way to do it then? Yeah. Well, he's really important and famous, and he has this podcast with 50 million people that listen to it, blah, blah, blah. Who cares? Because ultimately, ultimately, like, Like, you might be a pain in the ass.

Like, you know, it's like, ultimately that's not what people want. I'll tell you the best thing you can possibly do if you're traveling somewhere. This is true. This works for sure. This is actually what I do, just knowing restaurant. I will literally say, like, I'm going to be there anytime for three days. And I really want to try this place because I've heard wonderful things about it. Yes.

You tell me what time to show up between two and six people. I've never not gotten a reservation worldwide. Brilliant. You basically said, whatever there is, I'll take it. I really, I'm flexible. I know that you, you are not because there's a lot going on. And the reason that works is because, and this is something we've digitized and automated now with talk, is that what happens if you cancel is that there's a list of 200 names. And if typically what will happen is they'll email or call or text now, the first person on that list. And inevitably, that person will be someone who goes, I'm not sure. I'll check with my spouse and the babysitter. And now you can't just go, like it's bad hospitality. You say like, no, no, no, I need an answer this second. Right.

So. Yeah, you're basically, you would be a jerk to them. Like, oh, no, no, your spouse doesn't matter. I just offer you something and I'm pulling it back. That's the same skin in the game thing. It's the opposite of it. So you end up being, it feels very inhospitable. So if you know you've got a sure thing, you're going to call that person first.

And it really isn't about the money for most restaurants so much as it is. I don't want to call 25 people and I've got an hour. It's annoying. Yeah, you only have so much time before the service starts. And what we've done is that ultimately we've democratized it right now because we're post-COVID. We have suppressed covers, labor shortages, all these things. We have a wait list literally of a couple thousand names every night. And if someone specifies that they want eight o'clock, there might be 300 people.

If we get a late cancellation on that eight o'clock, I have a button on talk that says send to the list automatically matches, opens up the table on talk, and then sends an email to all 200 people. Wow. And first person who snipes it gets it. That's right. And ultimately, like, the amount of time when 11 Madison Park was going to go on talk, they had 13 people answering phones every day, telling people no, all day every day. It was like a phone center. I'm not exaggerating at all. That's crazy. It's crazy because you get thousands of calls. Linnea used to get thousands of phone calls. And inevitably, people thought you were lying to them. Like, if you called me and said, Nick, it's my anniversary in five weeks, you know, can I get into a line on a Wednesday night?

And I said, I'm really sorry, Jason, we're totally full. For sure, you think I'm full of shit. Yeah. Especially if you've been a guest on the pot. I'm assuming now I can roll in. Just roll in. Just roll in. Just roll it. It's fine. But, you know, it's like, so those are the problems that I saw. And rather than just throwing more phone lines at it, I was like, well, ultimately, like, why don't we just democratize this? Yeah. And send an email to all 200 people with a click of a button. So right.

And now you can actually automate that. You don't even need to click the button. If something becomes available, it just says, hey, is there anyone who wants it? Send them an email, send them a text. And yeah, and if they get to it in time, and if they don't, it just says, hey, that's not available. Let's talk a little bit about what's happened since COVID, because I think it's super interesting. Oh, my second technique.

Yes. My daughter is very upset about because she's been thinking about morals and ethics. and she says this was completely unethical what I did. And she's 11 and she won't stop talking about it. She loves to bring it out. Anytime we have dinner with anybody, she brings up my dad did this. Can't believe what my dad did. Can't believe what my dad.

All right. So she wanted to go to high tea at this special high tea place. We go. I didn't anticipate this was going to be like booked out whenever. So I'm like, all right, no problem. I take out of 50. I fold it twice, put it in a palm of my hand. Not your palm the matre d.

That's a thousand year old. Yeah, but it's, popping the matri d is a lost art. So I bring it up and I just say, I'm really sorry. I forgot to make a reservation. If anything opens up with anything you do for me, I'd love to see if it's possible at all. If not,

I'd love to come back another time. And I just, you know, put it right on the table there. She takes it. She comes back. She's like, we're all set. Because nobody gives 50 bucks or any, nobody tips anymore. The matri is, right?

So, so again, I, I, not that unique. I will tell you that there was a restaurant, and I don't want to say where it is, because you'd be, you'd be able to figure it out. And I do need to preserve their anonymity. Very famous restaurant went on talk and had multiple rooms, shall we say. And one of them was kind of like the bar area, like a lounge area. No one really wanted to eat there.

They wanted to eat the fancy down here. I already figured it out. Okay, I'm not going to say. Yeah, don't say. I'll beep it out. But you said multiple rooms and a fancy. place up front, I think I know. So they went on talk.

And sure enough, they put the casual room on talk for less expensive and sold it out. And we're also selling up the dining room. But then all of a sudden, they're major Ds, of which there were three, very traditional European guys, started telling the ownership, we hate this system. Of course. That doesn't work. That doesn't work. That doesn't work.

And I was racking my brain going, man, we've not heard this from any of thousands. of other restaurants, something weird is going on here. And what I figured out it was, was that those made or deeds were making hundreds of thousands of dollars a year. Of course. In cash tips. And we have, we eliminated that. Now, we've had the same problem with nightclubs. Some nightclubs have gone on talk. And all of a sudden, the various experiences. You want the DJ booth experience. You know what, though? The owner is entitled to that money, not the door person. A thousand percent. Sorry. Sorry. And you know what? That is completely unfair that the tip of the spear, you know, skims the cream.

And then everybody else is working on the experience. As an owner, so I really don't think it's unethical for you to try. But as an owner, it's my responsibility to let that host or hostess know why that's a bad practice for them to do that. And it has more to do with fairness to the other folks around who might be waiting or. I wonder if they pool the tips too. So they should. But I. But I could also.

put it in their pocket, nobody ever know. Thousand percent. And we've definitely had that happen and we caught it. And it should go to the whole. You're going to catch it immediately. Yeah, of course. Yeah. So it should go to the whole staff by law.

Definitely be pulled. Oh, by law too, right. Yeah. Yeah. See, and so she thought it was unethical that I did that. And I explained to her. My wife would agree with her. Yeah.

I mean, I kind of agree with her. Yeah. I kind of do agree with her. It is like, but I was also like, you. You know, it's a bit of a marketplace and some people value the tables more than others. So I'm just showing and indicating and that person lives up tips. But it was, it's such an outrageous tip for a, if that, yeah, it's. It happens every day though, for sure.

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Twist listeners can get 15% off and waived implementation fees at drada. com slash twist. D-R-A-T-A-com slash twist. So looking at the restaurant business today, one observation I have is that when I would go to Korea or Japan, it was pretty standard to have a red bell on the table. You could press the bell and get service. And it became increasingly standard, you know,

maybe even 10, 15 years ago in Japan or whatever, to just pay, you know, to order on your phone or to pay with your phone. and the concept of a waiter, even in, you know, more nice establishments went away because of the shortage now and with these QR codes for the, I'm seeing restaurants that were absolutely driven by the waiter experience and being weighted on, move to a runner. So you order it yourself, you close out your tab as you go using whatever it is. Toast, I think is one popular one. I don't know if you provide that.

Talk has that as well. to. And so what are your thoughts on that? And is that a trend that stays with us? And is it better for customers and restaurants or worse? So, well, the better or worst part is tricky. It's an experience thing, right? So I think great service will never go fully out of style, right? I mean, there's an art to that and it's a wonderful hospitality experience to have it. Weirdly, and this is a theory of mine, but I'm pretty confident in it. The reason why in Europe and Asia that happened more quickly is because credit card rates there are so many basis points less. They're less than half of, you know. And also, card present rates in the U.S. are kind of like 2, 2.1% for Visa MasterCard,

3.1% for Amex. Card not present rates are 2.9%. Table side transaction, even if you use this, they don't accept biometric data for it. So it's a card not present, which means you have to pay a higher amount? 0.8%. Because they didn't run a piece of plastic. And so consequently, if you want a billion dollar business,

convince the credit card companies that that is a dying thing. And here's how hard it is and how entrenched it is. Can you pay with Apple pay walking out of a restaurant right now. Like Tim Cook once said, Apple pay is not a success until I can use it walking out the door of my restaurant.

But the reason that Apple has not even been able to force function that is because all the POS systems are kind of already, you know, embedded with like literally wiring in these systems. And if you don't swipe the credit card, it's not a card present transaction. And so. Yeah. Yeah.

And so that's crazy. crazy. And that's something that I'm working on because if you can unlock that, if I can charge, heck, I should be able to charge less, right? Right. So, so if I could charge two percent or I could do a direct ECH payment directly from the, the, from you, Jason, I can actually give you a 1% discount if you just pay with the talk app. And it goes right into the restaurants. Amazing. Checking. Yeah. We just bypass them all together. I used, I've used the Apple Pay once or twice in restaurants. I was so delighted by it. Because you just look at your thing, you double click.

It's so easy. It's phenomenal. I am a big fan. We're integrating talk with Apple Pay in two weeks. Amazing. And we have a partnership with Chase. So these are all things that you have to do to start forcing the industry to go, hey, maybe that is a card price of transaction.

The great thing I find about the runners and this automation, if we consider it that, or business process automation is, you know, there's that moment. where your kid wants another order of Colomare and you can't flag somebody and it's busy and you can just order it and save 10 minutes of trying to flag somebody down. Think about how much time as a business is spent with that universal symbol where you check in the air and you're trying to get the person. And then you literally have to take out a piece of plastic, put it into a little envelope-y thing.

They go run it. They swipe it. They bring it back. You then write in pens. It's about the only writing I do these days with a pen. Write it with pen. sign it, which is meaningless. And then that's where your fraud comes in, both from the consumer, which is a huge problem

and in restaurants. I mean, a huge problem in restaurants. It's got to be 10, 20% of a service time is just dealing with the checks, right? Yeah. And then there are maybe 2% of the servers that unfortunately type in that tip run. Because that tip is not digital. So they just write, if you write $5, they punch it in six. Are you going to remember that?

So there's ways of software in the industry to track Blue do that incorrectly. But, you know, all that should go away. Like, you should obviously get your bill on your phone at this point. When you order in advance in one of those QR systems ahead of time and, you know, the runner brings food, do they see the tip immediately? Or do they see after you leave the restaurant? It depends on the system. Got it. I want them to see my tip immediately.

I'm a big temper. Yeah. Well, what should really happen? and his tipping should go away. But that's a whole other thing. Really? Why? Because that's Danny Meyer's position, right? Or he included the service?

It is. But unfortunately, unfortunately in New York, so Calicchio, Danny Meyer, a bunch of folks tried it. In New York, there was a single class action lawyer who went around finding Fair Labor Standards Act, you know, the FLSA, finding little tiny infractions and then doing class action suits and that's a felony. So they always settle their locked shut. I've read them all. and it's one guy who changed case law in New York City.

Wow. And unfortunately, the press always goes to Danny and New York City and all the famous restaurant owners there and says, hey, hospitality included, if it's a $10 hamburger, it's not a $12 hamburger. Well, we eliminated tipping in 2011 at all of our restaurants. We have been, we have 401K with 4% matching. We have health care. We have family medical leave act. And we have, we treat servers like the professionals that they are. But according to the FLSA, I can't do that.

I have to charge them hourly. I have to pay them hourly. And I have to pay them hourly plus overtime because they are not capable of entering a contract for work in the way that you and I work. That's so ridiculous. It's ridiculous. And we're talking about the highest end servers in the world at the number one restaurant in the country. Yes. These people are making significant salaries.

Yeah, $150,000 a year for some of them. So at the end of the day, like, I still have to pay them hourly in overtime. And it makes no sense. And what accrues from that is that benefits and whatnot. So if I can charge a 20% service charge in most states in Illinois and California and most states other than New York City, I can say it's a mandatory service charge for service, no different than going in and getting a haircut. That's a charge for service. It is taxable. So the city likes it.

And then it is ordinary income. Now I have to pay FICA on that and I don't get the tipped wage credit. So I can't pay them $2 an hour and just rely on tips. And then that money flows through my business. But here's the thing. What's fascinating during COVID is that all the restaurant owners who wanted to say, yeah, yeah, we should treat the industry better. We should do all that.

As soon as it said $15 minimum wage with no tip wage credit, they said, no, no, no, we can't do that. We didn't mean that. Right. And I'm going like, actually, it's not that hard. but unfortunately the press is located in New York. And they always went to the New York restaurants. And it is impossible to do it there. Danny Beyer did not fail at it because he's bad at what he does.

He failed at it because the system's rigged against him. And also it's the framing. It's the framing of... Framing's everything. Yeah, they're framing it as this rich restaurateur is, you know, not letting his staff get tips when in fact what they're saying is maybe the back of the house you get paid a little better. And there should be some fairness and everybody should work as a team. And they should know what they're going to make.

Look, the disparity between the front of house and back of house and some restaurants is four to five acts. And people don't realize that. The waiters are making three or four hundred a shift in those top restaurants? Yeah, easily. Yeah. 500 shift. And then what is the sous chef making? I mean, the suit, well, sous chef is salary because he's an exempt employee.

But you might have a cook making $18 an hour or something like that plus over time. So the front of the house is working a 12-hour shift making $40. an hour, the back is making half or less. Yeah, for sure. That happens all the time. And what's highly frustrating about this for me is that basically what you said. Like I'm like, no, no, no, we've gotten rid of tipping. And then even people within the industry, even advocates for the servers, you know,

themselves or unions or whatever are like, oh, you're being greedy. And I'm like, no, that actually cost me an extra 500 grand a year, like out of my own pocket, literally. Right. To do all this and to offer all these benefits. but it's better for longevity of the restaurant because we have a better business and a better hospitality. So that was an investment we made.

That is literally precisely the investment that they're asking for. Also, then you don't have to turn over the staff. And correct me if I'm wrong, the more you have to turn over staff, that's got to be the worst part of your restaurant tour. And it's what happens is the top 20 to 30 percent stay for 10 years, almost no matter what you do, the rest kind of turn because there's a lot of transients. in the industry. There's a lot of people come to Chicago, go,

you know what, I'm going to work here for a year or two, and then I'm going to move to San Francisco. That's kind of standard. How has delivery changed the business? So going forward, you think we have a lot of, just to wrap up the runners and the QR codes and the automated? I think that's going to stick around.

That stays, right? I mean, who wants to go backwards? Yeah. It will stay and improve. What needs to be improved in it, you think? I mean, aside from the fee structure, we talk about. Yeah, the fee structure. But I think that you have to,

to rethink the system of that. Like, there still has to be someone that kind of checks in on you and stuff. I think that, like, people look at it as an all or none. Like, if they ordered on their phone, I'm going to drop the food. There's not going to be any hospitality at all. It's turned into a glorified fast food at that point. And I think that there are ways of making it more elevated, even though this mechanism for your initial order and payment is digital. Yeah. I went to an Indian restaurant by me recently, and they had, very, very, very, very Asian style button system. One was for water.

One was for the check. One was just a call for service. And I was like, wow, they really thought this through. Like, they actually put water. Have you ever seen that? No, I've never seen it. But I'm kind of, I'm laughing. Like, you can't see me.

But I'm like, I'm like, the simplicity of that is so brilliant, right? Like, what else is there? Water, wait, or check? Like, that's 95%. You've hit almost all the edge cases. Yeah. Where's the bathroom is the only other one. Yeah, yeah, yeah.

So that stays, which means you need. need less servers, more runners. Restaurants work more efficiently. It's easier to get to profitability, I guess, because you've taken out 10% of the cost. I'm guessing something in that range. I don't really know. Now, what about delivery? Because it does seem like that's another thing where now everybody who said they would

never be a delivery restaurant, you know, some number of them are like, yeah, we figured it out. We had no choice but to figure it out. A lot of my favorite restaurants in the Bay Area would never do delivery. And then all of a sudden, these high-end restaurants are like, oh, you want ramen? Yeah, it doesn't deliver. You have to come get it.

And we don't even do pickup. And now they're just like, here's our at home ramen meal kit. Meal kit, yeah. The meal kit. So we've entered the trough of that, right? So it spiked hugely. We served about 280,000 people during COVID for a lineal loan.

1,250 people a night, every night. Delivery? Well, pick up because it picks up better. And delivery, a lot of issues. What did it cost and what was it? Was it like, how did you package it? $35 and $75. You know, you're looking for, you know, everything was reheated at home.

So, you know, just everything from Alinea Pop Pies to we did for our 15th anniversary, we did a seven course where you replicated some of the dishes at home. And what was really cool is that we were able to do that for $75, but we kept the quality silly high. And so it sold out every single day. Like, we went from. two days after the shutdown orders, we were open. We did 750 covers that night for carryout.

And I was like a drill sergeant in there. I was like, we don't own a restaurant anymore. Take all these tables out of here. We're going to have assembly lines. And we're going to put people six feet apart. And I worked with an epidemiologist. Like we consulted with doctors. And we basically wanted to bring a bit of joy to people during that very scary start

in the pandemic. And I have been. an advocate saying, why would we ever get rid of that? Now, the answer of why would you get rid of it is if no one buys it, you're not going to keep it. Right. And right now, we still sell them every week, but we sell way, way, way fewer. And it's a pain to keep it up when it's not a meaningful percentage of your revenue right now. Got it. However, I think that a great example, not to speak of our own stuff, but like Gavin Kaysen in Minneapolis owned Spoon and Stable. And he started doing GK at home, which are Zoom calls where you get a kit, anywhere in the country,

you hop on to Zoom, he teaches you how to cook it. He is killing it with that. And it is as vibrant as opening another restaurant. And at first he was just doing the meal kits. Then he added the video. He's got the lessons. Then he's got, they're on file. So you can order the one from a month ago. And while you can't participate, you can see the recording of it so you learn to cook. those sorts of things like there are tons of restaurants that are nationally recognized brands and chefs and owners who are nationally recognized brands whose food you can't get. And just shoving a bunch of bagels in a box and shipping across the country is not an innovative way to do that.

You know, it's novel. Hey, I'm going to send you some bagels from my favorite bagels. Yeah, the gold belly model of like, hey, I don't want to use the name. But yeah. Yeah, whatever. And right. Right. Right.

You know, so you're being. I don't know who's a sponsor. Right. I order Goldbelly sometimes and sometimes order it direct from folks. No, they're killing it. They're doing really well. But no, I like your idea of like that. People, chefs are celebrities and having that, you know, that business becomes super

creative for a brand. Gavin's done a genius job of doing it. And he's reopened his restaurants now and they're busier than ever. And he's still doing it. Like, why would you ever get rid of that? So I think that, I think it's short-sighted of restaurants to go like, oh, we did that during COVID. Now we're getting rid of it.

So I think it's just you have to figure out, well, during normal times, what do people want when they want something at home? And what days do they want? Like, I bought another 3,000 turkeys for Thanksgiving this year because for the most part, people aren't going to go to Alinea on Thanksgiving. But they will order the Alinia meal kit with Heritage Turkeys and all the sides and stuffings and pre-made and all that. They'll cook the turkey at home. What's that going to go for? I think it was a couple hundred bucks last year for person. We did almost a million dollars.

You actually cook the turkey and so you get a cook turkey? No, that's the only thing we don't do. You, you, the customer will cook the turkey. Got it. We will show you how to cook the turkey, but you get all the sides and the gravy and all that stuff where it's just heat up. We sold a million dollars of revenue in a single day. Wow. Yeah.

So why would we do that again? And even if we do it half as much, that's like, that's way better than being open. We gave our whole staff the week off. That they get to go on. When I grew up in the restaurant business, it was like Mother's Day, Easter, Thanksgiving, you're working. New Year's Eve. New Year's Eve.

I never had any of those holidays. I was like, who goes out on those civilian holidays? That's the worst night to go out. You're going to get banged out for four times of money. You know, kind of the same idea tangentially is like there's a huge nightclub company. That's a client of talk. And during COVID, they couldn't do nightclubs. And they just put big TVs in front of all like, you know, the private VIP areas.

and they sold them for NFL game day and stuff like that during the day. With food and beverages and all that, they're like, why would we ever get rid of that? That is like an incredible innovation that you would absolutely keep. What's going on with staffing and hiring? Because we hear in the press, unemployment is keeping people from coming back to these jobs because they're getting the supplement. Is that directionally true? And then is it also true that people are maybe saying,

like I'm rethinking my life. Maybe I don't want to work as much. Yeah, both political parties. Yeah, both political parties are wrong. Okay. Which is interesting. So it's a huge problem to reopen businesses, you know, especially in the hospitality industry.

But, you know, you're talking about hotels to airlines, you know, all that. And it's a problem for our businesses as well. What's interesting is that when you hear the far right. politicians say, well, like, we have to cut off all, all of the benefits. Well, that's certainly partially true for some people. But as you said, there are people who made a transition and, and went to other, you know, livelihoods and found out, hey, you know what? Even though I've been a waiter for 10 years, I can be with my family more at night. And I'm doing this other job. And I'm, you know, being very successful at it. So that, that, all of a sudden, you broke

apart in industry. People were resilient as they are. Yep. In a, in a, in our, in our capitalist society, they found other jobs, and now it's going to take time to replenish those people because they actually did the right thing. The converse is also true. When I heard President Biden say, look, like no one's staying home for an extra $600 a week or whatever, because that only adds up to whatever. I literally had a chef say who was making $65,000 a year plus benefits, so total comp $82,000 or whatever. Send me a picture of his government check and a bong from Breckenridge and said, I'll ski till September. See you then.

It's literally the case. Not ski, like hike, whatever, but yeah. Both things are true. You know, he went there during COVID to ski and just stayed and, you know. So the fact of the matter is is that both things are true. Some people in the industry are willing to make less. If they can make $45,000 a year not working or $80,000 a year working, they are not necessarily rational on going, oh, yes, I should plan for my future and make $80,000.

But then there was a whole bunch of resilient people who just went and found other jobs. Right. They may have pulled out that project they were waiting on. They had the 600 or 800 bucks or whatever they had. I can name 10 people off the top of my head who repurposed themselves with our help, by the way, who found jobs and software sales and stuff like that for the industry. We hired people from the industry for talk. Half of our sales people were former restaurant employees.

And so both things are true, and there's no cognitive dissonance in that. Like, it's just really frustrating to watch. And it's going to take, you know, not to watch it happen. It's frustrating as a business owner, but it is what it is. But also, like, the other thing is that, like, they're saying, oh, well, if you increased wages, you can offer a $500 signing bonus at $20 an hour and you're still like getting applicants. Yeah, I was talking to a famous restaurateur who had a place in San Francisco, and he was saying before COVID, they had to offer $35 an hour for a dishwasher in San Francisco.

I believe it. Plus overtime. And so now you're in the one and a half bonus. You know, now you're talking about whatever, $55 an hour for the last two hours of a shift. And he's like, I don't know how to make this work. Can I charge $38 for pasta? Like, I guess I have to in San Francisco. Like, inflation's a real thing.

Inflation's a real thing. And it's not like labor inflation is very real for, across everyone I'm hiring, whether that be on the software side or the restaurant side. That's where you're seeing the primary inflation. And then that's got to trickle down because if the person who's got the trucking company that's bringing you the produce has to pay 10 bucks an hour more for their driver. A thousand percent. It seems inevitable. And also, like, we don't want to get too technized, but like money supply looks like a Bitcoin chart.

So it's like at some point, like I literally am on a, uh, uh, uh, I'm, I'm friends with Richard Thaler, Nobel Prize winning economist. And when all the money supply stuff started coming, he put me on a chain with a whole bunch of really prominent economists. And I sort of said, like, what do you guys make of this? And they're the best economists of the world. They're like, I don't know. No one's ever done it before. Yeah, well, find out.

Your guess. They were asking me. They're like, well, you used to be a trader. How would you trade that? And I'm like, you know how to trade it. Like, it's got to devalue things. It has to. And if it doesn't.

I mean, the thing I'm seeing. is, I don't know if you're seeing this, but the most affluent people I know have become so much more wealthy during the pandemic because they had so many equities. And if they had the right equities, you know, some companies didn't go crazy, but they had the right ones and Amazon quadrupled or something. Now somebody who wasn't even thinking about buying a third or fourth home or a plane or whatever is buying a third or fourth home. And I like, because I can, and they don't sell the original too. So then you look at homes and the, appreciation of high-end homes has been nothing short of insane.

Bananas. But bananas bananas. Like people, I have people cold offering me from my house. People, people, yeah, I was going to say, people think that rich people don't take out mortgages. But if you're earning 25% on your money and you can borrow at 3%, you do that. So like, yeah. So there's a whole bunch of factors playing into it all. And, you know, it's going to normalize, but you can't shut off the light switch.

like we all did for COVID, and then expect to gear everything back up as fast as you've shut it off. Turning things off is much easier than it is turning them on. Yeah, restarting. If you left a car, if you've left your Mustang, 1969 Mustang in the garage for four years, and then you want to start it up again, you might need to get it tuned up. Or if you left your bike tied to a lamp post for two years, it's rusted, it's going to need new tires and a new chain. So what do you think about vaccines and forces? employees to have them.

This has got to be the most controversial topic. Yeah, you're giving me every hot button. Yeah, you're giving me every hot button. You don't have to talk about your restaurant. No, no, no, no, I will. I don't mind. I'm just laughing because most people try away from it. I mean, Google today said you're not coming back to Google offices unless you're vaccinated. I'll tell you what we.

I'll tell you what we did. Did you see that Google story, by the way? Yeah, I did. I did. I mean, that's, that is a, they're planted a flag there. What we did, what we did at the restaurants is as we reopened, we said, hey, you You don't have to do this. We're not going to force you to get vaccinated.

You don't have to show us your vaccine card. If you do, however, and your 10 days pass, your second dose, and you show it to us, you don't need to wear your PPE anymore. Okay. There's a great carrot. Right. So you can take off the mask and the gloves, and we got everybody who was vaccinated, a little pin that's a delineate group vaccinated with a checkmark.

So the customers would know that that person's fully vaccinated and it's been trapped. well, the small minority of people in the restaurant who were not vaccinated still had to wear gloves, do hourly hand washings, and wear the mask the whole time. And take a COVID test, probably. Yeah. Yeah, we had, you know, so at the end of the day, you can still work there if you're not vaccinated, but it's a bit of a scarlet letter. Everybody in the whole place is going to know that you're the person.

Now, I will say that there was one case and precisely one where the person had a medical reason to not be vaccinated. And that is valid. There are certain, you know, edge cases. And we didn't want to disadvantage that person or make them feel bad about her in any way or whatever. So we just basically said, like, hey, we also need people in accounting. So, you know, like we will retrain you to do other work where you're in an office.

That's very compassionate. I mean. Right. So. But what about customers then eventually? Are we starting to think about that? Because if your choice is, Delta variant is going bonkers and you could allow, you could keep the restaurant open and everybody has to show a vaccine card, which when I went to

Madison and Square Garden to watch my Knicks in the playoffs this year, I showed my vaccine card to be in the lower. And I was thrilled. That was like the coming out party for the pandemic. Yes. Yes. And people were just love to know mask. What do you think? Personally, I am pro science, pro vaccine. I have no idea how to, yeah, I have no idea how to reach those people. it's a failure of our educational system and our priorities. Yeah. And yes, you should have compassion to the people who don't understand it. But at some point, there has to be the conversation about rights and privileges.

Like, it is your right to choose not to do it? It's America. If you don't want to put something in your body, you don't have to. But then there's a whole lot of privileges that are going to go away. Yeah. And just like if you get hammered and drive a car, you're privileged to drive a car goes away. These are not novel concepts. Right.

But for whatever reason, the talk of rights and privileges devolves in our society now to, you know, it is not only my right to do that, but it is my right to shop at Walmart or go to my restaurant or whatever. And at the end of the day, that's a privilege. The public discourse, the public gathering is a privilege in our society. And we've lost that. And it's it's something that we, yeah, I mean, this is Hobbs, right? I was a philosophy guy. You know, life and a state of nature is nasty, shortish and brute, right? Yeah.

Brutish and short, I mean. And, you know, you have a social contract. And the concept of a social contract is not being messaged over the last six years in America in a very terrible way. It's very sad. Super sad. Do you think restaurants will become show your vaccine card? It's got to be something people are discussing now, right?

We ask people if they're vaccinated or not on our follow-up questions for all the people make reservations at my restaurants. The vast majority answer in the affirmative. Even if they uploaded that, which then you get into HIPAA thing about storage and all that, how do I really know they're vaccinated? Right. They could be, you have a fake car. So it's really without some, which won't happen, I don't think, but without some national passport, like Macron was talking. talking about. It's going to be very, very difficult, you know, to standardize that, right?

I mean, it was interesting in New York. They just said, show your vaccine card. And I guess if you had a penalty on the other side of having a fake one or distributing fake ones, I think that would be enough that if you got a 10K penalty for having a fake vaccine card. I would hope so. But part of me feels like there'd be a whole underground and just doing that. Yeah. All right, as we wrap here, and it's been great to have you on the pod, great, just great guest. Talk to me about the signature dessert you guys created, the painted table that is often now copied. I think that it's copied and mocked. And it was on the front page of Reddit last week where some people thought it was food porn.

And some people, there's a, there's a subreddit called, like, just put it on a plate or something like that. I was watching a Picasso documentary from the 20s or 30s where they had mounted a camera. behind some plexiglass and watched him paint. And I highly recommend no matter what you do and like, watch this. It is bananas interesting how he creates layers of paint and stories under the final image that you don't even see. And he feels like they'll still get conveyed. And at the time we were talking with Martin Castner from Crucial Detail, who's a designer that we work with a lot at Alinea.

And we were saying, how do we make people feel childlike? Like, one of the great things about a great hospitality experience or any experience is that it's new. And the older you get, the harder it is to have a new experience. And that is the childlike innocence that we all lose as we get older. So we decided we wanted to make people feel childlike. And the first thought that I had was I was once in a museum where everything was scaled to what it'd be like if you were five years old.

So the chairs were huge, the table was huge, a couple of you was huge. The plates were huge. And you'd sit down and you'd go, holy shit, I do remember that. I remember when my feet dangled off the chair and the fork was too big for my hand and all that. So I was like, we're going to make a table plate. And it's going to be like the size of the table and it's going to be a plate. And then we're going to take the chefs. They're all going to come out.

And we're going to let one of the customers plate the same food. So all the Mezun Plaza will be there. And we'll be like, yeah, just take the spoon and do this. And then there's one of looking like, there's, there's, look like shit because they're not, they don't have the paint stroke of Picasso of the artist of the chef. And at the same time, it'll be a new experience because everyone loves to paint when they're a kid. And you'll have this giant thing. So that was the start of the conversation. And we made up a mock-up of this giant plate. And what I realized very, very quickly is you cannot carry a giant

plate into a dining room without whacking people there. There's nowhere to store it. You can't clean it. Yeah, but like we always, we don't let that stop us. Like we're going to go like, no bad ideas in the I did like, yeah. Right. We're going to try this out on some people. And Grant told me like, I don't like going in the dining room. I don't want to go in the dining room. I don't want people painting like, this is stupid, all that sort of thing.

So it got shelved for a couple months. And then I would go like, well, maybe you could just plate out a normal plate and they could see the process. Because I would stand in the kitchen and in order to grant's attention in the first couple years in the line, I would just get some tweezers and, you know, some kitchen gloves. And I would do a plate. So I'd learn how to do it. and the poor person that got mine didn't look quite as good as the people like that is or they fixed it or whatever.

And I said, you know, people want to see that. That is the magic behind the door of the kitchen. The plateing of the dish is just such a wonderful thing to watch. Especially when it's elegantly done and beautifully done. And that's the thing. That's part of what you're paying for is that process. So anyway, Martin Kastner finally went like, well, we're thinking about this all wrong. We need to drape the table with silicone because it's hygienic.

it's clean, it's like, it's a tablecloth. We don't have tablecloths there. And then we'll do that. So we used to do it for like a couple months we did it for one table in each dining room per night. And, you know, the chefs would come out and do this. And the customers, even the customers not at that table would just lose themselves. Right. And then they all said, well, why didn't I get that?

Now, they thought that the other people were VIPs or they paid us off or something like that. Yes. But the reality was we chose people at random. And eventually we just went like, well, we just have to do it for every table. Yeah. And so that's the story of where that came from. And the wild thing for me was when we did Chef's Table for Netflix and I happened to be in L.A. And I was driving down the highway and I saw the billboard for Chef's Table for Netflix.

And it was that thing. And I can't tell you what a wild, it's just like putting anything into the world, be it software or anything else. but seeing it on a billboard and seeing people copy it and mock it. And it was on, you know, it's been in, uh, you know, a couple of movies where they made fun of it and all that. Like, I love all that. Yeah. Like what could be better than be parodied on SNL?

You pierce the zeitgeist. Like you figured out in the simulation how to capture everybody's attention with something for 15 minutes. And all we did is want to make people feel like kids again. And we stole from Picasso, which is a good guy to steal from. Amazing. Amazing. When you look back on derivatives.

software creation, restaurant creation, and you think about the core of entrepreneurship and the creative process, what do you think is at the core for entrepreneurs? Obviously, that's the audience of this podcast. What have you learned? What do you think the fundamental tenets for you are as an entrepreneur?

You have to get to a point where you wake up every day and you can't imagine not doing that thing. Right? So like there was a point when I would go eat with Grant, you know, at trio where I would wake up at like four in the morning going, I got to do it. I got to build a restaurant with this guy because there's like things I can contribute and he's the best in the world and no one knows it yet. Like I have to make that happen not just for him but for other people to see it. And there's a lot of other ideas that I have that like percolate around for a while, but they're not that like burning thing. Like, I was working on a talk for four and a half years before I said,

ah, God damn it. Now I need to go hire people and actually start doing this the right way. Because I knew what a commitment that was, because I had done that four or five times in my life already. That is the key thing. Because, as you know, call it a pivot, call it whatever you will. Some shit hit the fan at some point. And the entrepreneurs that do well go, oh, the world just changed or my business just change or whatever, that's fine.

The core of what we have is still there. The value proposition is still there. We just need to change this thing. But you have to be willing to wake up every day and be passionate about it. Yeah, and passion is such a cliche. I think what you're talking about, you know, if we were to use a more accurate word, is an unhealthy obsession. Yeah, yeah.

And also, which is notion. Which is noble, which is amazing. If you have something you're unhealthily obsessed with, well, that's so. much jet fuel for you to actually accomplish things. And as you're saying, there's going to be times when you need to pivot or fight through really rough seas. And if you're unnaturally obsessed with getting to this new world or seeing this thing manifest in the world, then that's going to carry you through.

There is a corollary too. And the corollary is, do you think it's an inevitable outcome of the world, even if you don't do it? Because then you've got some tailwinds. So like talk, the prepayment of experiences for restaurants would have happened at some point, even if I didn't do it. Grant would have had an awesome restaurant. And it wouldn't have been a linia. It may not have had a table plate, but it would have been awesome even if I didn't do it.

And to me, that's the other thing. If I'm backing a company, I just saw an amazingly cool company in the music space last week. And as soon as they started showing this to me, I went, oh, that's the inevitable outcome of, that part of the industry. And I was like, I'm about to. I'll talk to my last word. Yeah, right, right. And by the way, I think I know what restaurant had the three folks.

I'm going to say it right now. It's not going to be part of the official recording, but we can beep it out. That's fine. I'll tell you if you're right or not. It's a two-word name for the restaurant. And it's based in New York. Is the first letter D? No.

It's not, that's a D. It's a D. Damn it. I thought it was Gramercy Tavern. It's not Gramercy Tavern. Because they do have a casual up front. So Gramscied Tavern is the test case that I built, that I showed everyone in the industry, even though Gramarcy Tavern's not on talk.

Grams Seatown's not on talk because Danny Meyer invested in Rezi. Right, he did. That's right. But you're right, Gramancy Tavern is this is my other. They have five experiences there. They have the tavern. The front of the room, yes, the tavern, which is casual. then you have the restaurant and the prefix. That's three. I don't know the other two.

Well, there's two prefixes. There's the vegetarian and the regular. And then there's private event room. Right. The private event room is crazy expensive. It's like three grand. Yeah, five experiences in one restaurant, no way to book them until you get there with the exception of private events. This is, let me tell you what a foodie I was. Gravity Tavern used to be in my office because I would go there between one-th-thirty. It's a great restaurant. 530 and I would sit at the table in the front with the two right on the window with the two couches and I would sit there and just order food as we go and I would do six or seven back-to-back meetings and I during the dot-com there I just meet CEOs whatever I sit there and be me my editor my managing editor and the sales executive and we would just have people rotating in they would seat us I would give them a $200 tip they had the great ice tape

but before that when I was dating and I had no money I would take girls to the city opera if I had a date because I could get city opera tickets for 10, 20 bucks each. Sure. And then I would tell them, listen, I really want to go see Loboam and let's, but I have to work. So let's meet at Lincoln Center. And then afterwards we'll get dessert or something because I couldn't afford to take them out for dinner. Sure. Yeah.

And I would go straight to Gramercy Tavern. And I knew the bartender. And they had a souffle that they only did in the kitchen. But they also did cookies and some other. good stuff, sure, ganache, whatever the front.

But I knew the guy, and I'd say, hey, can we get two cappuccinos and the, any way we could get the souffle from the back?

He's like, because they had one that was like a harvesty kind of flavor, like a ginger or bread, whatever, man. That fucking restaurant

is so good. So good. So consistent. Michael Anthony, it's still great. Michael Anthony is a great chef. One of the three best dishes I've ever had

is the cold smoke trout there. Yeah. Great dish. Great dish. Great dish. and then 11 Madison is going all vegetarian Has gone Has gone

Yeah Does that make any sense to you? Is that gonna want? This is one of the ones where I will This is, I'm going to censor myself on this one This is where you, I'll talk about COVID all you want Yeah, that was what I'm interested to sit Because how many seats do they have and how many vegetarians are there

Who want to spend a what is it, 150 bucks or the pre-fix Oh, way more than that. Yes, way more than that. Yeah. 300? It's probably three times that. It's $300, $200, $250, $300. It's like per se level.

It's sold out instantly when they reopened. But I will say that we, I will not speak to them. But when we did for next, next every three, four months, we changed cuisines entirely from Paris 1906 to whatever. And we did a vegan menu where we did not rely on the usual like tofu and proteins and all that. We did really, really like the vegetable stocks were like brown. and cooked down with mushrooms and all that.

So you get really thick, anxious sauces and whatnot. And I am an omnivore and I love meat. And it was a great menu. If you cater to 3% of the population, you're going to have a hard time selling out. My friend started I said, David Freeberg for the Allent Podcast. And I was like, bro, I named him Queen of Kinwa.

I named him Queen of Kinwa. He started ETS on the program. It was a joke. We're playing poker. He basically started to eatze. It was like this automated, semi-automy. Yeah, yeah, I know exactly what it is.

Yeah, and then he went on and he bought the largest Kinwa farms in Canada or whatever. And he's like, all in on Kimwa. I'm like, any chance you can put it be salmon on there? He's like, no, it's all got to be vegetarian. I was like, Bogogi? Yeah, something. Yeah. Just give me something.

Like, you're limiting, you know, four people in the office go out to them to eat. As a business. So Daniel has articulated why he's doing this. and I don't question that. Like, great. Sustainability, the world. All valid. Yeah, all valid stuff.

And he's taking a risk and that's his right to do that. Right. It seems to me, so this is, he's not the first person. Trotter got rid of a whole bunch of proteins back in the day. I know. Charlie Trotter had a famous. Alon Pissar did the same thing. It lasted about a year and a half.

Like he was most famous for his breast chicken. People traveled from all over the world to eat this chicken. He out rid of it and did a vegetable menu for about a year and a half. He's now serving the person. breast chicken. So, like, I don't know. We'll see what happens. You know, New York is a very busy place and I think most people eat their ones. And it's a great experience, I'm sure. So that said, I would not want to do that. What about the mock meats? You would think that any of those are ready for prime time in restaurants? There is, so I invested full disclosure in a company called

meaty, M-E-A-T-I, which is mycelium-based. Where it has single ingredients. Mushrooms, right? Mushrooms. Yeah, it's the, it's like sort of the root of precursor of mushroom. They figured out how to essentially brew hundreds of cows worth of protein every 24 hours at medium scale in a substrate that has a texture that's more meat-like than the fake meats, like, you know, impossible foods and all that. I don't find those very compelling as a meat eater. But I read about what they were doing. First of all, those things have like 30 ingredients in them. Like, they're not, there's, it's arguable how sustainable they are and all of that and how much processing there is. This is literally like one ingredient. And the protein level of it is through the root. So they're scaling that up. We are working with them to work on improved flavor. It soaks up flavor just like tofu does.

It's a very, very basic substrate. But the, so I do think that there's validity to that. I think lab-grown meat is inevitability at some point. We're getting close. I mean, it feels like we're, because really it's a question of cost. You know, if it's, if it costs more to make a steak out of whatever, soybeans or whatever you're using, mycelium, whatever you use, then it costs to buy, you know, Miyazaki beef or Sharia, Guagu, like, who's going for that?

But when it starts to become, you know, more priced competitive. And also, and also, I think that there's an error that people make where they try to basically make the thing look like steak. Right. Like, I don't need it to look like steak. Just tell me it's a high protein XYZ and I'm totally happy. Now, there are some lab, I had some lab grown salmon that blew my socks off. Wow.

In a million years, I would, you know, on sushi, on as nigeri, never would have had it as nigeria sushi and you couldn't tell. Couldn't tell. it was perfect. And that's not at scale yet. You know, like people call us because of the restaurants and whatnot. Maybe that was wild type. It might have been wild type.

It was not wild type. It's another company. But I'll tell you. Phyllis foods was the other one. Finless foods and wild type with the two. I didn't invest in either. But I've looked at them deeply. Probably a mistake because I also had the ability to get in on Impossible.

Yeah, I blew that too. I didn't. Yeah. Why did you blow those investments? I tasted them. Which is a bad reason, I guess, right? But I was like, are people really going to buy this? So, like, meaty was the first one where I went, oh, like, I would eat this.

I would not just eat it. I would seek it out. You might enjoy it. Yeah. See, that's the thing for me is the blind spot I had with these was I was like, you're telling me people are going to spend three times as much on an impossible burger. So that you're going to pay $20 for an impossible. burger when I can get, you know, like a DBB show burger with short rib in the center.

Like, no. Like, it's like so sense. I was completely wrong. Yeah, I was completely wrong. It turns out people are willing to pay twice as much at Burger King or wherever. They're choosing to get these things for something that's better. I mean, that's, which now that you think about it, people will pay twice as much for a Tesla or a Prius or an EV.

Sure. And for an equivalent car because they want to save the environment. Well, they did. Now they've come down. Yes. not as pronounced. What three dishes are you most obsessed with in terms of food? Or have you become the most obsessed with? Oh, it's really simple stuff. Yeah, yeah, it's really simple stuff. I love making like an Italian sausage bolognese and at home. And that's what I like, even though it's summer, I, my wife is is out hiking this week. She's hiking the Tahoe Rim Trail. Oh, nice. And so when she's, when she's gone, I get to make that midsummer and, uh, and, and, and, yeah. And, yeah. And, Yeah, and so even though it's midsummer, I love that. I absolutely...

Either make or eat, by the way. Make or eat? Both. Yeah, both. Both. Okay. Yeah, I mean, I like to make and eat that. Like, I love, love, love.

You know, I love Italian food. So, like, I'm going to keep, you know, any sort of thing like that is great. There is a single bowl, pressure-cooked Korean-spoken. rice pulled pork that is like one of the greatest recipes that I've had in my life. Wow. And I've known my wife makes it. It's absolutely fantastic. Is she Korean or?

No. No. No. My wife's Korean. That's what I was asking. She was culturally appropriate. She was culturally appropriating that one. But it's, I think she got it from a Korean friend.

So that counts. And it's absolutely. We're going to put the recipe in the show notes, folks. Yeah, yeah. All the producers are going crazy right now in the slackroom. What's the recipe? What's the recipe? When she gets back from, she's very organized by her recipes.

Another investment of mine, but I invested in this not for environmental reasons, partly, but partly because the product was best. Maui-Nui-Nui-Venison. Maui-Nui, so in Maui in Hawaii. Correct. There is a venison farm. They're making deer or they're hunting deer? They're not, yeah, they're hunting the deer.

So the problem was, is that back in like the 1940s, 50s, I guess it would be some Japanese immigrants brought in these tiny little deer like they have in Japan and they are decimating the ranches and countryside. There are estimated to be 40 to 50,000 these deer are running around. On Maui, that's crazy. On Maui. And if you see, just go to Maui Newie Venison, Google it up watching the video. It's unbelievable. And Jake and his wife are spent, Jacob spent 10 years getting the USDA to certify a wild product. So you talk about a guy who's obsessed with something who wakes up in the morning. This is an unnatural obsession here for sure.

Right, right. And his wife is Hawaiian. And he got there and went, wow, like these ranchers are trying to get rid of these deer because they're decimating their crops. And yet they're eating. I mean, think about where they live. They live in a lush, wild environment. So they're eating this wonderful natural product.

So I heard of them through Tim Ferriss. Tim said, what do you think of this product? Sent me some. And I immediately took the rib rack, which is really small. It's the size of like a lamb rib rack. And I sent it to a linia. Like I ate one, cooked it. And I went, this is one of the best proteins that were ahead in my life.

Immediately sent it to a line. The chefs there were basically like, how do we buy this? And they weren't even selling to restaurants at that point. So it's sustainability for the island. They are now paying the ranchers to harvest these deer, which the ranchers were just slaughtering him and leaving them there. And so now the ranchers don't want to get rid of the deer because the deer, it's just, he's created this really wonderful economic incentive to help the environment there and also to be a high protein, beautiful product. Right now, for me, it's Peking Duck. I've been going crazy on Peking Duck.

Have you ever had the Peking Duck at Decoy in New York? I have not. Red Farm. Yeah, really great. Red Farm, I've been to you. Yeah. Yeah, so Red Farm, beneath Red Farm, if he's doing like Jewish Asian fusion on some of those dishes. I don't know if you've ever had the, he's got one of the dim sum items he's got as like corn beef or something inside of a dump.

Yeah, yeah, yeah, all right. But he does a limited number of ducks. I mean, he should be using your system for reservations. Yes, he should. Incredible. And then Mr. Jews here in San Francisco has peaking duck. That's pretty amazing. I mean, the other one I've been getting into, I don't know if you've ever had Ron.

that are dipping ramen. There's a company called Tai Shoken out of Japan, and they just opened in San Mateo the past year, but it's dipping ramen. So they call it Sukiman, where you get the soup that they make over two or three days. That's like a really thick. You dip these buckwheats in there,

and then you slurper up like David Chang, and I think Andy to Bourdain, went to the one in Japan, waited for hours. Yeah, my wife speaks Japanese and lived there. She's Latvian. And so we've been fortunate to tour Japan and eat all those sorts of things. It's just amazing stuff.

Amazing. All right, listen, we've got a lot of friends in common. This has been a great hour and a half. Yeah, wonderful. I can't wait to meet you in person one of these days and have dinner somewhere. Please do. You're in the Bay Area, yeah? I'm in the Bay Area now.

You might move to Austin, maybe Miami. I don't know. But I'm in the Bay area for now. If you ever roll through the Bay, I will take you to this dipping new place. I am two and a half hours from there right now. I'm in, I'm in, uh, Lake Tahoe area. Oh, fantastic. Well, if you roll through, let me know.

I will. I will do so. Enjoy. Not too much going on in Tahoe food wise. I'm not allowed to say that. We have some wonderful clients here. You do. Oh yeah.

No, I'm saying like I'm a high end. Yeah. Yeah, for sure. That's for sure true. But we're working on it. Well, thank you, Jason. We'll see you all next time. Bye bye.