Words from the W.I.S.E.

Richard Melman and Drew Nieporent What do a cowboy, a former governor and the inimitable Drew Nieporent have in common? Each has made an indelible mark on the restaurant industry. This trio and many other restaurant legends came together at the Winning Ideas from Successful Entrepreneurs (W.I.S.E.) Summit to share insights on how they built their empires.

The cowboy (Kent Taylor, founder and chairman of Texas Roadhouse), the former governor (John Y. Brown, Jr. of Kentucky and one-time c.e.o. of KFC Corp.) and Nieporent (founder, Myriad Restaurant Group) joined a stellar lineup of foodservice professionals. All recently spent a day in Chicago recalling their early years in the business, outlining how they brought their ideas to the market and, most importantly, how they grew empires while staying on top of their game as times change.

The event was a joint effort by Restaurant Hospitality and Nation's Restaurant News.

Brown's keynote speech kicked off the day-long program following a video recounting the attorney's long and winding career path. “This event is strictly for entrepreneurs,” he announced. He defined entrepreneurs as people “who look for things that haven't been done that they think need to be done.” In his mind, entrepreneurship is preferable to a job in what he called “brain-dead” corporate America, which he likened to serving time in jail. He and a group of investors bought Kentucky Fried Chicken Corp. during a period of fast growth for KFC franchises; while there, he says his team followed the KISS (keep it simple, stupid) approach to the brand, focusing on smaller units with more emphasis on takeout. “If there's one thing I'm proud of, it's that the concept today is about the same,” he noted.

John Y. Brown, Jr. Brown shared a laundry list of aphorisms for young entrepreneurs, including:

• Look for an unfair advantage.

• Follow your gut, and be your own financial advisor.

• When you get into a hole, stop digging.

• Remember that yours isn't a 9-to-5 job. When you are an entrepreneur, you will work twice as hard as everyone else.

• Hold onto your integrity.

• Do not hire a corporate professional manager, or you will end up working for that person.

Confidence in and enthusiasm for what you are doing are musts.

Brown said restaurant operators have three reasons to feel confident, despite the prevailing economic climate:

• People have to eat.

• Mom's not going back to the kitchen; women are entrenched in the workforce.

• What other product causes people to get excited three times a day?

Self-Reflection from Two Masters

Multiconcept master Richard Melman, founder and chairman of Lettuce Entertain You Enterprises, shared the stage with Nieporent, where they discussed lessons they've learned in their decades in the business. Melman freely admitted, after opening more than 150 restaurants “I've probably made more mistakes than anyone.” One of his biggest miscues — getting a little too cute when renaming a successful restaurant — taught him one of the most important lessons of his career: Be careful about your public perception.

After so many years and so many concepts, Melman appreciates the need to keep his restaurants current. “Make a change every week,” he tells his managers. Even if it's the smallest detail or touch-up, there is always a way to be better. He has found it easier to stay on top of things instead of tackling big changes all at once.

Nieporent, admitting that he hates to spend money, also acknowledged that change is more important now than ever. It's difficult to foresee when a restaurant goes from being an institution to just plain “old,” he admitted.

Nieporent also said that he finds dealing with a new generation of diners — and the way younger guests make and cancel reservations at the last minute — a challenge. On the other hand, Melman has realized that “sex drives restaurants” and believes that restaurants doing a good job of attracting a younger crowd are going to succeed.

Melman and Nieporent, who have built their companies with partners for individual units, had some advice about partnerships. Melman said he looks for street smarts, a strong work ethic and confidence, along with the ability to develop other people. Nieporent, conversely, likened partners to spouses — perhaps friendly exes, in this case. Rather than keeping them close, he has seen many of his former partners go on to create their own restaurant groups.

Nieporent has done a good job of keeping staffers loyal in competitive markets. Acknowledging that the restaurant may not be the most important thing in employees' lives — “especially the kind of people we want to hire” — he asks them to work hard, but understands they have lives outside of the restaurants and offers them flex time and the ability to choose how much money they want to earn.

Both Nieporent and Melman acknowledged that while critics wield some influence over restaurants, what the customer thinks is their number one priority.

“We do this because we live it, we breathe it, smell it, eat it every day,” Nieporent said.

Be Humble, Be a Student

Pizza Patron c.e.o. and founder Antonio Swad, who landed his first foodservice job at 15, believes in constant improvement. He established his credentials as an entrepreneur by inventing WingStop, which he sold in 2003. He used some of the profits to launch his current venture, a chain of pizzerias that targets Hispanic communities.

Swad said he's less motivated by money than by seeing people line up to eat at his restaurants. “It's approval; we want people to like us,” he said. And that goes for his organization. “You can't do anything great alone,” he observed.

Swad shared five principles he tries to follow:

Possess humility.

Always be learning. “People will offer us valuable tidbits, but we have to have our ears open,” he said.

Persevere. He thinks too many people give up on ideas or concepts too soon.

Take some risks. Swad said anything that won't kill him is worth considering.

Close every door. “Nothing is worse than having something from your past bite you in the butt,” he said.

Speaking of students, Raising Cane founder/c.e.o. Todd Graves created the original business plan for his chicken fingers concept as part of a college business course; ironically, his original proposal scored the lowest grade in his class. He spent the next few years working to prove his professor wrong.

After multiple rejections for loans to finance his first restaurant, he and a partner toiled away at blue collar jobs and saved. Finally, investors started listening, and a $50,000 SBA loan came through. The partners rehabbed a dilapidated site, furnished it with used equipment, tables and chairs, and opened for business. “It was the best night of my life,” Graves recalled.

Graves thinks Raising Cane's — which has expanded in 15 years to 80-plus units in 13 states — succeeds because of its focused menu and fast service. “Do one thing and do it better than anyone else,” he advised. He also believes in community service to fuel goodwill and sales.

Find the Money

The 345-unit Texas Roadhouse chain is another concept that had trouble attracting startup funding in the early days, c.e.o. Kent Taylor recalled. He finally convinced a group of physicians to invest in his first few stores, and after a few early missteps, the steakhouse concept took off. Now that Texas Roadhouse is a public company, he observed, “banks…love us.”

Taylor borrowed the idea of managing partners from Outback Steakhouse; he calls the partners “kind of the center of the universe for Texas Roadhouse.” He likes the idea that they have a stake in the operation and its overall success. He believes the practice results in lower turnover.

Entrepreneur John Schnatter, founder and c.e.o. of Papa John's International, sold a beloved sports car to launch his dream of opening his own pizza chain as a teenager. He used the money to start up a small pizza operation in a back corner of his father's tavern, ultimately opening the first Papa John's restaurant in 1984. Today, his company includes about 3,750 units worldwide; he owns some 600 of those units.

Schnatter outlined the core values behind the Papa John's culture: superiority, People Are Priority Always (PAPA), attitude and constant improvement. He said it takes about 18 months to get an executive from outside Papa John's to buy into the culture completely.

His advice? “Be abnormal.” Normal companies, he argued, are destined for failure.

The Velcro Moment

Tim Gannon, cofounder of Outback Steakhouse and creator of the famous Bloomin' Onion, says the genesis of Outback was “a Velcro moment,” referring to the accidental discovery of Velcro by its inventor. His came after 15 years at Steak & Ale and a brief stint in New Orleans, where he was “blown away” by the food.

“If I could take chef-inspired food to a casual environment, I would have it made,” he recalled thinking. At the time, he believed there was a huge chasm between the high and low ends of the market.

From there, he partnered with Bob Basham and Chris Sullivan to launch what ultimately became Outback Steakhouse in 1992. At the beginning, Gannon said he was “worried about the simplicity of doing a steakhouse,” but history has shown that his worries were unfounded.

“My advice is to find your Velcro moment, then find the right partners,” he said.

Drew Nieporent Wins the Melman Award

Nieporent (right) shows off the award named for Rich Melman (left) Success comes in many packages, and that's never been so apparent than seeing Rich Melman and Drew Nieporent together for the presentation of The Melman Award at the W.I.S.E. Summit. More than a decade ago, Restaurant Hospitality created the award to honor the founder of Chicago-based Lettuce Entertain You Enterprises and a man who is arguably the greatest restaurant concept creator this country has ever seen. Despite his huge success, Melman is quiet and unassuming. Nieporent, on the other hand, is a larger-than-life, cigar-chomping bon vivant who, like Melman, has been one of the country's most influential restaurateurs. They may be men of different style, but both have proven to be iconoclasts in their own way.

Earlier this year, the James Beard Foundation named Melman the country's Outstanding Restaurateur. Two years earlier, Nieporent, the founder of Myriad Restaurant Group in N.Y.C., won the same award. It was thrilling to be in the presence of these two titans. In presenting the award, RH Editor Michael Sanson explained that Nieporent demonstrated early on that he had no interest in playing by the rules. It was the mid 1980s, and Nieporent was full of bravado when he dared to open an upscale French restaurant called Montrachet in a little-known Manhattan district called Tribeca. Back then, even cab drivers rarely ventured into this shabby, not yet chic neighborhood. Not only did Nieporent open a fine French restaurant where no one else would dare venture, but he welcomed everyone in and told them to forget about the old rules and dress codes of the time. It was he who led the charge that put hipsters in jeans next to those wearing Armani. It was he who made dining in upscale French restaurants accessible.

Years later, Nieporent did a switcheroo. This time he took Japanese cuisine, which was primarily available in mom and pop restaurants, and made it soar in a sleek, upscale restaurant called Nobu. There was nothing quite like Nobu and it made Nieporent a legend who was courted by Hollywood stars.

He has gone on to create other great restaurants, not the least of which is his most recent, the Michelin two-star Corton. Decades later Nieporent has maintained his rebellious spirit, while at the same time maintining an old-fashioned sense of hospitality that is now sadly in short supply. And it is for this reason, RH declares him the 2011 recipient of The Melman Award.

Pay as You Grow

Four restaurant financial and legal experts spent an hour during the W.I.S.E. Summit considering the various financial options available to a hypothetical expanding restaurant concept. The discussion raised a variety of issues that owners might face as they grow, whether it's through franchising, loans, issuing stock, private equity partnerships or other means.

Among the tips they offered:

Protect your intellectual property, which includes things like a logo, décor and menu, by keeping it separate from any agreement if you can. “If you can segregate this, you can create….more power for yourself,” said Andrew Peskoe, a partner with Golenbock Eiseman Assor Bell & Peskoe.
Selling branding licenses to overseas partners is an often-overlooked way to generate growth capital.
Make sure to take care of top performers, typically by offering them a piece of the business. “Don't pass up the chance to hold on to your best employees,” Peskoe said.
Evaluate potential private equity partners based on whether they are a good fit for you and agree with your style of running a business.