Industry. Restaurant

Funding Source. Personal investors, then venture capital.

Big Idea #1: You cannot duplicate a personality, but, you can duplicate a system

For twenty years Dave was part owner in several restaurants. Ten of those years he ran The Broadway which was "the place to be seen" in Seattle. Open six days a week for lunch and dinner, he found himself in the restaurant most of his waking hours. Dave became an alcoholic and knew he had to get away from the environment where it was being served. When he took time off to decide what to do next, he realized that up to this point he had built his business around his own personality, which was why he was unable to grow.

Topic for discussion: How did Dave change his thinking to start a business that is not built around his personality?

Possible answer: He made Starbucks his model. The founder of Starbucks is on his board of directors and has been Dave's friend for years. With the focus being on multiple locations, Dave has to think and act completely different from when he had one large upscale restaurant where the customers were friends and came in regularly not just to eat, but, to see Dave. Now Dave does not even manage a location. He has removed himself completely from the day-to-day running of a single restaurant to focus on growth.

From food preparation to cash register tape, hundreds of detail must be in place so that every customer enjoys continuity from every location.

Topic for discussion: What is the most difficult component of a business to duplicate?

Possible answer: The service. Yes, it is hard to make sure every item on the menu served in every location is the same, however, if the supplier of the ingredients is the same, the recipes are the same and the preparation is the same, the food will taste the same. It's the people in the restaurant who will make a place feel different. Every business owner faces this problem. How do we teach people to perform excellent service by our company's definition?

Creating a particular environment is part of this solution. Todo Loco restaurants are bright, tropical, and fun feeling. This influences the employees. They wear uniforms and this is helpful. The fact that this is "quick food" means everyone is hustling. Dave will have to teach store managers how to give every customer the TodoLoco experience.

Big Idea #3: Dave has formed a board of directors. Many small businesses have them, but, most do not.

Topic for discussion: What is the difference between a board of directors and a board of advisors?

Possible answer:A board of directors has financial responsibility for the business. A board of advisors does not. Board members usually represent an ownership position whereas advisors probably don't. Because Dave is raising funds for a range of outside sources, he had to form a board of directors. The investors require a "seat on the board." When it comes to the kind of advice a business owner can get from directors or advisors, it will be very much the same.

Big Idea #4: Dave is dealing with the venture capital community.

. He already has funding from one venture capital firm and is looking for more. Prior to the success of Starbucks, venture capital firms shied away from food business start-ups. This is one reason you see so many national food chains use the franchise method to finance growth.

Topic for discussion: What is venture capital?

Possible answer: Venture capital is invested dollars for a part of the ownership of a growing business and sometimes of just a good idea. The money is available because risk-takers (not always wealthy) including individuals and corporations are looking for ways to increase their net worth and sometimes as a way to be part of "the next revolution." And, these people believe in entrepreneurship, capitalism and the free market.

By contrast, if a person invests in one of the S&P blue chip stocks, in five years that stock may have grown as little as 20-30%. If the investment is in a new venture, the dollars could increase in value by 100% or more. The investment could also be worthless. Why over 100%? Being invested in a new product when it "takes off" is the fastest way to increase net worth. Why worthless? How many goofy ideas have you wasted time trying to develop?

Big Idea #5: Dave says his number one job is hiring the right leadership.
He also says he is looking for character, not necessarily a particular set of skills or experiences. And, we are given another interesting insight into his hiring philosophy when he says, "all the good cooks are working."

Topic for discussion: What is character and why is it so important?

Possible answer: Dave does not ignore skills. He depends upon a professional headhunter, members of his board, and others in the home office to sort through the people who have the background to do a particular job. By the time a potential new hire meets Dave, the focus is on who this person is as a total human being. To Dave an individual with character has worked through difficult problems and has come out on the other end a better person.

Dave is interested in how the person's life is working in total, not just the professional part of it. This entire issue is so important to Dave because he knows he is now delegating rather than doing everything himself. These employees will be in other locations representing him and TodoLoco.

Great people will build a great business. Self-centered, greedy, immature people may contribute in the short term, but those are not the type of people Dave wants in this organization.

Dave says... "Tragedy plus time equals comedy."

Alan Cohen shows how to recruit employees by using the Internet.

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