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SPEAKER_05: As we kind of got busier and busier, we didn't really know what we were doing. We were bringing in octopus, and let's just say the octopus weighed 40 pounds. We would divide that by the ounces that we served, and we were like, great, we could serve octopus for six bucks. Well, we didn't take into account that once we cooked that octopus off, that 40 pounds became 18 pounds. And so all the loss in that, we didn't capture that in the pricing, so we were really giving away octopus for way less than you could buy anywhere in the world, probably. And we did the same for scallops and lamb chops, and we were kind of getting busier and busier and losing more and more money.
SPEAKER_06: Welcome to How I Built This, a show about innovators, entrepreneurs, and artists. And entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how three childhood friends who grew up on Greek food launched a restaurant and found just the right guy to help them grow it from a struggling sit-down into a sprawling national chain, Kava. You may have heard this statistic around the restaurant industry. 90% of restaurants fail in year one, which actually is an exaggeration, but still only 80% of restaurants survive past year five. The restaurant business is hard because there are so many variables that can put you in trouble fast. If there's bad weather, people don't eat out. One bad review from a disgruntled customer can lower your rating. If you overestimate your supply needs, you could lose thousands of dollars in spoiled inventory. If you underestimate them, you leave your customers disappointed when they can't get what they want. The list goes on and on. And by the way, the margins are usually pretty slim. So why do people do it? Well, in the case of Kava, the founders really wanted to share their Greek culinary heritage. Ted Sano Christos, Dimitri Moshe Vides, and Ike Grigoropoulos all met as kids in their Greek Orthodox youth group. They grew up eating things like lamb meatballs, souvlaki, tzatziki, and fresh salads with feta cheese. And as adults, they all ended up working at restaurants. So when they came together in their 20s to open a small Greek taverna in suburban Washington, DC, that was the plan. Run a restaurant, be a gathering place for the community, and maybe earn enough to live off. What they didn't plan for or anticipate was for Kava to become a national chain of fast, casual restaurants, a chain of more than 280 restaurants across the US. But to get there, the three friends had to go through a lot of pain, permit violations, near bankruptcy, and a money-losing venture to package their products. But a few years in, the founders connected with a guy named Brett Schulman. And Brett believed there was potential to turn Kava into something much bigger. And together, after a few more years of pain and financial struggle, they managed to figure out how to make Kava work. In today's episode, you'll hear from Ted Sinalkristos and Brett Schulman. Brett will join us a bit later, because the story really starts with Ted and his childhood friends Dimitri and Ike. Ted grew up in suburban Maryland in the 80s and 90s. His parents were working-class immigrants from Greece. And at home, Ted was immersed in Greek culture, not just the food, but the language, the holidays, and the Greek Orthodox Church. His mom worked as a waitress, and his dad worked in construction.
SPEAKER_05: He did jobs on his own. It was a company, but he was the only employee, right? So it was called JX Contractor. And my dad would come home pretty late from those construction days. And I remember him dragging me to a few days of work with him, whether it was a construction site or roofing job or whatever that was. I remember a day where he said, I need you to move all that wood from this side of the room to that side of the room. And I did it. And when I was done, I said, what's next? He's like, I need you to move that wood back to the other side of the room. So he was definitely testing me. And I just remember it being so hot. And I was like, I cannot do this for the rest of my life. I'm going to have to figure out something to do.
SPEAKER_06: And what about your mom? I mean, did you go to the restaurant with her?
SPEAKER_05: Yeah, my mom worked at Tally Ho Restaurant, which is actually her sister's restaurant. So my aunt and uncle owned it. And she used to take me all the time because she couldn't afford childcare. But I loved it. I loved being there.
SPEAKER_06: This restaurant's in Potomac, Maryland. It is still there, by the way. Yeah, it's Potomac, Maryland. It's a classic Greek American diner.
SPEAKER_05: It's like Greek American diner. Yep. They have oddly Italian items, pizza, Greek items. Bacon and eggs, breakfast.
SPEAKER_06: A little bit of everything.
SPEAKER_05: My uncle actually still cooks breakfast there every single day. So whenever I get the chance to stop by, I do. But I remember her dragging me there. And I fell in love with it. I was able to wash dishes. I would bus tables. I loved interacting with the customers. It's really where I fell in love with the restaurant business.
SPEAKER_06: And I have to assume Greek culture was probably pretty sort of central at home. Like you were probably eating Greek food, bringing Greek food to school for lunch. Right?
SPEAKER_05: That was literally all I ate. I mean, I was truly amazed. And I am more amazed today because I know how difficult it is to have a family and have work. Then my mom would go to work and still have time to prepare these elaborate, amazing meals. Whether it was like a whole leg of lamb or stuffed tomatoes or spanachopita that she would make from scratch. I mean, I tried to make one the other day and it took me like five hours. I'm like, I don't have time for this. And it was really amazing the experiences that we had around the dinner table. And in my mind, it seems like it was yesterday where I opened my lunch at school and the smell that came out of the tin full container was of spanachopita, which is spinach and feta cheese sitting in my lunchbox for a few hours before I opened it. Kind of smelled up the whole cafeteria. And people were like, what is that? What are you eating? And I was always embarrassed to explain what that was. I was a young kid and I was trying to explain what spanachopita was. And it was really, really hard kind of growing up being so different. Now I obviously really appreciate it and love it. And any chance I get to eat my mom's food is a treat.
SPEAKER_06: So you met I mean, you basically met the guys who would you would go on to start this business with Dimitri and Ike as kids. They were I mean, you met them in the neighborhood or at the church or in the youth group.
SPEAKER_05: Yeah, we met at the church. I mean, one thing about there were so many different churches around us, all Greek churches, and you got to interact with the kids from all over. Right. So I met both Dimitri and Ike through that church system. And we were a little different in ages. I was the oldest. I was one year older than Dimitri, two years older than Ike. But we hit it off as soon as we met through those church programs.
SPEAKER_06: I know that you did a couple years at the University of Maryland, but you obviously grown up watching your mom in the restaurant business. And I guess you in the early 2000s, you dropped out and basically started working restaurants as a server, right? Yeah, mainly as a server.
SPEAKER_05: I did work in on the line a few times in the kitchens. I would bartend. I managed a little bit. A good friend of mine opened up an Italian restaurant called Olazzo in Bethesda, Maryland. Still there. Yeah, still there. They do a great job. Both Ike and myself worked there. And I really loved it. I did everything there. It's where I really learned and started to understand the restaurant business, started to understand what it meant to have a P&L. And they really let Ike and myself kind of entrench ourselves in that business and do a lot of the wine ordering, the food ordering, the menu creation. Ike, who was an accountant by trade, was doing a lot of the bookkeeping for them. So it was an awesome opportunity to learn.
SPEAKER_06: So you guys were all working. You and Ike were working at Olazzo. And Dimitri, he was working at another restaurant. I think it was an Israeli restaurant, right?
SPEAKER_05: Yeah, it was called actually Tel Aviv Cafe. It was literally right around the corner from where we were at. I remember we would kind of grab coffee and talk about doing our own restaurant one day and talk about doing a real version of a Greek restaurant that really represented what Greek cuisine was. And we grew up visiting Greece. We grew up visiting our villages. We grew up really seeing what Greek food was about, whether it was our parents cooking it or those experiences in Greece and in our villages. Greek cuisine was never technique-driven like the French or the Italians or Japanese, right? It was always about the quality of ingredients. So even when my mom cooked here, she didn't need Greek tomatoes or Greek rosemary. She just needed the best version of those from here to make amazing Greek food. So that's really what we wanted to kind of bring here to open a restaurant.
SPEAKER_06: I guess you had some money from waiting tables, but I can't imagine you had enough money to open a restaurant. Clearly, you all came to this idea of let's start something together. But how did you make that happen?
SPEAKER_05: So we didn't have any money. You're right about that. We just had the will to want to do something different. And I remember, you know, Dmitri got a call from one of his distributors who said there's this Russian bakery going out of business. And this is probably 40, 45 minutes outside of Washington, D.C., in Rockville, Maryland. And we went up and we looked at the spot. And I mean, this shopping center was just barren. There was no cars in it. We went into this kind of Russian bakery. It looked like a, looked like a subway, if I could best describe it. So we offered to buy the business. And I remember it was, I don't know, I think it was like $10,000, $15,000. And the agreement would be that we would pay that over time.
SPEAKER_06: And in buying the business, you would buy the, you weren't buying like the brand name or what were you buying? Just the space. Just all the equipment.
SPEAKER_05: Yeah, just the equipment and everything inside, which I later came to find out was, you know, worthless because we couldn't use any of it. But so when we met with the landlord, the landlord actually said no, because some of the same things we ran into in the past, our finances weren't there. We didn't have the personal guarantees. We didn't have any cars or homes to put up. So he didn't want to give us the space. We were 26, 27 years old. He just didn't do it. So we eventually we come up with this plan. We had found out through conversations with the woman who owned the Russian bakery that she owed back rent. And so we went to the landlord and we said, well, what if we paid her back rent? Would you give us the space then? And I'm sure as many of your listeners will know already is that money talks and he immediately said, yeah, I can do that. So then the question was, where are we going to find this money now? We offered something that we didn't have. And by the way, how much was the rent per month?
SPEAKER_06: Do you remember?
SPEAKER_05: I'm not sure what the actual rent was per month, but I knew that she owed about $20,000. And so where are we going to find this $20,000? Right? None of us had 20 bucks in our pocket. So I think I always preface it with like, this is this is what you shouldn't do when you start a business. We took all our credit cards, our personal credit cards, and we just pulled money off them. Just withdrew cash. Withdrew cash. We basically maxed them out. And we were able to come up with that that money to pay the landlord off.
SPEAKER_06: Like what you like walked in with like a suitcase of cash?
SPEAKER_05: I think we turned it all into a cashier's check. But the story would probably be much better if we did walk in with a suitcase of cash. Here's the 20 grand. It's all there. It felt like it did feel like that.
SPEAKER_06: Hand number bills. So and what was the concept that you were thinking of? It was I mean, this is a Russian bakery that you were taking over. Tell me what it was going to be.
SPEAKER_05: So the idea was that we would do mezze, which many people know as tapas or small plates, shared plates, because that's how they eat in Greece. When you go, you order a bunch of these plates and you kind of share them. So the idea was that we would create these dishes, tzatziki. We had crazy feta, which was feta infused with jalapenos and shallots. We had baby lamb chops over French fries, but we would hand cut them every day, fry them in olive oil, top them with oregano. So the way that we had them in Greece, right, with real fresh potatoes. And so.
SPEAKER_06: And this was a sit down restaurant or you'd order at the counter and sit down?
SPEAKER_05: You sat down. We had full service. We had a full bar. Full service, waiters. Well, everything. Full service bar, host stand. Everything that you would experience at a nice restaurant. And the three of you guys are going to do everything? Everything. Dimitri was going to cook. I was going to run the kind of front of the house with Ike. He would use his time to focus on the finances. But that was the plan that we would own and work in this restaurant for the rest of our lives.
SPEAKER_06: All right. So you got the 20 grand to pay off the back rent, but you still need money to like get supplies and get and build it out. And you know, right. So where did the rest of the money come from?
SPEAKER_05: So the rest of the money came from us working during the day, during the evenings, I should say. We worked at night at Alazzo restaurant and Dimitri worked at his restaurant. And during the day we we would build and we would do all the work ourselves.
SPEAKER_06: Your dad was a contractor, so presumably you had some guidance.
SPEAKER_05: They helped. They were really disappointed that we were going into the restaurant business and that we were not lawyers and attorneys. You're not going to be a lawyer or a doctor? Yeah.
SPEAKER_06: What are you doing? Why are you from Greece for this?
SPEAKER_05: Yeah. And they and and, you know, they saw the center and they were like, are you going to even have any business here? Yeah. Yeah they weren't happy about that, but they did help. Ike's dad, Ike's uncle, my dad, Dimitri's dad, they all really helped us bring it together. But I'm telling you, we built this thing for right around like 10 grand. We everything was from Marshall's, TJ Maxx, Target. We would go into these to Target or Wal-Mart. We would open up the credit card so we could get that extra 10 percent discount, you know, when they offer that at the point of sale. And we did everything ourselves. It was there were crazy stories that happened along the way. I mean, we did our own electricity. Wow. Was that permitted? I'm going to plead the fifth on that. You know, it's not everything was done by the books, I will say, for the build out. And everything's up to code today. So we resolved any issues we had. But before it was a Russian bakery, it was a tile shop. So the person who was selling tile there had tiled every part of this place in different color tiles. And so we tried to hand chisel this stuff up. We tried to get it up with machinery. None of the tiles would come up. Once we hand chiseled it all off, there was about an inch of glue underneath them. I don't know why anyone would need that much glue, but for some reason it just was there and we could not get it off. And I remember asking people what they recommended and someone said to me, you know, you should try muriatic acid. And I said, OK, that sounds cool. I head over to Home Depot. I buy some muriatic acid. I remember mixing it with my flip flops and a T-shirt and shorts. It starts kind of, you know, steaming up. The vapors are coming up. I pour it all over that glue. And I'll tell you what, that glue was gone. That muriatic acid works miracles. I was literally at the doctor and in the hospital. Hours later, I was just, I could not breathe. Weezing. Weezing. I had blood was dripping from my nose and you know, you're supposed to be wearing goggles and a mask and gloves. And there I was just literally just pouring that stuff out. But it worked. We got the glue up and we can move on.
SPEAKER_06: So you guys are working your day jobs as waiters or night jobs and then or maybe in the daytime you're working on the build out. How long did it, between the time that you got the lease and the time that you eventually opened, how long did it take?
SPEAKER_05: I think it took, I think we were working on it in the summer of 06. And we eventually got to opening day was in November of 06, a few days before Thanksgiving. And I remember right around October, we went for final inspection and the fire inspector came in and he looked at us and he said he was there to test the Ansel system. Ansel system in the restaurant is basically what puts out fires on your grill or fryer if you have one. And he said, where's your grease hood? And we said, what do you mean? It's just a, there's the hood right there. And he said, well, this is a baker's hood. Call me when you have a grease hood. And we went out and we, we got a quote for this and it was going to cost over 20 grand. It was like 23 grand to remove that hood and put a new one in. And I just remember we were sitting in that restaurant. It was all built out. The candles were lit. We had the tables, the tables and chairs were all set. I mean, there was, we were just ready to go. And we thought we were done right then and there because I don't know, we just didn't know how we were going to find that money to put that hood in.
SPEAKER_06: Wow. I can only imagine how, how just disputing that was. Because you need that approval to open up. You can't open it up until you get that final inspection. So what did you do? So that was one moment where it felt insurmountable because where was this money going to come from?
SPEAKER_05: Our credit was already down the tubes, by the way, because we were not paying those credit cards we maxed out. So nobody was, was really going to give us another credit card. And I remember talking to my uncle who had recommended we talk to a banker he knew. So we met with this banker and he met us. He came into that restaurant and sat down. By the way, there was restaurant at the time had no sign on the outside. So it was hard enough for him to find it, let alone our customers were going to experience down the road. So he comes in and he's like, where's your sign? And we start to tell him our story about the money and how we've run out and the hood. But he kind of looks around and he sees the space and he's like, well, how did you get it to this point? And I told him the story that I've been telling you about all the work we had done ourselves. And he looked at us and he said, you know what? I believe in you guys. There's something here. I love this story. I love everything you've done in here. I'm going to lend you the money. Wow. You guys had no credit.
SPEAKER_06: No credit. But this is, I mean, it happens less and less with bank consolidations, but this is what used to happen more often when you'd have small local banks.
SPEAKER_05: Yeah, it was a nice experience. It was my first interaction with a bank or a banker because I'd never even had any money to put in a bank. So I kind of thought it always worked like this. You meet a guy, he gives you money and you build your business. But obviously, as we've been in business since then and we've learned that that was actually a pretty miraculous moment. Lucky break.
SPEAKER_06: Yeah, very lucky break. What kind of collateral did you guys have to put up against it?
SPEAKER_05: Well, there was no collateral except for the restaurant itself. So there was a lien on the restaurant, which, like I said, I mean, we built that place for 10 grand. So the collateral was less than the loan was going to be. So what was impressive is how quickly we also got that loan. I mean, it was probably a week, maybe 10 days later, the check came in.
SPEAKER_06: So you then went out and bought that greashood.
SPEAKER_05: We bought the greashood, we got it installed, and we called the inspector and everything worked, everything clicked. And we were set to go. And that was the Tuesday before Thanksgiving of 2006.
SPEAKER_06: So let me ask you about the name, Cava Meza. Why did you choose it? Does cava mean like a cellar or like a cave? So cavo with an O on the end means cellar or cave.
SPEAKER_05: And the word cava actually comes from that word. When you go to Greece, you'll see a lot of stores called cava, or you'll see a lot of bottles of wine with the word cava on them. And it's not the sparkling wine from Spain. It really means that this wine has spent a little time in a cellar and becomes kind of like a reserve wine.
SPEAKER_06: And tell me about the menu. Was it spanacopita, moussaka, tzatziki, dolma, souvlaki, was it like that kind of stuff?
SPEAKER_05: Yeah, we had some of the basics. Again, it was like all small plates. We had chicken souvlaki. We also did these beautiful like U10 scallops that we sautéed in our Greek olive oil. We did lamb chops. We did grilled meatballs. A lot of the recipes came from Dimitri's mom and just doing it in the way that Greeks would do their food or treat their food or their cuisine and have the best possible products and create food out of that.
SPEAKER_06: All right. So you eventually get the go-ahead to open. I'm assuming when you opened, there was probably a lot of friends and family and people from the church to support you at the beginning, right? Like people were coming in and you were probably busy from day one.
SPEAKER_05: So we had some friends and family who came in just to kind of help us practice. And things kind of went wild. We didn't really know what we were doing. And we were trying to figure that out because we didn't have a POS system. We didn't have any way of like tracking orders. We were handwriting everything. We were using all these handwriting orders on tickets. Everything. So we were writing it on a ticket and then we were going in the kitchen and transferring that order onto yellow sticky notes. And, you know, I remember one of the early moments of those sticky notes. You know, I think the common theme has been we didn't have a lot of money and we were trying to save money and everything we bought. And I remember we bought the knockoff brand of the 3M sticky notes and walked into the kitchen. We had a packed house. I'm looking around. I'm wondering where the chefs have gone. I'm wondering where all the food is. I look down and they're all on their hands and knees kind of looking through these tickets. It was so hot in the kitchen that the glue was melting on the back of these knockoff sticky notes. And they were all falling down on the ground. So, you know, I remember we end up kind of giving all this food away for free. And, you know, that was a little bit later after opening. But I just I remember funny stories like that along the way.
SPEAKER_06: I mean, restaurant is a very risky business, right? I mean, anyone who's been in the business knows that you're more likely to fail than succeed in the first three years. I mean, once you factor in, you know, the cost of labor, the cost of rent, the cost of food, there's very little margin left. I mean, it was just the three of you. So you didn't have presumably you didn't have to pay employees. But were you bringing money in? Were you losing money? I think in the restaurant industry and maybe it's it's just I don't know, maybe it's in our blood, but every single day you feel like the restaurant could fail.
SPEAKER_05: It's it's kind of a crazy feeling. Even even that first day of opening, we had one customer come in. I remember he came in, he sat down. I was the waiter and I went up to him and I said, this is what we're doing here. We're doing this Greek concept, small plate shared. And he said, well, I want big plates. I want a dinner. I came to have a meal and, you know, I try to be as charming as I could. I love talking to people. I love making people happy. And I went into the kitchen and I think it was Ike that pointed out that we had only purchased small plates. So there were not even any big plates in the restaurant. Literally, you only had small plates.
SPEAKER_06: Exactly.
SPEAKER_05: And so I went back out there and I said, I'll figure it out. I'll make him happy. And he got up and left. And we didn't have another customer for two more days. And again, we thought we were going to fail there. And so, like, as we kind of got busier and busier, we didn't really know what we were doing. We were bringing in octopus and let's just say the octopus weighed 40 pounds. We would divide that by the ounces that we served. And we were like, great, we could serve octopus for six bucks. Well, we didn't take into account that once we cooked that octopus off, that 40 pounds became 18 pounds. And so all the loss in that, we didn't capture that in the pricing. So we were really giving away octopus for way less than you could buy anywhere in the world, probably. And we did the same for scallops and lamb chops. And we were kind of getting busier and busier and losing more and more money.
SPEAKER_06: When we come back in just a moment, how Kaba starts hitting its stride with the help of a new partner who sees the marketability of the Mediterranean diet. Stay with us. I'm Guy Raz and you're listening to How I Built This.
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SPEAKER_02: Hey guy, my name's Keith. I'm from Bushmills in Northern Ireland. I love the story of Ooni Pizza Ovens. It was great to hear how two people in the UK were able to take a concept and build and grow a business enabling people to produce true Neapolitan quality pizza in their own home. I'm also a teacher. I live in the UK and I was captivated by the story. So much so that I'm now the proud owner of Ooni Koda 16. I love your show. Keep up the good work. Thanks.
SPEAKER_06: If you want to share your favorite episode of How I Built This, record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is and why. A lot like the voice memo you just heard. And email it to us at hibt at id.wondery.com and we'll share your favorites right here in the ad breaks and future episodes. And thanks so much. We love you guys. You're the best. And now back to the show. Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2008. And even though Cavameze is popular, the restaurant is losing money. Ted and his partners are paying themselves basically nothing. But then the customers start giving them an idea for how to expand the business. We had people kind of requesting to buy our dips and spreads like our hummus and tzatziki.
SPEAKER_05: And like, they were like, Oh, can I get a pint of that? Can I get a... To take home. Like, can I get a gallon of them? Like, what are people doing with a gallon of hummus or tzatziki? Right? Right. And eventually, you know what, we had a customer who came to the restaurant all the time, Kenny Mates, who said to me, like, why don't you guys sell it in the grocery store? And I said, well, I'm not really sure how we're going to do that. I don't have any experience doing that. And so we decided to do it because everything that we had done in the past, we had no experience doing. It's found a way to work itself out. So we started doing that whole business. And, you know, at that same time, we started talking about doing a second restaurant. We're like, hey, we figured out what we're doing. We must be geniuses, right? Let's go do a second restaurant and and let's try to sell our dips and spreads in grocery stores at the same time. And I remember we would make these dips at night. We would hand scoop them into the packages. We would use these little scales and then we would use blow dryers to melt the ring of plastic around the top to crimp them. And then eventually deliver them to the grocery stores in the early morning. Was the payoff good? I mean, you're getting into a few small local groceries, but a lot of work.
SPEAKER_06: You got to make all that tzatziki and you got to make all that feta and you got to make all that hummus and package it. And was it worthwhile? Was it a good revenue stream?
SPEAKER_05: It was not a good revenue stream. It was losing money. It was giving us heartache. I remember even the first delivery I took, the grocery store refused it. I delivered it in the backseat of my car and they said, well, you know, has this been refrigerated? You know, since you delivered it, I go, no, we pretty much made it, threw it in my car and brought it over. So I had to throw that all away. Obviously we're making this stuff without preservatives. And as we made it a few days later, these packages were kind of blowing up because we didn't have any preservatives in it. So we didn't really understand the business at all. And it really, really struggled. I guess this is sort of around the time when you get connected with Brett Schulman.
SPEAKER_06: First of all, why were you looking to reach out to somebody? You sort of felt like you guys needed help figuring this part of your business out? Yeah. I mean, at that time we had signed a lease for our second location.
SPEAKER_05: We were delivering to a few Whole Foods in the mid-Atlantic and a few smaller other grocery brands. And we were having issues. We were having logistical issues. We were having production issues. It was not profitable. And right around that time, the economy started to kind of collapse. This was 2008. 2009. Yeah. We were building that restaurant. We had a loan for that restaurant. And the bank eventually pulled it because of the collapse. And so we were in a tight spot. Things were not going well. And I guess this is probably a good time to bring in Brett Schulman, who soon at this point became your partner.
SPEAKER_06: You kind of come into the picture at this point, Brett. Yeah. And you've been sitting here quietly the whole time listening. But just to kind of paint a picture here, while Ted and Dimitri and I were building up Kava, you were working at your wife's business, which was a sort of a startup that she had called Snickity Snacks, a small snack food business, which I guess eventually got acquired. So at this point in your life, you were kind of looking for your next move, right? Yeah. I had been heads down for four years helping build that business.
SPEAKER_03: And the exit that we did, it was a success. I wouldn't say it was a tremendous success by any means. It was like pushing a boulder up a hill. But it was a tremendous learning experience in what it takes to build a business and build a brand. Yeah. But now here I was at a crossroads. What was I going to do next? So I did seek counsel from people around me and thinking about what I wanted to do next. And that's where I started thinking about consulting. And even before I started thinking about that is when I got connected with Ted. And from what I understand from what I read, the two of you basically get introduced and you get together.
SPEAKER_06: You start talking about Kava. And I guess eventually, Brett, in exchange for your consulting help, because I don't think they could afford to pay you, Ted basically offered you some equity in that grocery business that they were doing, like the dips and spreads, right? Yeah. At first, that was the idea. But why were you interested in doing that? I mean, it's a small restaurant. They're hand-packaging dips and spreads to a couple of local places. I mean, that's a tough business, right? I mean, there's big brands out there, Sabra and other big brands that are making hummus and dips and stuff. And the question is, why would you take this opportunity? I mean, you were looking for something to do, but they couldn't pay you. Yeah. They were offering you equity, but equity in something that wasn't worth anything. Well, it's an interesting guy.
SPEAKER_03: At the time, I had been speaking with a former colleague from my finance days about starting up a consulting practice where we would consult with small, emerging brands and potentially take equity in lieu of compensation and help create value with that equity interest. And when I met Ted, we kind of clicked right away. And then we were customers of the product. We had it in our refrigerator and really believed in the opportunity in that category. So you start to learn about what they're doing. And why was it not working based on what you were looking at?
SPEAKER_06: One of the things I learned in the snack food business is just how precise and how detailed you have to be.
SPEAKER_03: As Ted said earlier, it's a pretty low margin business. And I remember walking in and saying, you know, how much does this tub of hummus cost us to make? And it was like, oh, you know, around two dollars. I said, well, like to the third decimal point, you know, hundredths of a penny, you know, including the label, including the seal, like making sure we have all of our costs down. A little bit like Ted talked about what they learned in the in the full service restaurant. And and then how are we monitoring our batch production and our yields? And I remember the business was using just QuickBooks at the time. And QuickBooks had a manufacturing version and that was very relevant. So you could build what's called bill of materials for those products to have a true understanding of every production you run, what the yield is, what the usage is, what the true costs are in the business. So there was a lot of just experience I had gained through the snack food business that I was able to apply very quickly to that business to drive more profitability and efficiency. So you were focused entirely on the dips and spreads that were being sold to grocery stores.
SPEAKER_06: You were not at all focused on the restaurant at all. No, I solely when I first came on board, I was focused on the dips and spreads business.
SPEAKER_06: And Ted, you sounds like you guys were happy to just like let him run with that, that that was more of a burden for you guys. And you guys go back to focusing on the restaurant.
SPEAKER_05: Yeah, I mean, we were super happy to have the help. And what we really saw was that business slowly start to turn around. And I saw him so complimentary of what I do. I like to be a little more creative. I like to be a little loose with the numbers. I'm like the guy with the briefcase of cash. Right. And he really just brings this completely different way about thinking about the business. And I, I really started to think right then and there, like how he could help us in our restaurant business. So Brett, before that happened, right, what was your sort of thinking around the dips business?
SPEAKER_06: Were you thinking, all right, this is really going to be the thing that grows this overall business. And this thing is going to be, could potentially be huge. Like we should go raise money. We should turn into a brand. Like, was that how you were thinking about it? Yeah, that's exactly how I was thinking about that. We could raise capital and really grow this into, you know, a large player in the hummus and the dips and spreads category that this could be a brand we could scale.
SPEAKER_03: And it was around that time that, you know, I had experienced the full service restaurant and was really struck by a couple things. I was struck by A, the authenticity of what Ted, Ike and Dimitri had started. Just the soulfulness of the brand. And B, here was a way of eating that was satisfying and flavorful. And oh, by the way, it happened to be healthy. And I said to the guys, like, we need to bring this to a larger audience. Yeah.
SPEAKER_05: He said to us, he's like, guys, look around, you know, this kind of Mediterranean food is already healthy. And I don't think I realized that I just grew up eating that right. The prebiotics and yogurt, the amazing qualities of olive oil, the chickpeas, just the natural healthfulness of all the different items that we had at our restaurant. Right. And so I remember saying, hey, let's talk. Let's have a coffee. And we sat down and I said to him, hey, you know, I really love what you're doing. The guys love what you're doing. I think what you bring to the table is very different than than all the tools that we have. And I would love nothing more than for you to join us as our fourth partner. And I remember, you know, to his credit, he looked at me and he actually told me that that was that's actually a bad decision. That's bad. You know, he's trying to give me good, good advice as a business partner already. Like, that's not a good thing. Just give away 25 percent of your equity of a company. Right. And I said, I really see something. I believe in in what you're doing. I believe in our partnership. And you wanted him to be the CEO. Yeah. I literally was interviewing him to be my boss. Right. And so, you know, outside advice that we got, we're like, oh, you're crazy. Why would you want to hire a boss? Why would you want to give this up? And I just saw a bigger picture. I knew and I could see it, what he was going to bring to to the to the three of us. And it was going to be much bigger than than what the three of us were going to accomplish on our own.
SPEAKER_06: And and at that point, were you guys profitable?
SPEAKER_05: So the restaurants were making profit. The dips, of course, were not. We were funding those with the restaurant profit. But, you know, we were starting to see the light at the end of the tunnel coming out of that whole economic collapse of 08, 09. And we were in a good place. Ike was running the books. Brett was actually even helping us a little with that, without having any kind of consulting agreement. We were just kind of going to him for advice. And so things were going well at that time. I'm curious about the dips business.
SPEAKER_06: I mean, if that business was so hard to turn a profit, why why continue doing it at the time? Well, we thought that there was opportunity to continue to make it more profitable, which we were able to do.
SPEAKER_03: And we wanted to maintain being a culinary brand and really bring Mediterranean to consumers across the country. So having those dips and spreads, being able to be in our customers refrigerator, in their house, being served to their friends and family, having that awareness touch point, having the validation of the quality of being sold in Whole Foods markets was just a great brand amplifier to what we were trying to do in the fast casual. I mean, when you and the other guys started to talk about, all right, what can we do next?
SPEAKER_06: The idea was, let's open a fast casual version of Kava, right? Like, let's do something more like, like, were you thinking more like a Chipotle or something like that? Was that what you were thinking? Yeah, I had been a customer of the early fast casuals like Chipotle and Panera and had looked at the different business models, counter service, the walk the line assembly line format.
SPEAKER_03: And one of the things that struck me that really helped us make the decision was that the walk the line format allowed very efficient labor costs. You know, it's the old Henry Ford production line that allowed you to invest in high quality ingredients. And the guys were already using these great high quality ingredients, whether in the dips and spreads or at the restaurant. And we felt like that's what was going to matter. And if we could bring those high quality ingredients like we served in the restaurant or put in the dips and spreads to a larger audience at a more affordable price point, that, you know, that could be a great proposition. And so we ultimately settled on that format. And I remember immediately kind of getting into the kitchen with Dimitri and working on bowl ideas and calling Brett up and be like, hey, come up to Kava Emezi at the time, our original restaurant.
SPEAKER_05: And we kind of put these bowls in front of them. And it was the start of, you know, what we've kind of been doing for the last 12 years here and last, you know, 16 years overall. This partnership of kind of working through what the concept would be, what the food would be, how it would look, how it would taste. So we were super excited. I think we'd love the idea.
SPEAKER_06: All right. So now you have to get the money to open this this restaurant. How did you get it? Yeah, it was, uh, you know, the, the guys had a lot of customers of the original cover, Mezi restaurant who were some successful local business folks who would come to them and say, we want to invest in your next cover Mezi restaurant.
SPEAKER_03: And so we reached out to all of them. We got them all together at the original cover Mezi closed for lunch. One day we mocked up all this food, put a presentation together. And we said, look, this isn't going to be another cover Mezi, but here's our idea. We want to take the great food of cover Mezi, put it in a fast health based format, open two or three, prove that, that this, you know, has the appeal. We think it will, and then look to scale it from there. And, and, um, that's what we were looking to raise money for. So we got everybody together at that original restaurant in Rockville.
SPEAKER_05: You know, we had people who worked there invest at bartenders, servers, uh, family members. I mean, we had almost anybody who wanted to, we were willing to take money to help get this thing off the ground. It was really interesting. I remember one investor that I met with when we were trying to raise that original friends and family around, he said to me after I finished presenting the idea to him, he's like, I like this idea.
SPEAKER_03: He's like, how many restaurants can you name off the top 100 Washingtonian restaurant list from 10 years ago? And I'm sitting there thinking, and I'm like, gosh, I don't know. He's like, exactly. He's like, full service restaurants are hard and it's hard to build a brand around. And he said, I love what you're trying to do to take the great aspects of what you have in your full service restaurant and create a brand around it in this fast format. That's much more scalable. All right. So this was not going to be a small plates restaurant. This is going to be more like a Chipotle, like you go in and there's a line. So tell me, so you had to streamline the menu and tell me what, how you guys start to think about it. Like it was going to be like a Chipotle, like salads or, or, or rice bowls or, or, or stuffed sandwiches.
SPEAKER_06: Well, one of the first things we thought about was we had a commissary that we were making the dips and spreads at a central commissary. And we also felt like those handcrafted dips and spreads were the flavor centerpiece of the menu.
SPEAKER_03: So we started to think about building the menu around that and that grain bowls and greens and mains that were elements of the full service restaurant, whether spicy lamb, meatballs or the chicken marinade that was used at the restaurant. So that's how we started to build out the menu and then Ted and, and Dimitri really working on how do you take these items from a made to order format to a cook and hold format on the serving line. And so tell me about that first location.
SPEAKER_06: Yeah, it was really funny. I still have a picture from our friends and family night, you know, before we officially opened.
SPEAKER_03: And it was, this was in Thessa, Maryland, the first one in Bethesda.
SPEAKER_06: Yeah, it was January of 2011 and we had raised money from friends and family to open two to three locations. And this was the first.
SPEAKER_03: And it was a good market for this type of fast format. There was a lot of office workers, but there was a lot of also residential and families and high school students. So I remember standing in front of the line with Ted on the friends and family night and we're looking at the topping section. We're like, this kind of looks like a salad bar. You know, it's just like a bunch of chopped tomatoes, a bunch of chopped cucumbers. And so we were constantly iterating and thinking about how do we elevate it? We did not have dressings at that time. We only had one type of greens. So, you know, it was a very basic version of what we have now. We've always continued to try and iterate and evolve. But yeah, we, we, we did not want it to be a salad bar. And how did it do in comparison to the, to the sit down restaurants? I mean, the restaurants are popular, but how did the fast casual place do?
SPEAKER_03: It didn't do great at first. Yeah, I mean, we had guests walking in who knew the full service, who were like, what do you mean? I have to serve myself here. I have to walk through a line. Where's my lamb chops? Where's my scallops? Where's my martini? Where's my Gregus? You know, so we had many, many moments of that.
SPEAKER_05: Yeah, it was a really bit of a struggle in the beginning trying to educate people on what this kava was because the full service was called Kava Meze, which still exists today. And then this was called Kava. And so there was a little bit of confusion as they walked through the front door.
SPEAKER_06: Was there a clear, at this point vision, like you knew that you would raise some money, I think about two and a half million dollars from friends and family to open those three locations. But, but were you thinking, Brett, like, okay, let's start like this. And then let's go to investors and raise a lot of money and really see what we can do.
SPEAKER_03: I don't think we at the time, we were thinking about raising a lot of money. I think it was really let's prove these out and then maybe go raise a little bit more money to keep growing it. And I mean, it sounds like every kind of decision you made up until this point was very, you know, sort of methodical and baby steps. But I imagine that that there were also some mistakes that you were making at that time.
SPEAKER_06: Always. You laugh. What were you doing wrong?
SPEAKER_03: Well, really, I think it started with the second location. An opportunity came up at Tyson's Corner Center, which is at the time, one of the top malls in the country. And there was an opportunity for a location that was at a mall entrance with an interior and exterior storefront. And it was a bit of a sleepier entrance. But we opened in March of 2012 and we opened our doors expecting people to show up. And it was tumbleweeds. There were very few people that showed up. And I just remember thinking, oh, no, I've made a bad decision. I've undermined this business. This is a lot of money we just committed. We only have so much money to build so many locations and no one's coming. So and then it really spurred the idea that has become customary tradition. You know, how do we introduce ourselves to our new neighbors and the new communities? And so we started this idea of our community day where about three weeks after we had opened, I mean, the sales were really anemic. We did what's called our community day and we advertised and got out on social media and radio that we were doing this free lunch service. So anybody could come and have free lunch. And we didn't require a donation. But if you donated, we would match your donation. Donated to what, by the way?
SPEAKER_03: A local philanthropic partner that addresses food insecurity.
SPEAKER_06: So you're offering free lunch for the day? Yep. Yeah. So we had a huge crowd that day. And then that was at the end of March. And then in July, something else interesting happened. It's called a derecho. I don't know if you know this weather event where we had a derecho.
SPEAKER_03: Like a mini tornado.
SPEAKER_06: Yeah. And so we had a really severe one come through the DC area and it knocked everyone's power out. Yeah. Tens of thousands of people were without power for like three, four days. And so people couldn't eat at home. So everyone came to the mall and everyone came and there were huge crowds. And so it drove even greater awareness.
SPEAKER_03: And by the end of July, early August, we had such significant lines. We had to get those movie stanchions and ropes to corral the lines so that they didn't block the concourse entrance. Wow. All right. So at what point do you remember saying, all right, let's see if we can build this out even further? I mean, you've got the three fast casual restaurants and they're all in the DC metro area and they're doing well.
SPEAKER_06: What do you remember, Brett? What was the kind of the tipping point where you're like, let's go big. Let's go out and raise money and make this into a much bigger concept.
SPEAKER_03: Well, there was an interim step where we raised another friends and family around because we felt like we had something that was starting to work, but we didn't have clarity that this was going to be a huge opportunity. And so we did another small friends and family around to open a couple more locations. And I think the tipping point really came when we opened the fifth location. So this was in February of 2013 in a new mixed use project in Fairfax, Virginia, called Mosaic. And we did our community day. We did a free lunch and a free dinner. And we had two hour long lines and the restaurant opened, you know, for its regular service the next day at twice the revenue run rate of the other restaurants that had opened and the other restaurants all started to to grow in concert with it. Yeah, but I mean, you know, the lure when you're successful is to really expand quickly. And that can sometimes really damage a business that can be a death knell for certain companies, especially if they can manage inventory, they can't, you know, manage efficiencies.
SPEAKER_06: So did you think methodically did you or not about, look, let's expand this slowly or I don't know, were there moments where you thought let's just go all out? Well, when we knew we had something or we felt like we had something after Mosaic, we really wanted to expand further and we started looking at new markets outside of the mid Atlantic, you mean outside of the mid Atlantic.
SPEAKER_06: So we had committed to a couple more locations in the DMV, but we started looking at new markets and we had the brilliant idea or I made the brilliant decision to have our second market be Los Angeles, 3000 miles away from home where no one knew us.
SPEAKER_06: When we come back in just a moment, why expanding to LA feels like starting the business all over again. And why the Kava founders decided to buy another restaurant chain that's three times bigger, but failing. Stay with us. I'm Guy Raz and you're listening to how I built this. This episode is brought to you by eight sleep. Better sleep is the gift that keeps on giving an eight sleeps biggest sale of the year has arrived. Now I have to tell you, the eight sleep pod cover is one of my favorite products of the last few years I have told everybody who will listen about how it is revolutionized my sleep. It has had an immense impact on the quality of my life on my mental health and just on being a nice person. The pod cover will improve your sleep by automatically adjusting your bed's temperature based on your individual needs. So if better sleep is on your wishlist this holiday season, look no further than eight sleep until November 30th eight sleep is offering our listeners up to $500 off. When you build a bundle with my personal favorite, the pod cover, go to eight sleep.com slash built for these exclusive holiday savings. Eight sleep currently ships within the USA, Canada, the UK, select countries in the EU and Australia. As one of the largest integrated fee only registered investment advisors in the US, Coriant has experienced teams who can craft custom solutions designed to help you reach your financial goals. No matter how complex, real wealth requires real solutions. Connect with a wealth advisor today at Coriant.com.
SPEAKER_06: Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2015 and Ted and Brett are planning to expand Kava to LA, 3000 miles from home base.
SPEAKER_03: Yeah, at the time, you know, we were thinking about the dips and spreads business alongside this business. And we were thinking about a hub and spoke model for our commissary production. Because we didn't have the shelf life on our dips and spreads that we do now. And we wanted to open in a large market and Southern California was a great customer profile, a really large market opportunity, which was the attraction of doing that. And so we actually opened a small commissary there, but it didn't open until after our first restaurant opened there. So we had to do the dips and spreads in that original Los Angeles restaurant. And the challenge of Los Angeles was so difficult already before we had even opened that restaurant that I went to Ted and I said, what do you think about moving to LA? So tell me why. Yeah, Ted, tell me why you moved out there. What was the challenge in LA?
SPEAKER_06: So I actually moved out there in 2014 to start building that commissary and to build that restaurant.
SPEAKER_05: And the commissary, just to be clear, would be making the dips and spreads for mainly for Whole Foods.
SPEAKER_06: And the restaurant. And for the restaurant.
SPEAKER_05: The commissary would provide the dips and spreads. So, you know, I moved out there. We thought the restaurant was going to open up much sooner. It ended up being delayed. And I was out there kind of doing the commissary. We had huge delays in construction out in Los Angeles. And when we finally did get it open, you know, Brett alluded that we were making our dips in the restaurant. This space was so small. I remember the door of the walk-in box opening and hitting the back of the chair to the office that I was sitting in, you know, in that tiny little space. So we were making the dips in there. And what a challenge it was being 3000 miles away, having no help, no one knowing what the brand was, no one knowing anything about Kava. We could barely hire people. We could barely keep managers there. Had to have my wife come in and help me run that restaurant. But through it all, what I really noticed was how much the customers loved it. And if we were slow on some days and we couldn't keep up, whatever issues we were having because of the expansion being so far away from home, I noticed people coming back, people telling their friends and people really loving what Kava was. But how did they know what it was? I mean, how did you get the word out? You just opened up the doors and just hope that people would show up?
SPEAKER_05: This goes back to the community day that we first had at that Tyson's Mall, right? We were really slow there and we had that community day. And so we started doing that at every opening. And I'll tell you what. Free food. Yeah. Free food will bring people out. That line was, I remember going through the line and telling people, this is going to be an hour from where you're at. And then this is going to be two hours from where you're at. And the line just, I have a video of it, just went down the block and it was really, really crazy. And so slowly, slowly the business just start to grow. And Ted, how did you like being out there? I mean, what was it like for you?
SPEAKER_06: Overall, I love being there. I wish I could have stayed. My wife and I decided after about 18 months, we felt disconnected from family. We felt disconnected from our friends and wanted to come back home.
SPEAKER_05: But I just kept traveling back and forth because, you know, I really believed in what we were doing out there. And, you know, we just, it was the same as building a business here. It felt like we were just starting all over again. I remember when we had the first manager had resigned and I had to go in there and start running that restaurant again and getting into the dish pit and getting into the walk-in, ordering food again, making schedules again. And at times was brutal, but overall it was a really awesome experience that again, I look back on and miss those days. Yeah. Brett, as those LA locations started to grow, imagine this is, you know, 2017, you're starting to think, okay, how big can we make this? Can we make this as big or bigger than Chipotle?
SPEAKER_06: I mean, you have to be thinking there's, you know, huge potential here. Yeah. At that point, we felt like there was real potential that this could resonate in most parts of the country, if not all. And as we built out LA, it taught us how to open a large new market.
SPEAKER_03: And it has become one of our most successful markets now in the Southern California region. So that really, again, was another validation that if we execute this right, this cuisine and our proposition is really resonating with consumers and can be something we take to the next level. And it's really, really exciting to see this be something we take to communities across the country.
SPEAKER_06: So I'm jumping a little bit, but I want to get to 2018 because this is a very significant year, which is you guys raised more money that year from Ron Shaik, actually, who was part of that, who was on our show many years ago, the founder of Panera, to acquire another kind of fast, casual Greek-ish chain called Zoe's Kitchen. Right at that time? Yes, they were struggling as a public company. Their sales were declining. And I met with Ron, as I do, you know, a couple times a year and we were having lunch. And he said, he talked to me about, you know, that Zoe's had approached him and he said, you know, what do you think about if our investors put together the capital, we acquire it and give it to you, Brett and your team?
SPEAKER_03: That's a big idea. That's not quite what we were thinking about. You know, we're on this straight organic growth path. We've got a lot of momentum. We're over 65 restaurants at this time. We've got New York open now, L.A. open. We're signing signing deals in other markets. We're just on the straight heading. And here is this left hand turn that's being put in front of us. And Zoe's was kind of similar, I think, a little bit, right, Takava?
SPEAKER_06: Well, it was similar, but different. It was a counter service format, but it was more founded as Southern Fresh Market Fair with a Mediterranean flair. The brand, its original menu had like chicken salad, egg salad, tuna salad sandwiches, and then Greek salad and hummus.
SPEAKER_03: And as time went on and it changed ownership and went public and Mediterranean diet grew in popularity, brands like us came on the scene. They started to add falafel and harissa and tzatziki without losing the pimento cheese off their menu. And I think what happened was their guests got a little confused and the operations got overcomplicated and really started to deteriorate service.
SPEAKER_06: So there was an opportunity to acquire all their locations and they had how many locations did they have at the time? Over 240 locations. Wow. And 100 percent of Zoe's portfolio was in the suburbs and the Sunbelt. So we saw this as a way to accelerate our expansion in a large part of the country, the Sunbelt that we were already trying to get sites in.
SPEAKER_03: We had a few cabas that were across the street from Zoe's and we were doing almost twice the revenue. And that emboldened us to make that decision and take Zoe's private. So all of a sudden you've got all these stores that can convert to cava. Did cava's opening up in the southern areas all of a sudden resonate with people quickly or did it take a while?
SPEAKER_06: Well, it took us a while to convert them because we had to stabilize Zoe's first. We weren't able to get to those conversions right away.
SPEAKER_03: You know, Zoe's was three times our size and it was struggling as a public company. And I'll never forget, we closed on the acquisition the day before Thanksgiving in 2018. And I remember when we were looking at the deal, the metaphor we used is we, we knew we were acquiring a melting ice cube and we just had to stop it from melting. And I was on a plane from Denver to Jacksonville and I get the most recent month report of Zoe's sales. And when we were negotiating the deal, the sales were declining about three to four percent, same restaurant sales, you know, year over year. And I get this report just sent to my inbox and I open it up and it's minus 12. Wow. And uh oh, what did we just buy? I remember landing in Jacksonville and calling my wife and said, I think I just undermined 10 years of hard work. I'm not quite sure this was the right decision. So we get back home from Jacksonville and we had our holiday party a few days later. And I pulled to like in Demetri aside at the holiday party and I said, listen, we've got this Zoe's location actually here in this area in a place called Park Potomac. I said, I need you guys to turn that into a test kitchen, figure out how we fix this menu and fix this business so it doesn't drown Kava. Yeah. So we took over that restaurant in Park Potomac and we just started to work on it.
SPEAKER_05: We started to figure out, you know, they were doing things like serving a full chicken and it was taking 40 minutes to serve that chicken because you had to cook it from scratch and or you pre-made them and you end up throwing them away. So how could you get rid of items that were being wasteful? How could we reduce the pantry size? How could we make it easier for the team to operate without having 30 people in the restaurant? We started to look at all that and break it all down. We looked at quality of the food. We looked at how we serve it, how we cook it. Demetri was hard to work in the kitchen with the culinary team. We had some of our operations team members come in and really help with that finance to really drive home what the numbers should be. So it took a big team effort to really try to fix that Zoe's menu that was hemorrhaging at the time. And basically taking out some of those things that were not quote unquote Mediterranean or Greek.
SPEAKER_06: Yeah, I mean that's where we started. You know, we have this document called Concept Essence that talks about our food, our people, our design, you know, everything that we do.
SPEAKER_05: We looked through the document. So something like pimento cheese, right? Tasted good, was delicious, but didn't really fit Mediterranean essence. Didn't really fit our concept essence. So it was gone. Chicken salad, things like that, right? And what we found out, which is a pretty funny story, on the day that we opened, reopened that restaurant after we had reworked the whole menu. And I was talking to customers and it was really funny. These Zoe's customers had been coming, a lot of them, for just one item. Some people were coming just for like a tub of pimento cheese or a tub of chicken salad. And I had a few customers just go nuts on me, you know, and say, what are you doing here? Nobody asked you to come here. Nobody asked you to change these recipes. Why are you changing the hummus to kava hummus? Why are you changing zadziki to kava zadziki? We were obviously doing it because we could run them out of our commissary to make it easier for our team members. So it was really hard to explain, you know, why we were changing these things and what we were doing them for because people just didn't want to hear it. And I think, you know, a lot of this work that we were doing, it was ultimately bringing us closer to the decision to convert all these Zoe's locations to kava locations. And ultimately that was going to be what we were going to go forward with. And I think the turning point really came when by January we had the first positive comps in Zoe's business since 2017, a year before we bought it.
SPEAKER_03: And kava was comping double digits. Wow. I want to kind of digress for a moment and ask you about some of the sort of broader challenges related to, not to kava, but just overall to the food business, right?
SPEAKER_06: You mentioned many times hospitality, like people love our hospitality. And I get that. I mean, like if I went to the original kava restaurant, I could feel that. But, you know, yesterday I went to a Starbucks and I just happened to, you know, get a coffee from somebody who just was maybe having a bad day or maybe they just weren't happy to be there. And like, it's very hard when you've got 300 locations or thousands of locations of a store to make sure that everybody is on board. You know, everybody's got that Mediterranean hospitality ethos. And so tell me how you guys sort of think about employees and labor and why would somebody work at a kava versus a sweet green or chipotle?
SPEAKER_03: It ultimately comes down to whether the team members believe or not, whether we care about them. And it's all the things like hearing where they're struggling. You know, we had this thing. We go out and we visit the restaurants. And at the end of my visit, I say to the team, okay, I have a magic wand and I'm going to grant you three wishes. What are the three things that I can grant you that's going to make your day completely better? What is like the bane of your existence when you wake up every day that you think about that's getting in your way here? And I remember like I would go, I have like five restaurants in a row. They're like, Brett, people love our pickled onions, but man, my arm is so tired from chopping and slicing onions. I'm like, I hear you. I got with Ted and worked on Ted because we had been looking at pre-sliced onions, but they were dehydrating too much. And so Ted worked with our produce suppliers and got a vacuum sealed pre-sliced onion for them to pickle in house that they no longer have to do that. And so it's very powerful. We're trying to set them up for success. And if they feel that support, it goes a long way. You know, I think for me being a founder, I really genuinely care about how they're going to grow their careers here.
SPEAKER_05: My mom was beat down in this industry. I don't want that for people. I started this restaurant business to change that. And look, are we perfect? Are we where we want to be? We're at almost 300 restaurants. Chipotle has over 3,000, right? Panera has thousands. So as we grow, we have to continue to offer more to those team members to keep them, to bring them in. And those are things that we're working on. So I really honestly think, you know, to Brett's point that we care about our employees and that we give them the opportunity for growth.
SPEAKER_06: Ted, as you guys were growing, tell me about how you saw you and Dimitri and Ike saw your roles. I mean, did you all kind of sort of feel comfortable in where you were in the company or did every decision still have to be made by the four of you in consensus? Or did the three of you say, look, we can't operate a business like this. We've got to let Brett make decisions without asking us for our opinion every time. Look, I think when we decided to bring Brett on and, you know, we gave him the keys of the kingdom, as I say, we believed in him.
SPEAKER_05: I definitely believed in him. You know, no matter what happened, you know, when he felt like he chose that wrong location at the mall, I felt like we just had to work harder because there was a reason he chose it. And we had to work harder to prove that out, you know, where he felt like he had made a mistake with Zoe's. He had mentioned, again, I felt like it was our job to deliver on what he envisioned by buying that Zoe. So, you know, originally we had in one of those investment deals early on, one of these big VCs wanted to kind of buy the whole company. Wow. And then you guys would be left with a nice chunk of cash. I'm sure that was attractive.
SPEAKER_06: Yeah, we would have gotten some cash and, you know, whether or not it was a lot or a little depends on how you look at things.
SPEAKER_05: But we didn't start it for that, right? And I don't think we started the first restaurant for that. And I don't think cash has ever been the number one driver. I think I remember back to my mom working in this restaurant industry and how hard she worked. And, you know, at the end, there was nothing really left for her. And I wanted to create something bigger and better. And there were so many moments along the way of believing in Brett and believing in this business. He told a story of, you know, what I think you asked the question, what did we learn from our first restaurant? And there were so many things within that restaurant that we learned right about operationally and how we can make it better. But what he left out was we ran out of money after two restaurants and our investors didn't want to give us any more money. And so we went and took a loan out against everything that we had worked for. We took a loan against our full service restaurants, against these these fast casuals, really because I believed in Brett and what he could take Kava to and what he could ultimately help me become in the end. Right. And along the way. Yeah. You guys went public in 2023, actually.
SPEAKER_06: This is the year we're doing this interview and have had an amazing market debut. But tell me about the ambition. I mean, now you're a public trade company. So where do you see the future of Kava? We see Mediterranean as the next big, large scale cultural cuisine category, and we want Kava to be synonymous as the defining brand of that category.
SPEAKER_03: And so we're just excited to have that opportunity to bring it to people across the country.
SPEAKER_06: Brett, you joined this group as a consultant in 2009, and then you were asked to become CEO and ran this dips business for a while. And then you guys started to expand this thing. And here we are in 2023, multi-billion dollar market capitalization for Kava, approaching 300 locations. How much of where you are today do you attribute to the work you put in, your intelligence, your strategic thinking? And how much do you think has to do with getting lucky?
SPEAKER_03: Well, I like the term. I saw the term that luck is the intersection of preparation and opportunity. And I really believe that. I mean, you can have all the talent in the world, but if you don't work hard, it will all go to waste. And I think we've had a lot of counterintuitive decisions along the way. Going to L.A. is our second market, buying a company three times our size that was struggling and converting it. People used to ask me like, you know, the baseball analogy, what inning are you in? You say, well, we're in the early innings, but I still think we're coming out of the dugout. How about you, Ted?
SPEAKER_06: Look, I think that any time you're successful in life, you got to get lucky.
SPEAKER_05: I mean, I was lucky that that banker walked through my door, but he saw the hard work that we put into that restaurant. And that's why he gave us that loan. I was lucky enough to meet Brett, but all along the way, we've had so much help. I in no way take credit for anything that has happened in the last 16 years. We have had people who have busted their ass in the kitchens for us. People have busted their ass growing these restaurants, building these restaurants, doing a lot of the heavy lifting. I get a lot of the credit. People come and thank me all the time and say, your restaurant's amazing. What you do is amazing. But the people that work every single day in those restaurants, they are doing a lot of the hard work. And they have really helped us build this brand and make this what it is today.
SPEAKER_06: That's Ted's Henro Cristos and Brett Schulman, co-founders of Cava. By the way, their other co-founders, Ike and Dimitri, are still with the business today. And that original Cava Mezza restaurant, the very first one that they opened in 2006, it's still right where it started, an outdoor shopping mall in Rockville, Maryland. I tell people to visit that restaurant today, and you can still see a lot of the heel and shoe marks on the bar from all the dancing on it.
SPEAKER_05: So there were just crazy, crazy things always happening. But the craziness of the restaurant business is something that I've always been attracted to. So I kind of actually miss those moments.
SPEAKER_06: It's edited by Neva Grant, with research help from Rommel Wood. Our audio engineers were Gilly Moon and Patrick Murray. Our production staff also includes Casey Herman, Kerry Thompson, J.C. Howard, Alex Chung, Malia Agudelo, John Isabella, Chris Messini, Carla Estevez, and Catherine Seifer. I'm Guy Raz, and you've been listening to How I Built This. If you like How I Built This, you can listen early and ad-free right now by joining Wondery Plus in the Wondery app or on Apple podcasts. Prime members can listen ad-free on Amazon Music. Before you go, tell us about yourself by filling out a short survey at Wondery.com slash survey.
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