Advice Line with Scott and Ally Svenson of MOD Pizza

25:16Yeah, and congrats. It sounds like you've had a lot of success and man, you are in a really good space. If you were to look across the restaurant industry over the last five years, and I'm sure you know this, being in chicken and chicken sandwiches, there's no better place to be massive you just can't get enough of it you've seen all that what's happened with you know the different brands who brought in chicken sandwiches and it just seems like that you know as long as we don't run out of chicken we're gonna be uh you you'll be in good shape we just added a vegan chicken sandwich to the menu as well wow okay there you go um so i take it that you've financed all of this and and this is all company owned uh today yeah i have and And, you know, that's one issue with growing, you know, like I don't want to stretch this out too thin.

26:00Yeah, well, congrats. I mean, that's it's commendable that you've done it all on off the back of, you know, your own hard work and incrementally grown it. And right now you are just in Birmingham. That's right. The three the two stores in the three foot trucks. That's correct. Yeah. And so I take it that there is a desire to want to take this great menu, this great brand you have and grow it. Yeah, so we bought a new food truck this year, which we call a travel truck. And we've just been traveling different markets. We just got back from Nashville for four days on Sunday. Because if you're going to do hot chicken, you got to do it in Nashville.

26:34Plus, it's a bigger market. And I feel like we can scale quicker if we get to Nashville. So we've been taking our food truck there. Great way to test it, too. Yeah, and it's been great. So, Zebi, it's funny. You're smart. because my first piece of advice was if you're going to test new markets, you've got a food truck, it's mobile, it's a low-cost way of getting the product in people's hands and seeing how they respond. It sounds like you've done that. You've done it in Nashville. Have you done it anywhere else? We've been to Atlanta. We've been to Nashville a couple of times. We've got a hot chicken, not a hot chicken, a fried chicken festival coming up in New Orleans in October, so I'm pretty excited about that one.

27:12The response from customers in Nashville and Atlanta was positive? It was real positive. You know, people tell them it's great, but it's a little bit different. So that's awesome just to hear it because we're not like anybody else. You know, it shows background. Yeah, it shows background, you know, and growing up with hot chicken. I want it, I don't want it just hot. I want to add more flavor to it, you know, and it's been great. What's the population in Birmingham? Roughly, you know, if you add it in the suburbs, it's 33 municipalities, I say around a million people. So the first thing that I would ask you to consider is, in our industry, there's a formula that is the more penetrated you are in a market, the more well-known your brand.

27:55And generally, the brands that are more well-known perform better. So making sure that you really feel like you've, before you move into a new market, that you feel like you've really taken advantage of your home market. Yeah. And I don't know, I would tell you in a market with a million people, I would be surprised, Zebi, if you couldn't have 10 or 12 or maybe even 15 points of distribution, whether they're food trucks or stores. In Birmingham. And I'll tell you, it's exciting and it's seductive to go to that new market. But man, it does bring a whole series of challenges and complexities that at the right time are worth taking on.

28:34But man, before you've really maximized the opportunities in your home market, I would just strongly encourage you to do that first. And then with a really strong foundation, then think about, okay, how do we want to extend into a new market? And then there's all types of questions, Zebi, around how much risk do you want to take? Meaning, do you want to do it all company-owned? Meaning you're going to continue to finance it all? Or do you want to bring in partners? Do you want to franchise? And this is another challenge with growth. As soon as you start focusing on growth, particularly if it's in a new market, you got to travel, you got to hire people, you got to bring.

29:11Now you're not focused on your core business. You're focused on the growth because there's only so many hours in the day. And that's when people get into trouble because now, as opposed to focusing on how do I elevate and improve the quality of what I'm doing? How do I manage my costs so that I can keep my prices where they need to be? How can I take care of my team so they're delivering a great experience? you start focusing on the fact that, well, I had a general manager in Nashville and they left and I got to leave. I got to go to Nashville for two weeks and I got to stay in a hotel and that's going to cost me.

29:41And you end up changing your priorities and your focus. And so, man, I think the more you can really own your home is a mantra that a lot of people in the industry talk about. Own your home, build a fortress, because if you can become the loved local brand in Birmingham, And if you end up having six, seven, eight, 10 locations, there's a loyalty that develops with those iconic local, we have several of them here in Seattle, which have been around for 50, 60, 70 years. And the value of the brand is almost more now than the value of the business. Then you can decide to do anything. You can go franchise it.

30:20You could grow into a new market. You're doing it from a really solid foundation. Or you can just build it up, have a really easy business to run, and then eventually sell it as this iconic local Birmingham institution. Zebi, quick question on the, you mentioned that you have sauces that are distributed in groceries. So that's a huge deal. How did that come about? Yeah, during COVID, you know, we were just looking for another way to pivot. And we, you know, we're a scratch restaurant. We want a few fast cows or scratch restaurants. And, you know, people, they love that comeback sauce and they love that white sauce.

30:51And I was just figuring out what else could we do with it. And, you know, we ended up bottling it and putting it in grocery stores. How do they sell? They're doing well. We're in a few local Piggler Wigglies, but that's another thing, trying to figure that out. I'm trying to get somebody else to kind of take care of their part of the business while I still focus on growth of the restaurants. But how do we handle that growth and that scaling? What key performance indicators do you look for to measure success? Yes, I mean, it's a great question. I mean, I'll give you a few which are pretty typical in our industry.

31:25The first is average unit volumes. Everyone wants to know what are your AUVs. Secondly is your store level contribution. How profitable is the store? And that's going to be obviously a byproduct of where your cost is sold, where's your labor and your occupancy costs and other operating expenses. And people want to see that a couple of things, that your revenue is at least two times your cost to build and open a store, your capital cost, and ideally closer to three, but at least two times. So if it costs you half a million dollars to open a store, they want to see it at least a million to a million and a half in revenue.

32:01And then a 20 % store level contribution, store EBITDA, store profit is a really important marker. Sometimes people are in the high teens, best in class brands, Chipotle and Cava and others are in the mid 20s. So being at that 20 % level or higher is really important. And then, frankly, the other key metrics that you've got to keep track of are how your customer is feeling about you. All of those, you know, the customer feedback. How's your team feeling about you? Because, you know, turnover is expensive, both in terms of cost to hire people, train them, as well as just the experience they deliver.

32:40So I'd say those are probably the most important metrics to track. Yeah. Thank you. Zebby Carney of Eugene's Hot Chicken in Birmingham. Thanks so much for calling in. Good luck. Thank you all so much for having me. Yeah, congratulations. It's great having you. Yeah. It's exciting. Take good care. Good luck. I just, I love a fried chicken sandwich, I got to say. He's in the right spot. And he's been doing it for a long time. So he clearly, he knows what he's doing. He's clearly developed a product that people love. Yeah. And you just see in the last, as you mentioned, the last several years, you know, Raising Canes.

33:14Oh, man. Obviously, Chick-fil-A. And I mean, even the chicken sandwiches at Popeye's, I mean, they've just, it's exploded. I mean, you see and Dave's Hot Chicken, you see these other chains coming up. I mean, that category is just exploded. It's just exploded. Exactly. All right. We're going to take another quick break, but we'll be right back with another caller. Stay with us. I'm Guy Raz, and you're listening to The Advice Line right here on How I Built This Lab.

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36:06Welcome back to the Advice Line on how I built this lab. I'm Guy Raz. And let's go ahead and take another call. Hello, welcome to the Advice Line. You are on with me and Allie and Scott. Hello, who's this? Hi, everybody. I'm Christiana. How are you? Hello, Christiana. Welcome. Tell us where you're calling from and a little bit about your business. I'm calling from Los Angeles, California, and I'm the founder of Valor Bevidas. Valor is a tequila company that's committed to really creating a brighter future for the tequila industry through fair and sustainable practices, both for the people and the natural resources that bring this beautiful spirit to the world.

36:46Cool. When did you start the business? We formed the corporation in May of 2022 and launched the product in July of 2023. And you're making it in the United States or in Mexico? Tequila is just like champagne. In order to be called tequila, it has to have a designated region. And 95 % of tequila comes out of the state of Jalisco. And then there's a few other municipalities within the country of Mexico. But yes, we produce out of the town of tequila in Jalisco, which is where the name tequila came from, is actually the town. Cool. Well, tell me a little bit about your background. Have you been in the spirits business for a long time?

37:25No, not at all. My background actually is in corporate responsibility and sustainability. I worked for the Walt Disney Company for seven years, leading our environmental and science education portfolio across the enterprise. And then I went to an environmental nonprofit in D.C. And then in 2019, decided to start my own company called YouGoodery, where we consult with major corporations like Amazon and Disney to help them be better corporate citizens. and then one of my mentors said you know christiana you spent your entire career helping companies try to do better maybe it's time for you to start your own company so you can model what it looks like to create a responsible company from the very beginning and and how did you land on tequila which by the way is the only spirit i'm drinking now because it doesn't spike blood sugar yes at least for me yes i'm so excited to hear this it really does it's amazing i just had some last night because all my friends are drinking whiskey and I can't drink it.

38:21Tell me how you decided to get into tequila. So I am the daughter of immigrant parents. And so I spent my time as a kid living between California, El Salvador and Mexico. And tequila was my very first drink in fourth grade. My sisters. Wow. In fourth grade. And my sisters get so mad at me for telling the story because they're 12 and 13 years older than I am. It was just a little sip of a margarita. But tequila has had a really special place in my heart since I was little, appropriately little. But, you know, I grew up with a family, you know, that sort of always took care of people and being and growing up in developing countries like El Salvador.

39:02You know, you got to understand the deep disparity in labor. And so tipping and taking care of people was always a really important ethos to our family. And I was in Mexico for a New Year's trip and learned a lot about tequila. and the real inequitable practices in the industry. It's a multi-billion dollar industry. It's one of the most labor intensive industries in the world, but the money stays up here. The money stays in the UK and it doesn't go back to the people. So I came back and it's also really exploitative in terms of not the people, but also extractive for the environment. So came home and I said, you know what?

39:36Tequila, that is what I'm going to do. And I don't know. One door just kept opening and opening and opening and opening. It was just kind of a natural thing. Amazing. And tell us what your question is. Yeah. So Allie and Scott, I listened, I did a lot of research on you guys, and I listened to your How I Built This episode. I was in tears like 19 times. I'm like, they put people first. They were able to do this. And, you know, because there have been so many times where I'm like, am I insane? Like, is this crazy to think that we can do this? And, you know, people are demanding more and more that companies be more responsible, but not quite yet at a higher price point.

40:11And so how do we get consumers to demand more of companies like ours and everybody? Because supply chains rarely begin here in the U.S., but we get to benefit from, you know, inequitable labor practices all around the world. Scott, Allie, you can answer the question or ask your own questions, please. First of all, congratulations. What you're doing is really exciting, cool, and it's so authentically – I just love that your mission and your purpose is just so fundamental to why you're doing what you're doing. So that's really great to hear. Is any other tequila brand in the world focused this way?

40:48No. Great. Okay, great. That was my question. Yeah. And I would just say, first of all, congratulations. I love the story. And I just popped onto your website. I think it's important to note, dedicating 10 % of sales is not trivial. I mean, that is a serious commitment. Serious. I would suggest that you are taking the position of building a company in order to promote these, which is spectacular. Our journey with Maud was similar, different but similar. And I think a lot of people try to wrap social impact and being a good corporate student and dedicate teeny little bits of resource and try to get the benefit.

41:32And it feels like you're doing exactly the opposite. Yeah. Wow. What's your price point? So our Blanco is$79.99 retail and our Reposado is$99.99 retail, which, by the way, when we launched, it was$119 for the Blanco and$135 for the Reposado. But we just we pigeonhole ourself by doing that. So we took a big plunge and we're actually getting ready to do another price drop. I'm sort of taking the Uber approach where, you know, we'll probably break even with this next price drop. But for us, like velocity and just getting this product in front of people is really important because that's our biggest roadblock is price.

42:07Ali and Scott, I'm curious. I mean, and I'm going to play a devil's advocate here for a moment because I think that the 10 % is incredible. But I wonder whether, again, we talked about this with Mod, you know, whether consumers ultimately care about that to the point where they're going to choose that product, right? Because, I mean, there are – I think about the coffee industry and I know La Cologne and a lot of other coffee brands do a version of this where they really focus on sourcing and making sure that they're buying it from the farmers. I'm not convinced based on my conversations on the show and around the country that consumers care as much as we hope they will.

42:45Right? And so I wonder whether there is a – that approach is really the way to sell the tequila. Yeah. So I would just offer that, first of all, Christiana, we totally applaud you because I do think, as you said, that consumers are starting to become more aware and are starting to appreciate good corporate citizens who are building businesses the right way. but I agree with Guy. I think you are in the vanguard. You are a pioneer. And I don't think consumers yet are necessarily voting with their pocketbooks the way they do with their conscience, the way that they might talk about it. Now, that's not to say that you can't be one of the pioneers that pries it open and finds a way.

43:33And Guy, you gave a few examples. The one I would offer is Tom's Shoes. And so Tom's, that one-for-one model, and Allie could speak more articulately about this than I, but I do believe consumers at the time when they went in to buy that type of shoe, they cared enough to buy that product. And I do think you have a similar opportunity. It all comes back though to the product. People have to love your product and you're selling a premium product. So you're selling it to people who are maybe not quite as price conscious or as price sensitive as others. And I do think if you can find a way to communicate with them, educate them and get into their conscience that this is not a matter of you just having a token, you're giving 10 % of sales.

44:19I think a key word is education because I had to gosh, ideally, you almost want to find some journalists or a publication, you need people to help do some sort of an expose and help educate us as consumers, our country around this industry and the practices that either are good or bad, because as soon as there's more discussion or education around it, then people will ask the question, well, who is doing it right? What are my options? And if you can get people asking those questions, you're going to be the only one standing there saying, I'm doing it. And so education, as much as you can help educate people, I think would be huge.

44:59I might also suggest that you study Starbucks and what they did years and years ago when people started, nobody knew anything about, people knew they liked drinking Starbucks coffee, but nobody knew anything about ethical sourcing of coffee beans. Nobody was talking about that. And I think Starbucks did a phenomenal job years ago, starting to help us consumers racing and getting our latte. And they started to see bits of information and education in their locations that started to discuss this. And I think that can help get people made more aware of what really the issues are. That's where you got to get it to the point where people are asking or curious.

45:37And boy, you're the person to have the conversation with. It feels like there's an opportunity as well. If, you know, this is a type of product and it's an industry in particular where influencers and people who have – I'm forgetting the name of the brand that was started by the famous movie star. It's gone out of my head. George Clooney? Yes. Oh, the Casamigos. Casamigos. But there's a great example of a product that blew up because of that affiliation. I would be surprised if you couldn't find some very influential influencers who would buy into your mission and buy into maybe partner with you to say, we're going to get this story out.

46:26We're going to help you promote this brand in a way that's much more efficient than just buying marketing or what have you or media. That's the type of thing that's going to just elevate the brand, elevate the story, and start to trickle down this message that, hey, this is a brand that's doing things differently. A lot of people love tequila. And I think if you can tap into that Venn diagram of people who are loving tequila and who love the fact that you're doing it differently and obviously ultimately need to love the product. I'm going to push back a little bit. I think that all of that advice is really sound.

47:02But there's one thing that I still think is important, which is the product. And from what I understand looking at your website, Christiana, is that there's something somewhat unique about your tequila, right? It's mature agave and water, and that's it. Nothing else. Really clean. That's it. Very clean. I would push that because the mission side is going to be critical, and you're going to be pushing that, and you're going to be explaining that. But the flip side is, you know, you want people like me who are on keto diets who want to have a drink or people who are going to CrossFit gyms or people who are going to Orange Theory who want to have a drink.

47:39And, you know, nobody should drink in excess. But I'd love to just for you to double down on that clean, mature agave plus water. Something that really evokes this idea that this isn't just another tequila. This is the one you should go for. And who are the most high-end bartenders these days that are, you know, introducing people to the best of the best? You want them to, I mean, if the product is so great and it's so clean and it's helping build community and solve real problems, I mean, that's a wicked combination. And if you have bartenders, you know, the ones that people are writing articles about or people are building concepts around, making sure that they are your ambassadors, I think, would also help.

48:25So much of it, I think, does come down to education. People just don't know until they know. And that's a big job. You can't do it on your own. I also think there's an opportunity, you probably are already doing a version of this, to really push this with women. Yes. Being a women-owned brand is something to trumpet as loudly as you can. I think about the wine with Cameron Diaz's brand. I think people really respond to that, and you can have your version of that. I think consumers are open to it and respond very well, but it's a matter of just getting out there for them. Yeah. Oh, gosh, you guys.

49:01Thank you so much. This is all you guys are amazing. You know, we are a very tiny brand. We don't you know, we're actively going to actually raise real capital now because to do all of this, it takes so much money. And unfortunately, bartenders, a lot of them are pay to play now and influencers. And I get it. They have to make their money. Right. We just don't have like we're too busy. we say 10 % of the bottle, like 900 % of the bottles are going to the work that we're doing right now until we get this work off the ground, you know? So it really is like our advocates that have been wonderful and haven't charged us to promote us.

49:33And Walt Disney World actually brought us in. We're the first female additive free brand for Disney ever too. Congratulations. That's huge. Thank you. Thank you. Yeah. It's been an exciting, it's been an exciting ride, but I'm not joking. when I listened to your episode. I felt very hopeful. Very hopeful. Very, very hopeful. Awesome. Christian Martins, the brand is called Valor Tequila. Congrats. Keep us posted. We'll be following you. We will be watching. Thank you guys so much. Congratulations and best of luck. Thanks so much. Bye. Take care. Bye. There seems to be a theme from almost all of the entrepreneurs that we got to talk with today.

50:13They're all at the right time in the right place in terms of a product, or offering something that is right now, whether it's chicken or just the vegan movement, tequila, the time is now. It's very exciting. And I think there's a lot of, we can be very hopeful for all of them. For sure. We could have a great meal. We could. We could for sure. I would go. Scott and Ali Svensson, co-founders of Mod Pizza, thank you so much for joining me on the Advice Line. It was great to have you guys back on the show. So fun to be with you again. Yeah, great to see you again and great to be a part of this. And by the way, if you haven't heard Scott and Allie's original How I Built This episode, you have to go back and check it out.

50:55You can find a link to it in the podcast description. And here's one of my favorite moments from that interview. We had never worked in retail. Our qualification was the fact that we had been customers of the thing that we wanted to create. Yeah. It's interesting. I think one of our strengths at the time was the fact that we didn't know what we didn't know. A friend joined our board early on, and the week before our first store opened, he said, Listen, I decided to do this because I really like you to, and I wanted to make the process of failure less painful for you, because this is never going to work.

51:36Thanks so much for listening to the show this week. Please make sure to check out my newsletter. You can sign up for it for free at GuyRoz.com. Each week, it's packed with tons of insights from entrepreneurs and my own observations and experiences interviewing some of the greatest entrepreneurs ever. And if you're working on a business and you'd like to be on this show, send us a one-minute message that tells us about your business, the issues or questions you'd like help with, and hopefully we can help you with them. And make sure to tell us how to reach you. You can send us a voice memo at hibt at id.wondery.com or call us at 1-800-433-1298 and leave a message there.

52:21And we'll put all this in the podcast description as well. This episode was produced by Catherine Seifer with music composed by Ramtin Arablewe. It was edited by John Isabella. Our audio engineer was Sina Lafredo. Our production staff also includes Alex Chung, Carla Estevez, Chris Messini, Devin Schwartz, Elaine Coates, J.C. Howard, Carrie Thompson, Neva Grant, and Sam Paulson. I'm Guy Raz, and you've been listening to How I Built This.

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