MOD Pizza & Seattle Coffee Company: Scott and Ally Svenson

27:14You guys found a spot in Covent Garden, which is obviously sort of a tourist hub and a bustling area. And was it a hit right away? It was. And it was so validating because we would get people piling out of a black cab in front of this little location of ours. These euphoric Americans that had heard finally – they were what we would have been two years prior, three years prior, looking for the people that would finally open one of these places. So they would come in so excited or a lot of people that had been traveling around Europe had heard. They would show up in London. Their first stop would be Seattle Coffee Company because they could get a taste of home.

27:51That was really fun to see. But the nice thing about Covent Garden is it's so crowded and so busy. So very quickly, we also had British people that worked nearby. The lines developed very quickly and it was fun to watch how people would – some people knew exactly how to do it. and then a lot of people didn't. And so we had to create, you know, beautiful posters that demonstrated the architectural build of one of these coffee drinks. What's the difference between a cappuccino and a latte? Yeah, and sometimes the British, you know, response was what we predicted, which was you can't make it feel like it's this American concept being shoved down your throat.

28:31A lot of people came in and said, I just want a coffee. We knew what they meant was like a latte. They wanted coffee with warm milk, But they didn't know how to order it. And you could watch people in a line learn from each other. So if there was the American asking for the coffee drink using all the right lingo, the British person behind them could start to get a little comfortable with, well, what is that? What do you mean vanilla? Can I try the vanilla? And you were basically managing this first location. Yeah. I mean it was kind of a collaborative effort to be honest. We were just figuring it out.

29:06We were in the location all the time. It was a crazy time, though. There was a moment that maybe lasted a month when we opened the store and we realized I was driving Allie to drop her at the store early, early in the morning before it opened. I would then go to the health care company to work during the day, and then I would drive back to Covent Garden to help her close. and we would then drive home at nine o 'clock at night and pick up a pizza or something and then wake up the next morning and do the same thing. And while that was exciting and entrepreneurial, it also felt incredibly constraining because we're like, oh my gosh, we've opened this thing and now we own it.

29:49And how are we going to get out from under this? Because otherwise this is just going to be a burden. And we knew that the only way was to refine the concept, figure it out and start growing it so that it wasn't just this one location that we needed to babysit. We then did, we did, I remember, recruited our first manager so that we could, that we didn't have to be in the store every moment of every day. It was a character named Peter who, his previous job, he'd worked in Buckingham Palace as a footman. So the idea was, if you stayed running this one store, it was going to be hamster wheel. It was just going to be like, you couldn't get out that hamster wheel.

30:27But in order to – so your thinking was in order to get off the hamster wheel, which is – I'm trying to figure that out because I would think that you just build yourself a bigger hamster wheel. It was – you would expand the concept. Because you didn't go into it thinking let's build a chain of coffee shops. You thought let's just build a one-off. Well, we – this was the thought. We had always talked about wanting to bring to London two things, the Starbucks-style coffee experience and a bit of home, a bit of Seattle. And that meant, you know, the customer service ethic, the positivity, the energy that we associated with home that didn't exist on the high street of London at the time.

31:10And we said when we opened our first store, if the worst thing that happens is we open this one store in Covent Garden and we bring those two things together and introduce it to London, that would be a success. But we had in the back of our mind, well, gosh, if this works, then maybe it will lead to something bigger and more exciting. But at the time, our planning was like one step at a time. and the initial planning was, well, let's just see if we can get one location open and we can figure out how to put all these pieces together and let's see if people even want this. Once we'd gotten through that and realized, wow, there is a lot of demand for this, then we started to say, okay, what's next?

31:48The next step was, well, we should probably open two other locations in very different venues because, listen, opening a store in Covent Garden, it's Covent Garden and there are a lot of people. So let's try one in a business district and let's try one in a location outside of London. And it was a bit haphazard, but that was the way we thought at the time. Let's expand this one step at a time. It was working in Covent Garden. And so there is a certain logic to say, well, let's find other places like Covent Garden. And we actually did the opposite, like Scott said. And I kind of look back and I wonder, gosh, we were really, we did the right thing at the time.

32:26we opened our second location was as different from the Covent Garden location as it could possibly be. We made it really hard for ourselves. We opened a bookstore cafe in Cambridge. And then our third site was in the city financial district. And that kind of set us up for what we were able to then grow it quickly. You decided that you were going to expand this. And I guess going from one to two to three, you had a template, right? You had a design what the locations looked like. You had the logos. You now had, you're getting the Lavazza coffee. So you had, you had it all worked out. So going from one to two to three, you could replicate that.

33:06Right. And it was a matter of just hiring people and making sure that they were well-trained more or less. Right. Well, yes. And, um, you know, the, the format and profile of the first store was very different from the second, different from the third. It felt a little bit at that time, like we were kind of continuing to create the concept while we were opening those first few stores. Laboratory mode, very much. But you're right. It was a simple, straightforward. I mean, you had just coffee, drinks, and maybe like some baked goods. Yeah, we had a pretty extensive food offering, more extensive than Starbucks at the time.

33:43To put it in context, Starbucks food sales at the time were 8 to 10 percent of sales and ours were 25 percent. Wow. But we should talk Talk about the coffee. Yeah. Because it was within that laboratory phase where two guys showed up to our first location there in Covent Garden. They were both British, but they were two guys who had been, they were living in California, and they became infatuated with Pete's Coffee and the whole Starbucks scene. And they were captivated by it all, actually learned a bit about coffee while they were there. And then they decided, are we going to set up a roastery or are we going to set up a retail brand back in London?

34:22They decided just when we were setting up Seattle Coffee Company, unbeknownst to all of us, they decided to go with developing out a roastery, Torres and Macatonia roastery. So they did that while we were building out our first location. They came, stumbled on us. That was an incredible beginning of a relationship that also really enriched what Seattle Coffee Company became because we ultimately acquired Tours and Macatonia. And so we now we were roasting our own coffee. And at the time they were supplying beans to the highest and most special restaurants in the UK. They were really, you know, wonderfully obsessed with the science of creating great coffee and roasting beautiful coffee beans.

35:05So that helped Seattle Coffee Company quite a bit. I'm trying to get my head around. I mean, you open the first location in 95. By 97, you've got 35 in the UK. And then there was a period of like two months where you opened like 20 or 25 stores. First of all, it seems like you were racing against a clock. Why were you in such rapid expansion mode? Well, a lot of it was, this was at a time when Andy Grove's book, Only the Paranoid Survive, had come out, I believe. And we respected Starbucks so much. They had been our inspiration and they were our role model. And there was no animosity between us and them.

35:48We truly were inspired by them. And we knew that if they decided to come to London, that they would probably just take over. And, you know, their size and scale and sophistication, we really felt like we were outmatched. Remember somebody told us, oh, if they get here, they'll squish you like a grape.

36:11When we come back in just a moment, what happened when Starbucks did come to London and how a van full of teens led Scott and Allie to think seriously about pizza. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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40:54Hey, welcome back to How I Built This. I'm Guy Raz. So it's the mid-1990s. Allie and Scott are working round the clock on Seattle Coffee Company, and the business is booming. But they still have to figure out how to manage the company's growth and deal with the looming threat of Starbucks. I mean, I think we had an appropriate amount of humility and a little bit of an inferiority complex that if they came over, they would bring the full capacities of the organization to try to dislodge us. And so we knew that it was a market share game. We knew that we had to get out and secure the right real estate and build the brand.

41:33And in our market, they talk about the first mover advantage. And we had to secure that first mover advantage so that if they did come, we could defend ourselves. How did you manage? I'm just trying. I mean, you know, 65 locations in a three-year period of time. I mean, you had to identify locations. You had to get the build out. You had to find the people. And you had to – I mean, and you're doing this all over the UK. sometimes two or three a week. Just help me understand how you actually manage that. I'm smiling right now because I'm having a memory of what our Sunday... So you mentioned site selection.

42:15I mean, just that alone is a process that's very time intensive. And we would get, you know, long lists of potential sites from our real estate broker. And typically, you go through the process of visiting and studying those sites and you have to, you know, make a schedule to go do that. And at the time when we would get this list of a bunch of sites to go look at, we were parents of a very young kid named Tristan who I was nursing. And anybody who's been a parent of a baby knows there's not a lot of sleep that goes on. If you're feeding a baby in the middle of the night or early morning, that can be tough.

42:56But for us, it actually was awesome. We would have our Sundays. I remember on weekends, Tristan would wake up for his morning feed at whatever, four in the morning or something. And instead of us going back to sleep, we would load him up in the car after I fed him and we would be able to drive what otherwise would have been, you know, gridlock traffic all around the city, all around London. We would be able to drive with sleeping Tristan, well-fed in the back and see all of these sights all in a day. And then on that Monday morning, we were able to give our feedback to the real estate guy and we could fast track things that way.

43:33I mean, that's how I mean, our situation was a bit nutty. Our life was very the dimension of it was all about Seattle Coffee Company. But in some ways, like having Tristan, that helped us. So, all right, this crazy rapid expansion and even licensing deals overseas. I mean, imagine a certain point you thought, okay, this is going to be a global empire. But in the end, three years in, Starbucks offers you$90 million and you accept it. You sell the company to them. Yeah, it's interesting how that came about is interesting. We had been raising capital to grow. We had a strategy to turn this into a brand that was, like you said, outside of the UK.

44:22And we had global aspirations. We had signed up with partners in the Middle East and South Africa and Southeast Asia and had plans to go to Northern Europe. And actually it had conversations with several brands in the U.S., well-known brands, about us acquiring them to create an entree into the U.S. so that we would become the global alternative to Starbucks. At the time, Starbucks was very established in the U.S. and they had gone to Japan as part of their first step to becoming an international brand. Well, we were far ahead of them internationally. And so the hypothesis was we could become the Pepsi to their Coke.

45:04And at the time we sold to Starbucks, we had 68 locations. But we had 50 locations in our UK pipeline for the next year. And we had a whole bunch of stores we were going to be opening internationally. And that's when Starbucks approached us and said, we have an aspiration of building the world's most inspiring brand or something. There was a context for it. And they said that we know that to do that, we need to be successful in three markets, New York, Tokyo, and London. And we are in New York City in Tokyo and you're in London. And that's a problem. And so we want to solve that problem by working with you as opposed to against you.

45:48And so we ended up having this very positive conversation because, again, we very much looked up to them as our inspiration. So we started by having a conversation with Oren Smith, who was the president of the company at the time. and that led to Howard Schultz coming to do a visit and entering a negotiation to see if we could make this work. And it all led very quickly to us deciding to work with Starbucks as opposed to competing with them. So all of your locations under that deal would become Starbucks. You would become, you would take on an executive role and eventually I think you were even the president of Starbucks Europe.

46:30What was that experience like for you? I mean, because you – I should say, you didn't – I don't think you ended up spending that much time there. Was it – was that the idea that you would just kind of stay there for a couple years as part of the commitment of being bought out or did you think, okay, I'm going to have a career at Starbucks now? Yeah, it's a great question. At the time the transaction happened, I made a commitment, Allie and I made a commitment that we would work as hard as possible to make sure that the transaction was as successful for them and their shareholders as it had been for our shareholders.

47:04And that was an informal handshake. And I stuck around for almost two years to help manage the transition from Seattle Coffee Company to Starbucks. And it was a fascinating experience, very eye-opening in that we assume that, you know, this big successful business would come over and everything would be buttoned down and polished. And what we found was all of the challenges and the imperfections and the dysfunction that we had in our small little company were just amplified on a bigger scale at Starbucks. And it was funny because Howard Schultz took us to dinner right after the transaction closed in London.

47:49And he had had a little bit of a campaign going on internally at the time around how do you get big and stay small. And there was a book that he was handing out to all of his senior executives called Orbiting the Giant Hairball. And he gave us a copy of it. And it's a lot of pictures and graphics. And the whole premise is when you start a company like Starbucks, you have to put processes in place and systems and controls. And each one of those is like a little piece of hair. And over time, it creates this hairball that if you're not careful, it'll stifle. So he talked a lot to us at the time about that.

48:28And his basic message to us was, we love what you have done in the UK and how entrepreneurial you've been and dynamic. And please build a wall across the Atlantic and don't let, I think the word he used was the bastards, but don't let those in from Starbucks who are going to try to take that away from you. And they will do it in my name and with all of the right intentions. but they don't understand that what I really want is for you to continue to be entrepreneurial and dynamic and creative, not just to cut and paste everything that we've done in the U.S. into the U.K. because that will be a hairball.

49:08And so what we found was he was right. There was a lot of momentum organizationally to simply replicate in a new market what they had success doing elsewhere. And so that was a very, very interesting experience for me. And I loved it, but ultimately decided, Ali and I, that what we loved even more was building things. And I talked to Ali about it, and we came back, and I sat with Howard Schultz and said, I love this place. I love this brand. but I think Ali and I are going to go and think about what to do next in terms of building our next business as opposed to coming in and managing your great business and so we ended up deciding to to leave Starbucks.

49:56So you guys moved back to the U.S., back to Seattle in 2000. You've got you're financially secure. I mean you can just kind of spend focus all your energy on your family if you wanted to for the rest of your lives. But you, I think, Scott, you joined or maybe you started a private equity group when you got back. You created one, right? Yeah, so one little thing that happened in between is as we were leaving Starbucks, we got involved with helping to back an incredible couple and concept called Carluccio's, which is an Italian deli cafe concept that two incredible people, Antonio and Priscilla Carluccios, were in the process of bringing to life in the UK.

50:40And we helped them build a really fun, successful business called Carluccios. And that was something that we did while we were still in the UK. And then we were very involved with when we got back to Seattle. But that was another chapter for us of helping a really great team bring to life a concept based on what we had learned from our experiences with Seattle Coffee Company. And that's a company that eventually went public in the UK and then we eventually sold it. But that was all happening while we moved back to Seattle. And then you're right, we decided to set up a company called the Sienna Group, which was intended to be a platform from which we could bring the experiences we'd had with Seattle Coffee Company and Carluccio's and support and back other private companies that were growing.

51:32But to do so more as a investor and coach, less as a full-time executive. So you're back, fully back in Seattle at this point. And you, I think initially the idea with this private equity group that you started was to kind of follow the Warren Buffett playbook. find great family-owned businesses, buy them, and don't sell them necessarily, but hold them for a long time. And was that, I mean, did that pan out? What kind of businesses were you looking at? I mean, he's got paint companies and railways and chocolate. Yeah, so Carluccio's was one of the businesses that we had participated in. And then we ended up making a very large investment in a a wealth and asset management company here in Seattle with the idea of kind of using this as a platform to start to dabble in combining profit and purpose.

52:33So you guys are involved in philanthropy and so tell me how you, the conversations you started to have around starting another business of your own because you'd been through it, right? You did your own startup 10 years earlier. And now you're, you know, it's like 2006, seven, you start to talk about maybe the two of you starting something again. How did that start? Well, what ended up happening is we had been approached many times by people who were interested in getting us involved with a coffee business or a restaurant retail business, and we had always politely declined. But one of the elements of our time in Europe was we had an intense love affair with Italy and all things Italian.

53:20When we had a chance to travel, most of the time we ended up going to Italy because there was just something about the country and the people and the culture and the food and everything about it, the architecture that just drew us in. And we loved our experiences. You overlay that with somebody approached us during that time that we were back in Seattle and thinking about how we were going to be investing our professional time. And they came to us with the idea of doing something different in pizza. And I'll be honest, I kind of poo-pooed it. And then Allie kept coming back to it saying, you know, I really think we need to look more closely at this.

54:01Why, Ali? Why were you saying that? I specifically remember one moment that made my hair, you know, stand up. I was driving our big family rig. We had groups of, you know, our boys and a couple of their friends in the car. And we were doing one of those typical things where you're between a game and a practice and got to drop off and this guy's hungry and now I am too. And what are we going to do? And we really struggled to find the right solution for the carload. You know, if we're going to feed them, then we're going to be hungry. If we're going to feed us, they're going to be picky and it's going to cost a fortune.

54:36And it was just one of these. And we'd had so many moments like that. And then we just had this one in the car that day of that deja vu feeling of we are looking for something that doesn't exist. And I know that what we're looking for, other people would want to. and because we'd have this backdrop of somebody talking to us about pizza and the exploration of not doing pizza by the slice but individualized pizzas, which of course is the way it's done on the street in Italy. So we had that in the back of our mind and then that deja vu moment of we're looking for something that doesn't exist. Wow, if we could go and get pizza that we could all customize, that is interesting.

55:13So I think it was a deja vu moment of we're frustrated, we have a problem to solve, we should pay attention to this feeling. And was there somebody, I mean, was there a partner or somebody who was like, pizza, let's do pizza? Yeah, there were a couple of people who approached us. One in particular who the general idea was pizza is slow, it's expensive, you know, it takes time and it's a sit-down occasion. Or you go into these places where you have pizza by the slice, but the pizza was made hours ago and it's reheating it. And is there a way to combine all of these, the attributes of fast casual with pizza, which is the second largest food category in restaurants behind hamburgers.

56:01It's a loved product. There's so much innovation you can do because you have this great platform of dough that you can put any combination of wonderful toppings on. And so maybe we can try to make the experience more personalized. So you guys saw what Chipotle was doing, right? The fast casual was blowing up. And, you know, now there's millions of burger chains, smash burger places and stuff. But so you saw what was happening. And essentially this was happening with things like sandwiches, burritos, but pizza, nobody was really doing it with pizza. There was no fast casual, quick pizza place. That's right.

56:43Yeah. Yeah. And this is a category. And as you say, this is the second most popular fast food in the U.S. or food. Back in the day when we were doing our research and trying to brainstorm around this. Yes. I mean, those will be out of date numbers now, but they were really compelling. And so the idea was, well, could you do this pizza? And I'm thinking of like like Papa John's, for example, I think, which is not a fast, casual place, mainly delivery. but they have like a conveyor belt system, I think, where they put the dough and then they put it and it runs your conveyor belt and it comes out and it's a fully done pizza.

57:16So you could do it. I mean, the concept of kind of creating a fast pizza place, you could make that happen. Well, that's why we knew we needed a laboratory. We knew from our Seattle Coffee Committee experience, we don't know how to do this. We don't know what it will look like, but we need a real laboratory. What was the motivation for the both of you? I mean, you were going to now dive back into a really intense project. Of course, you had more resources and you had more experience. So it was going to be different than the Seattle Coffee Company and slightly less scrappy. But still, it was going to require a huge time and emotional energy commitment.

57:56So what got you to the point where you're like, let's do this? In all honesty, it was a little bit like our time with Seattle Coffee Company where it was one step at a time. and the plan really didn't extend years into the future. It was, this is a really intriguing question about can you modernize the pizza experience to deliver a more personalized, customized, quick experience? And can we do that in one location? And how did you start to determine what the concept would be? Did you rent space? Did you get a kitchen, a commercial kitchen? Did you bring a bunch of people together in an office?

58:34What did you do? It was a combination of all of that. We had an office for the Siena Group, and we used that as kind of our main hub. There was a lot of work that was done on whiteboards and so forth. We then collaborated with some equipment suppliers to get into kitchens to test this idea of how we could formulate the dough and how we would press it and the different techniques for cooking it and how quickly could we do it. And so there was like multiple streams of work that were going in to convince us that if we actually did lease a space and build it out and start to construct this concept that the key components would all come to life in a way that we could at least run one restaurant and have it operate.

59:18We had lots of questions, though, about would we be able to deliver a product that people liked enough to actually come back? We were able to answer enough of them to convince ourselves that, hey, taking a lease and trying this once might not be a bad idea. And by the way, at the time in particular, Guy, we weren't thinking that if we did this and it started to build momentum into a business that Allie and I would be the ones in the driver's seat. But that was not the perspective at the time. Early on, it was very much the kitchen table mentality, even more kitchen table mentality than Seattle Coffee Company had been.

59:59Because we had been motivated to just pull in people and want to work and collaborate with people that we respected, that were friends. we really just sat around our table and, you know, kind of named creation. And early on, what could, you know, logos be like? We launched actually with two logos because we couldn't decide. We were playing with it. We didn't have a sense of desperation. It was more about curiosity and getting really creative and brainstorming. What do we want to create that we ourselves would need? What solves this? And we played a bit. Let me ask you about the sort of the overcoming some of the bottlenecks here, right?

1:00:38Because a burrito place, you can – there's tortillas that are made. They're quickly heated and it goes down a conveyor. It goes down a line and people add stuff to it and it's packaged in a foil wrapper and you're done. Pizza is a little bit different, right? Because you've got the balls of dough and usually there's one, maybe two people who are flipping the pizzas in the air and stretching the dough and then making the pizzas and then putting it in the oven. and you've got to monitor what pizza's doing what, and maybe you can, depending on the size of the pizza oven, maybe you can do three, four at a time.

1:01:10I mean, that was a bottleneck you had to solve because clearly if there was an easy way to do this, somebody would have figured this out. These are presumably questions you were asking on the whiteboard. And what was the, like, how did you come upon a solution to this, to the bottleneck issue of just a long line of people waiting to get their pizzas done, you know, made? As you just described it, we were confident that people would be attracted to the idea of walking into a restaurant where they could walk down the line like they do at a Chipotle and co-create their own pizza using 30 fresh, beautiful toppings.

1:01:47And that's the fast, casual concept. That idea of being able to walk down the line and have the ability to personalize was very attractive. but to be able to do so quickly and efficiently was also important. So we knew that would be appealing. Now, if you're at Chipotle, the food has been prepped before and it's simmering. So it's sitting there and as you put it together, by the time you get to the end of the line, it's done. You put the top on it and you take it away. At Maud, that creation of the pizza was the first step. The second step was then to cook it. and that takes three or four minutes.

1:02:26So in exchange for a freshly cooked product, that is gonna take a little bit longer. Now, you're preoccupied because you go at the end of the line and you go grab a drink and you pay for it. And while you're doing all of that, we're cooking your product. But there was a question, both in terms of customer acceptance of that slightly longer experience and then the production process of being able to get the throughput but particularly at the peak hour and in our ovens, we can at peak have 15 to 20 pizzas in the oven at one time, but it's still going to take, you know, three to four minutes for that product to cook.

1:03:05And would people come and have pizza at lunch? Because pizza historically has been a dinner occasion. And this concept wouldn't work if we couldn't crack the lunch occasion, just given the economics of paying for a piece of real estate and the people and so forth. And that was the, I mean, that was going to be the concept for the first location. I mean, the idea was, let's do one-off and see how this goes and then decide what we want to do afterwards. We're lucky because the first location that we had identified was actually a great one to test that focus that Scott mentioned around, will people eat pizza for lunch and can we handle volume in, you know, at peak time?

1:03:48And the first location that was to be our laboratory was in an office building that was really only going to be trading Monday through Friday, primarily lunchtime. So it was actually a really, really great place to start to figure, you know, to answer some of those most fundamental questions. That's why we chose that location, downtown Seattle. And the name Mod Pizza Made On Demand, that's what it stands for, right? Well, a little bit. A little bit. But the mod name was inspired by the mod era of the 50s and 60s in the UK. Ali and I grew up as big fans of the Who and the music and vibe of that era.

1:04:30And the original mod movement, when you read about it, it just has that innocent rebellion kind of... Yeah, there's something written about the mod movement, which is a movement that was all about speed and style and challenging convention and innocent rebellion, all in pursuit of a better future. and we were like, that's it. That's what we want to build with Maud is a brand and a business that has that essence. Combined with, it's not made to order, it is made on demand, which, you know, that helps. And we like the idea that this is a modern way to enjoy pizza, Maud. There are a lot of ways to interpret Maud.

1:05:11We intentionally tell people, it's not literally meant to be made on demand. And we love that inclusivity and that flexibility around how mod comes to life. But mod is what you make it, and mod can mean a lot of things to a lot of people. Well, we come back in just a moment. How Scott and Allie made mod meaningful, and how an economic downturn and a free bottle of water would give shape to their pizza business. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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1:07:49Hey, welcome back to How I Built This. So it's 2008, and Scott and Allie believe that with Mod Pizza, they're on to an idea that will work. But right as they're getting ready to launch, the financial crisis hits. And for lots of startups, it would mean the end. But Scott and Allie doubled down and decided to ask what Mod Pizza should and could do. This really informed a lot of what Mod was to become from a perspective of how do we take care of customers and how are we going to take care of employees. And those two, we made some decisions very early on because of the financial crisis that I think today are some of the most fundamental decisions we made about Maud.

1:08:35Starting with the customer proposition, this need for value, with all the financial insecurity at the time and people aren't going to be, you know, the disposable income question around are they going to be going out for food? This one price model of here's the price. It's one price for whatever the size of the pizza. It doesn't matter how many toppings you put on it. There's one price. And that had never been done before in pizza. And the story of how that came about, like with so much of this stuff, it was a personal thing for us. We had stayed in an incredible hotel in California. We'd forgotten to bring our water bottle into the hotel room, which I hate forgetting to bring our own water because I don't like to pay an insane amount of money for the water in the hotel room.

1:09:19And as it turns out, there was this wonderful sign in this very expensive hotel room that said, we're so happy you're here. Enjoy, you know, these items on the house. And I remember looking at Scott and I almost burst into happy tears. You know, my gosh, the water's free. Like, all this is free. But yes, we agree. That's refreshing. Like, that was a very nice discovery moment for us. And that feeling we wanted to capture when we opened Maud, again, given the timing of the recession, this idea of one price, there is no nickel and diming. We wanted customers to truly feel that this is a place where there is a commitment to being value for money.

1:09:58We've got your back. And if people ask for more chicken or they want to add pepperoni to their pizza, there's no additional charge. And it was really fun early on watching customers react the way we had reacted all those years ago in the hotel room where they just couldn't believe it. Like, well, what's the catch? There is no catch. This is the price. Now what's the pizza that you want? Well, let's make it. So the pricing came about because of the recession. And that was important. And the other thing was this idea of we want to be employers that are truly taking care of the people that we're able to employ at a time when job security and in the fall of 2008, it was a real issue.

1:10:38And to this day, and I'm sure we'll get into it, our opportunity employment and taking care of the people that we're able to employ continues to be, you know, absolutely fundamental to this business. Let me ask you about that. I mean, from the beginning, because we should dive into this, I mean, your sort of the hiring practices are quite interesting. I mean, you hire a lot of people who are formerly incarcerated and people with developmental disabilities and people who sort of have struggled with homelessness. So was that baked in from the beginning? Was that the intention or did that evolve?

1:11:12It was baked in in the sense that we had a philosophical approach when we were starting M.O.D. And we were in that lucky position to be able to, we didn't have to build Maud. We wanted to build Maud or we wanted to start this thing. And if we're going to start this thing, what do we want it to be? What matters to us? I mean, we were able to take time to ask all these questions. And we knew that we wanted to build a business that we were proud of and something that we wanted to see grow in the world. And there were problems that we were seeing. and then when the recession kicks in, the problems were even worse.

1:11:48Can we make sure that what our business is doing is a force for good in some way? Can we help deal with some of these issues that we're now all having to deal with? The world seems to be melting. This is scary. What can and should mod be? And from that moment on, you know, we knew we've got this platform. We do two things. We employ people and we feed people. So let's make sure that with every opportunity of feeding or employing, We're using this for good. Yep. Our motivation was to create a platform that we could use to make a positive social impact that would endure and sustain beyond us. And we knew we wanted to focus on people and starting with the employees or our people.

1:12:33But then we basically said to our team, you know, Mott is what you make it. Mott is what we make it. Let's, we want to, our North Star is to use this business as a platform. Now, let's together figure out what that means. Because the philosophy and those conversations happened before we even opened the first locations. In our second location, we had employed a couple of individuals who had been justice involved. And this idea of how much of an impact our business could make through employment practices became clear very early on because these, at the time, unemployable individuals. They would have had to check a box in Seattle, and we did not require them to check the box.

1:13:17We employed them. The first job out of prison was working at Maud. And in a very short period of time, even though some people thought, well, that's kind of crazy, we like to say what was crazier was the incredible work that these individuals did. And their gratitude for being given an opportunity translated into a work ethic that was incredible, the way they took care of each other, customers. I mean, this started to happen quite immediately. And that's the thing that started to take hold when we ultimately got to the point where we did have to have the conversation around, gosh, now we have, I think at the time it was five locations.

1:13:55And kind of like with Seattle Coffee Company, they were all very different, which helped us learn very quickly about what worked and what didn't work. The expansion really, I think, started to kind of take off in around 2013. By then you had like 12 stores, mainly, I think, entirely in Washington state. And I think a year later, you were up to like 31 locations in six states, which is amazing. It's pretty great, but still slower than the growth of the coffee company, right? And then I guess over the next few years, you raised like around$50 million from investors. That's right. But you also began like a franchising program in 2014.

1:14:39So can you explain why you decide to do that? I mean, obviously franchising, the model is great because you can expand quickly and with less upfront costs. But you also risk losing control, right, over the brand and the quality and things like that. Yeah, it's a great question. So you're exactly right. On our fifth birthday, we had 12 stores in western Washington. And it was at that time that we sat down, as Ali said, and had a long conversation about what we wanted to do with Maud. Did we want to keep it regional and live, frankly, a more comfortable life and just drive to all the new stores and know everybody?

1:15:18Or did we want to take a swing and see if we could turn this into a true national, maybe even international brand, and really expand this platform that we'd been talking about into something much more profound? Now, most of that growth that we then embarked on was company-owned growth. But you're right, we did also bring in a franchising model because in that first five years, having started or kind of pioneered this category of fast casual pizza, halfway through that first five years, a lot of other brands started to enter the category. and back to the conversation about Seattle Coffee Company, there is an advantage for the first mover.

1:15:58That person or that brand that gets out and secures the right real estate, builds that relationship with customers. If you allow a brand in a category to get too far ahead in a particular market, it's hard to supplant them. So as these other brands were entering the market and they were all franchised, we would only be able to push ourselves so far with company-owned growth and we would ideally bring in partners who could help us expand into those markets that we would not otherwise get to. And so we brought franchising in as part of our strategy, but we did it differently than a lot of brands.

1:16:34We chose only partners who, importantly, were people who we felt philosophically aligned with, who we enjoyed, and who understood our purpose and really bought into it and that could build out a relatively large market. So today, 85 % of our stores are company-owned, 15 % are franchised with nine partners who are fabulous, incredibly valuable, and experienced operators. But in that second five-year chapter of our growth, on our fifth birthday, 12 stores in Western Washington, five years later on our 10th birthday, we had over 400 stores spread across 70 plus discrete markets around the U.S. So that second five years was, it was frenetic.

1:17:21It was exciting. It was exhausting. And it was all driven by this mission of we want to win in this category because the payoff or the end that we're pursuing is to build this highly successful, healthy platform that we can use to make a difference in our communities and in the world around us. You use the word discreet. Did you target sort of communities, places, regions that were a little off the beaten path? Well, we, it's funny, I remember sitting in our little office that we had in the early days of our growth, and we had a whiteboard, and we were talking about our growth strategy, and we literally took out a map of the United States and somewhat arbitrarily started to carve up the country in the markets that we would enter ourselves as company markets and the markets that we would then go and seek out franchise partners in.

1:18:23I look back on it now and think, well, if we were answering the same question today, we would be pretty thoughtful with research and analytics. And And at the time, we literally got up, we took this map and took a marker and started circling regions of the country. So, yeah, we constructed a growth strategy that had logic behind it, but it was seat-of-the-pants logic in some ways. And also dependent on where you find great partners. Yeah. So as this kind of rolled out, I mean, I think at a certain point, not too quickly after the expansion plans were kind of released or unveiled or whatever, you became, I think, the fastest growing quick service restaurant chain in the U.S.

1:19:09for quite a bit of time. Yeah, we were the fastest growing restaurant brand in the country for, I believe, four years, three or four years. And that's a nice accolade. It's not something that we put on our resume. It's not something we view as that important, other than it is a reflection of the fact that we were growing really fast back then. But we also recognize that that rate of growth, particularly for a small and not fully developed organization, was going to come with a cost in terms of a heavy investment in infrastructure, a heavy investment in new market opening, a heavy investment in mistakes.

1:19:49Because anytime you're growing that rapidly, you are going to make mistakes. And that was very conscious decision that whatever mistakes we made, whatever collateral damage, if you will, that comes from going too fast would be more than made up for by winning in this category and having all the advantages that come from being that market share leader over time. Being the Starbucks of the category, the Chipotle of the category, the Panera of the category, as opposed to the second, third, and fourth brands in those categories, many times it's even hard to think who that second, third, fourth brand is.

1:20:24In sort of building this business, how did you guys divide and conquer? I mean, did you, who did what? I mean, were you, who was the CEO? What did you, Allie, would you focus on? Scott, what did you focus on? And, you know, was it similar to how you operated at Seattle Coffee Company? I think it was similar. I think it was very similar. And I think Seattle Coffee Company, that experience helped us understand how we best divide and conquer. We're really lucky, I think, because we've known each other a really long time. I think it happened naturally, the way that we divide and conquer combined with the fact that we have very different strengths.

1:21:05And we just naturally kind of each focused in the areas where we could help the most. Scott is absolutely the CEO. And I've always liked working with him on some of the big strategic focuses that we have. But I also love getting into the weeds in the areas that I know he and I, the whole reason that we're doing this. We're so intentional at the beginning with Maude. We're only going to do this if we know that it needs to be done, that it matters, and that we can actually do something good with it. And because that was very intentional at the beginning, that's that element of it, ensuring that we continue to be focused on the why behind the business.

1:21:45has always been a primary focus for me. Allie's title is Protector of the Purpose, and I think that's a great way of summarizing the contribution she makes. In addition to that, she's got a magic touch around our brand and how the concept evolves and the way we deliver value to customers. And I get involved with a lot of the details of how do we build the framework and the infrastructure and the team to actually now go and execute on it. The restaurant is, I think, mainly, I'm assuming most people sit down and eat there. Or am I wrong? Or is it most people take pizza out and leave? Well, it's a really great question.

1:22:30Prior to the pandemic, 95 % plus of our customers would come into Maud, a restaurant, and either walk down the line and build their own product or pick up their product and take it out. Since the pandemic, a much higher percentage of our business or our customers approach us differently, either through delivery or through our digital channels. And so that's actually part of our story today, which is how we need to continue to evolve. In 2019, there was a study conducted. We had an investor who joined us at the time, and they commissioned a big study by a big consulting firm. And they did a deep dive into the business and the industry and our brand.

1:23:14And we had a very thoughtful plan to, you know, develop greater off-premise capabilities and digital capabilities. And it was like a five-year plan and all of a sudden the pandemic hit and we needed to do all of that in five weeks. And so it's been, the last three years has been a real adventure. The business has changed from what it was just a few years ago. My understanding is that there was a target to hit 1 ,000 locations within five years of 2019. And I guess my question is, is that still the right kind of – I mean not even just for mod, but in general for a quick service restaurant. I mean, with this sort of the rise of ghost kitchens, particularly in urban areas where, you know, you can make a bunch of stuff and send it on to DoorDash and somebody gets it.

1:24:04I don't know. Does it – is it in your interest to actually have more restaurants or to have more of these ghost-type kitchens or a combination? I don't know. We really focus more on the more successful we are and the more stores we have, the more people we'll be able to employ, and therefore the impact that we wish to make will be bigger. And so that's a real driver and motivator for us. Just specifically on this question of ghost kitchens, I'll be honest with you. It's not really an area that's super appealing to us, and there are a number of reasons why. One is we believe one of the roles that Maud plays is a venue or a location within which the community can come together and connect in person and be a place of celebration and human connection.

1:24:54This whole idea of ghost kitchens is a little, it's not a model that makes perfect sense or hasn't been perfected yet. Because a ghost kitchen is a location from which you can ideally build a restaurant meal more efficiently because you don't have the more expensive real estate. But you still have the same challenge of having to get that meal into someone's hands. So the radius that you have to work from is still more or less constrained by the same constraints you have for any restaurant. You can only deliver a meal with a certain quality within plus or minus five, six, seven miles, depending upon the topography.

1:25:32And so it becomes really challenging. Some people say, well, as opposed to having these five restaurants just build one ghost kitchen. Well, just the dynamics of distance doesn't always allow that to pencil. Yeah. So, I mean, when you think about this, as you say, I mean, you don't measure your success on a number of locations. But I mean, is there – I mean, earlier you spoke about, hey, maybe we can make this into a national and a global brand. I know you are in the United States and in Canada right now. And I don't think – you're not outside of North America. But is that part of the long-term plan?

1:26:11Yeah. So it's interesting. You know, I think as we've gotten, we've been in this game longer and we have an incredible team around us, you would have thought that our planning would have become a lot more thoughtful and sophisticated. And in many ways it is. But it is still a game of one step at a time. And I can tell you with great conviction what our next step is and what we're focused on and the opportunities we have and the improvements we're making. But three to five steps out, our industry is changing so rapidly and the needs of the consumer and technology and even now with robotics and AI.

1:26:51And it's an incredibly dynamic environment and it's exciting, but it does mean that we have to be really thoughtful about how we're evolving with all the changes. We get excited about growth because for us, growth opens up pathways for people. Right now we have about 12 ,000 squad members. If we were to open another hundred stores, that's going to be another 2 ,500 squad members that we're going to be able to provide opportunities to and bring into this community where they can find belonging and connection and opportunity. and that excites us. Now, that also allows us to build, hopefully, a more successful business, which will give us more fuel, more resource to do things for our team.

1:27:40So, for instance, this last year, we introduced an education benefit through an organization called Guild, where people are able to access classes on a whole range of skills and access a BA. And we have had an incredible take up. People are thirsty for those types of opportunities. And we would love to go deeper into that. And we'd love to offer more and more to provide that rich experience to really help people. And so growth is a part of that. I feel like you, I mean, you sort of tapped into two different times in your careers into two different kind of cultural phenomenon. Coffee in Europe, certainly sort of second wave of coffee.

1:28:30And there's a similar, it's not an exact parallel, but a slightly similar thing with pizza. Of course, pizza's been around in the United States for a long time. But I feel like in the last 20 years, you know, there's been a kind of a new renaissance like Pizza Bianco in Phoenix and Roberta's in New York and Mazda in L.A. And they're, you know, just amazing. And so there has also been this kind of pizza revival that you guys kind of hit on, too, at the, you know, at the sort of similar to coffee in a sense. I mean, do you agree? Do you think that that also helped kind of create momentum with your business?

1:29:11I think I'm sure, yes. But also I think it's part of why we felt a healthy amount of confidence around pursuing the opportunity for Seattle Coffee Company and now with Maud. It's not fancy, new, crazy thinking. it's really fundamental. And it's just about how do we evolve that and build upon that which is already kind of proven and known. And we've also always been big believers in only ever really wanting to be involved with things that there's need there, where it makes sense, where it's justified, where it's not excessive. And things like, you know, pizza and coffee are stuff we can relate to.

1:29:51It's, I mean, you guys clearly were looking at trends and trying to spot them, you know, ahead of the curve and look around corners and whatever other cliche I can come up with. But you looked at pizza and you're like, this is a category that can work. And so I guess I wonder, where do you see the opportunities now? Or like if you were, you guys, when you were 30, looking at, you know, something to start, where would you go? For me, the big opportunity is to continue to lean in to this macro trend that is both, I think, powerful, but also incredibly needed to tap into the potential of capitalism and of business to be a force of change, a force of good in our society.

1:30:36we have so many issues in our country and our communities and they're not all going to be solved by the politicians or they're not all going to be solved by the non-profit sector. I think companies need to be more accountable for the health of the communities that they rely on for their survival. And I don't think that that is a zero-sum game. I actually think that if you do that and you do it well, you can build a business that is better and stronger and more defensible because you're going to attract and retain and engage a group of people who want to be a part of that as an employee. And then over time, you'll attract customers, hopefully, who understand that you are about more than just a product or just about profit, that you are also about giving back and they're going to want to be a part of that.

1:31:27When you think about, you know, the journey you guys have taken together. I mean, first of all, you met when you were teenagers, you know, 15, 16 years old. And it's actually quite remarkable because we change. Humans change a lot. Your values stay consistent, but who you are is quite different from who you were 10 years, 20 years earlier. What happens is people meet in high school and then they split up because they grow apart. They grow in different directions. And you guys have kind of grown together and changed together. And so what do you count for? I mean, you probably don't know anybody else who met in high school and are still married.

1:32:07Well, I'll be honest, Guy. I just think my lucky story is every day that Allie puts up with me and has adapted to all those changes you talked about. Allie just keeps getting better and better and I just try to keep up with her. But it's been, no, it's definitely been the blessing of my life to have a partner like her. and it has been incredibly collaborative and a lot of give and take. And we're human, which means we're imperfect. We always focus on this theme of it's about progress, not perfection. And you've had these challenges together. And I'll tell you, there's nothing better than that.

1:32:44Sharing that with someone makes the journey just so meaningful. And I count my lucky stars every day. So do I. I remember I had, I overheard a conversation that my mom was having with a friend of hers when I was in high school, getting ready to go to college. I heard her saying to her friend on the phone, yep, Allie and Scott are still together. And you know, the college thing's starting. And, and my mom actually said to her friend, I, I truly believe that they are meant to be together. I just worry so much whether or not they'll be able to weather all the chapters and the storms because that's where it gets hard.

1:33:22And I remember at the time listening to that, thinking, oh, she's, you know, she doesn't know us or I don't know what she's worried about. And I now know what she was worried about. And it's what you just said. I mean, people do change and there are chapters and it's, um, and so I do think that part of it is we've been very lucky, but I also think part of it has, um, we have that, you know, we, we subscribe to the saying that the harder you work, the luckier you get sometimes. And I think we've worked hard at, At being friends and supporters of each other through all of it, you just sometimes have to shift how you're engaging or what the stages of life that you're in.

1:33:58And I think Scott and I have been so lucky because the things that we've been collaborating on, whether it's having our kids or the businesses that we've built, it's stuff that we've been able to share. It hasn't been divisive stuff. It's been stuff that we could come together on, and that's kind of how we've chosen to approach it, which has strengthened us, not weakened us. Well, you've answered my question about luck or skill, so that's very helpful. That's Allie and Scott Svensson, co-founders of Mod Pizza and Seattle Coffee Company. And despite its size, Mod is still clearly a family business.

1:34:35They even named four of their classic pies after their sons, Tristan, Caspian, Dylan James, and Jasper. Hey, thanks so much for listening to the show this week. please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's totally free. This episode was produced by J.C. Howard with music composed by Ramtin Arablui. It was edited by Andrea Bruce with research help from Casey Herman. Our production staff also includes Neva Grant, Liz Metzger, Carrie Thompson, Alex Chung, Elaine Coates, John Isabella, Sam Paulson, Chris Messini, and Carla Estevez.

1:35:15I'm Guy Raz, and you've been listening to How I Built This.