Wingstop: Antonio Swad. A Brilliant Idea — And a Nail-Biting Exit

29:02You didn't eat them because you were a vegetarian. I didn't eat chicken. So you didn't even like you didn't take bites to chew it or anything? I licked the sauce. I mean, I could remember what chicken tasted like. By the way, why were you a vegetarian? Oh, man. I was a vegetarian because it was my way. And I remember the last time I had meat in my mouth at this time. It was when I was working up in Watertown. I came to the conclusion that the industry of commercially raising these animals was so full of cruelty. And the only way that I could personally protest it was to not eat meat. It was all, quite honestly, it was all I can do.

29:47I was in the restaurant business. I had to sell meat. Yeah. You know, but hopefully we'll get to that. I mean, I had to sell meat right up until the moment I decided I didn't have to sell meat. So you are, and you're convinced this is going to work. So first of all, where's the location that you find to open this up? It's in Garland, Texas, and it was 1 ,100 square feet. It had a hood. It had everything already there. It didn't have a type one hood. It had a heat-only hood. I don't know, but it wasn't big enough, and it wasn't the hood I needed. But it had two restrooms. and to put in a restroom, especially an ADA-compliant restroom, is pretty expensive.

30:29So it had two restrooms already. And the first manager, Rex, very important in this story, he had some construction skills and he also had some good food training. And he worked for a cafeteria chain and we even used a couple of the recipes in the first wing stop that he knew from the cafeteria. Is Garland considered, I don't, Garland's not considered maybe an outer exurb of Dallas, but it's not even considered a suburb of Dallas, is it? Yeah. Am I wrong? It's a suburb. Yeah. And this shopping center, this is what it had gone for. It had a blockbuster video as the anchor. Okay. And to me, that was gold.

31:17because this did you did you think that hey this is the perfect place to be because people will get a bucket of chicken wings with their movie yeah i thought that they would it was a great food to go to go with movies and i had and i had people coming on the lot already and that's why we sampled to them you know and a lot of our customers were developed from that you know and eventually you know blockbuster you know went out of business but by that time you know wing stop was pretty well established, you know. And wings eventually would become like, I mean, God, I can't imagine how many wings are sold during the football season.

31:54It's just unbelievable. But you open this place in Garland and as expected, it's a hit right away? No. No. Okay. No, it wasn't. It was like, you know, people couldn't believe that I had a place that sold only chicken wings. And And we were building it. Rex helped me with the construction. We were building it, went into a Home Depot to buy some of this stuff. And a guy waited on me, and we had our tape measures on our way. So he thought we were like the contractors. He didn't really know that we were the restaurateurs. And he said, what are you fellows building? I said, oh, we're building this little place over there in Garland.

32:35He said, well, what's it going to be? I said, it's going to sell chicken wings. And he's like, and what else? I said, well, pretty much just chicken wings. He said, come on. I said, no, it's true. He said, let me give you some advice. You be sure and get all your money from that man because there's nobody can make a living selling nothing but chicken wings. And man, you talk about a chin drop. I remember walking out of the Home Depot going, man, I sure hope he's wrong. When we come back in just a moment, And Antonio launches the business, then totally rethinks it after imagining a football stadium full of chickens.

33:16Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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36:49So it's 1994, and Antonio, along with Bernadette, his wife at the time, have opened the first Wingstop restaurant in Garland, Texas. It's right near a Blockbuster video store, which is great. But aside from that, it's not a prime spot. The location wasn't the best. It was on the road takes a radical curve. And this space in the shopping center was kind of like where the curve was most extreme. The Blockbuster was on one end and there was a Remco rent-to-own furniture store on the other, but right in the middle where it kind of did this big bend. So it wasn't very visible. And again, I didn't have a lot of money to advertise.

37:31I ran these little tiny ads in the—we had a free paper called the Dallas Observer. And I would make up these catchy little ads and the Observer was given away free all over the Metroplex. But you still had to convince people to drive from wherever to try it. You know, you got to get trial. And once we got people got the food in their mouth, you know, we had a real good shot getting them back. Because, again, it wasn't that I had to teach people to love chicken wings. I had to teach people that you can buy chicken wings from us. And also the challenge is that it's not like a burger or a sandwich, which people think of as lunch or a meal, right?

38:21At that time, certainly, I would imagine most people didn't think of it as a meal. More like an appetizer or something. Yeah, an appetizer. It was not known to be a center of the plate item. It was not. So was your business mostly takeout? Yeah, it had to be. I only had 22 seats. And in order to achieve the sales that I really wanted to achieve, the majority of the business was takeout. Takeout business is great business. You exchange the money for the product, and they turn around and leave. The integrity of the food I don't think is as good because as soon as you put a hot item, particularly a fried item, it starts to degrade.

39:02But people didn't care. It was good enough, and people loved it enough. The flavors were interesting enough that they came back. Okay. So you are experimenting with chicken wings. And so, again, the frying part isn't what makes it special. Of course, it's basically – it's a vehicle. A chicken wing is a vehicle for sauce, right? It's a crispy vehicle for just tasting a bunch of different sauces, super spicy to savory and sweet or whatever. You're correct. And that's good for growing a company because you can buy chicken at a certain spec pretty much anywhere in the world. It's the sauce that makes the difference.

39:44Because you could make the sauces and that would be the special. That's a secret sauce. The secret sauce is the sauce. And keep in mind, too, that these sauces that we developed were proprietary. None of them we could. A food salesman couldn't just open his notebook and say, oh, I'll sell you the same sauce that they're getting down the street. It was none of that. But I mean, I imagine, you know, you're sort of describing the sauces as like this really special proprietary thing. But like, I imagine you had buffalo sauce, you had ranch dressing, you had maybe a barbecue sauce. Like what was so special about the sauces?

40:19We did have buffalo sauce, which is standard. And we had hot sauce and butter. It's cayenne pepper and vinegar based sauce. And we had a mild version of that, which was essentially half that and half butter. Yeah. This butter called whorl. It's not real butter, but it's the base. It's a butter base. So we had that for sure. So we had that covered. But then we used, we had a Hawaiian chicken, which was essentially a recipe that Rex brought over from his days in the cafeteria. Like a teriyaki pineapple. Yeah, exactly. And then I developed the compound seasoning sauce. The lemon pepper was one. And the garlic parmesan was another.

41:03Then we'd use the hot sauce as a base and mix Cajun seasoning with it. And then that was a Cajun. You'd sprinkle Cajun seasoning on top of the wings. And it just looked fantastic. You could just eat them with your eyes, you know. And then we developed, using fresh habanero peppers, the sauce that became known as Atomic. Oh, and the other thing about this concept that I think is interesting is it's almost like make your own meal, right? Because you get the wings. There's nothing on them except salt and pepper. But then you decide, like, how to dip them. And, like, right, you could order a bunch of different sauces.

41:40Is that right? And you dip them or were they, like, rolled in the sauce? No, they were rolled. They were sauced. And this is important. This is an important part of making wings. You have to sauce them as soon as they come up out of the fryer. because I don't have any scientific evidence of this, but it seems like if you sauce the wings when they're at their hottest, the sauce is kind of drawn into the meat a little more and the entire wing is more flavorful that way. And that was part of our program. We would sauce them to order. Then we had a couple of side items. We had this pearl potato salad and bourbon baked beans and fries.

42:21and that was it. And in the early stores too, I sold beer, but it was like 3 % of the sales, but I put beer in the store to position the concept as an adult concept and not fast food. Because I wanted people to think of it as a place where it's okay to spend more money than you would spend in a typical fast food restaurant. We had music, I had the lights down low, But the majority of the sales were to go sales. Okay. You opened the store in 1994 and it's a slow burn, but it's going to grow. Meantime, you have four pizza restaurants. So tell me how you were – because it seems like your attention all of a sudden is really shifting to Wingstop because you see this as also a great franchise opportunity.

43:10So how are you dividing your attention between Pizza Patron and this wings concept? Anybody that achieves anything doesn't do it alone. And I certainly didn't do this alone. I had some key managers. They ran the stores. They ran the pizza stores. And I spent very little time in the pizza business. I was 100 % focused working at the wing stop, listening to customers. And so the pizza business was kind of on, I don't want to say autopilot, but it was for me because I had these key people that knew the business. They both were bilingual. And it was only four stores, you know. So we had a pretty tight little operation.

43:57And it kind of took care of itself during the early years of Wingstop. So did you, in your mind, you knew that you'd been exploring this idea of franchising. And franchising can be a good way to expand a business because it doesn't require a whole lot of capital on the owner's part, right? The money is put up by the franchisee. There are other challenges with it, which we'll get to. But it could just be replicated, turnkey, everything. The logo, the menu, the sauces, all there. All you have to do is just fry the chicken. It was trainable, and I'm selling a widely consumed protein with proprietary sauces that you could only get if you walked through the door of a wing stop.

44:42And I imagine if it works, the margins are pretty great. The margins were good. Now, chicken wings didn't remain at 55 cents a pound as the popularity grew. So, you know, in a lot of ways, as Wingstop grew, you know, we contributed greatly into the popularity of wings. I got a lot of competitors, a lot of people opened wing concepts of their own. And then eventually the price of wings, you know, certainly went up a lot. But when we opened the store, 10-piece wings were$2.99. Wow. Okay. So I believe after three years of proving this concept out, you decide that it's time to franchise this thing.

45:29Yes. And how much was it to buy in? What was the cost? Do you remember? $20 ,000 at first. It was$20 ,000 and it was divided into two fees. $7 ,500 was called a development fee and you paid that up front. Then you started to look for a location. And then after you found a location, you paid the balance of$12 ,500. And$20 ,000 would get you, that's a franchise fee. Yeah. But you would be responsible for finding the real estate or would you guys help them? Well, they would be responsible for finding it. And this is a very important point. If you find the real estate for them, you pick up some contingent liability, almost assuring their success.

46:14And this is something I learned early on. Almost assuring their success? By saying, this is a good spot. You'll do great here. You never said that. You never want to say that in franchising because there's so many moving parts. And at the end of the day, it comes down to human behavior and human performance. Yeah. So they would say, I want to open a store. And they'd pick an area. And then you would define a development area and say, okay, you can look between here and here and here and here. and once you found the location, it was up to us to approve it or not approve it. But that's different than picking it out for you.

46:52And just to dig into this for a moment, I mean, it was$20 ,000 to open up a franchise location. In today's just back of the envelope map, that's like a little over$40 ,000. And I checked this out to open a Wingstop today. It's at least 300 ,000. Some of them are up to a million. So that's low. I mean, presumably you're getting 15 % or maybe of sales and maybe like a percentage of profit. But I mean that even in 1997, that was like pretty cheap to go to buy in. A couple things here. That$20 ,000 was just for the fee. It was the franchise fee that included the development fee and the franchise fee together was$20 ,000.

47:39you still had to fund the construction of the store and furniture fixtures and equipment. Right. But even saying all that, all in, you could open a store at that time for about$125 ,000. All right. So you've got this first franchise. And where was that location? Louisville, Texas. Just north. Now that is a suburb. And that is north of Dallas, maybe 20 minutes. And it was owned by two women. And one woman, it was a school teacher, phys ed teacher. She cashed in her retirement as her down payment. That along with an SBA loan, she was able to fund the store. And like many of the original franchisees, they went on to become own multiple stores and become multimillionaires in many cases.

48:31Well, you have to. I mean, if you own one Wingstop or one Taco Bell or one McDonald's, you can do pretty well. But you really, to see serious money, you got to own 10 to start seeing like significant dollars. Absolutely. That's right. That's what I've – from the time I've spent around these places. So, okay. So, this door opens and you are – again, like I think people think of, wow, franchise businesses like they basically can generate a ton of money for the owner or the mothership. And that is true in many cases. But I wonder, I mean, were you all of a sudden like seeing significant money come into your business and your life?

49:14The store that I owned, it quickly continued to grow, eclipsed a million dollars in sales. By the time the franchising program was in full swing, the store was doing well over a million dollars a year. And eventually the store did over two million dollars a year. It's crazy. It's kind of hard to believe because it's just wings. And but, yeah, I mean, I mean, I, you know, you look at like the average Chick-fil-A, I think they do like seven million a store, eight million, maybe more. But to do a million dollars for just chicken wings is kind of amazing. Yeah. And the money that I was seeing, most of the money was the profit from the stores, the company owned stores that I owned.

50:02but then started to see some royalty revenue and royalty was 5 % of sales, 5%. I'm sure it's much higher than that. Yes. Fair. It was fair. And the higher their sales, the higher the royalty that they paid. So, you know, I had a vested interest in having every one of the stores do well, do extremely well. And nothing sells franchises better than successful franchisees. And eventually it got to that point where the number of franchise leads that we got was just was darn near overwhelming because the stores did well. OK, let's let's get into this because there is a story you've told. And I really want to dig into this because I'm I'm skeptical of it and not because I don't think you're telling the truth.

50:52I really do. I'm just I want to interrogate it a little bit because it doesn't entirely make sense to me. OK. But five years in. Wingstop has grown to 150 locations. I mean, clearly, it's going up and up and up. And you decide that year that you want to get out. And I'm just trying to figure out why. I mean, you finally have this concept that is really working and you want to sell. And I mean, okay, money is one thing, sure, and security, financial security, but it's going up and up. So help me understand what was going through your head at that time. Well, give me a moment to tell you the story, and I'll tell you the defining moment.

51:43And it was never about the money, which is funny. Usually when people say it's never about the money, it's usually always about the money. But in this case, it wasn't. I had a defining moment, a vision, if you will, at a football game, Dallas Cowboy football game. Bernadette and I went. And usually at the end of the third quarter, they came on the loudspeaker and they announced the attendance of the game. And this stadium held about 65 ,000 people. And so I'm sitting there and I started to imagine that in 65 ,000 people and I'm looking around and, you know, it's a sellout. that there was a chicken on every seat instead of a person.

52:27I'm just trying to wrap my head around 65 ,000 chickens. And I started doing the mental math. And keep in mind at this time, you know, I was feeling more and more like a hypocrite growing this company that sold nothing but chicken, not eating chicken myself, and knowing what the industry was like. You know, it was football Sunday. It was the busiest day. And that thought of killing all those chickens, if we killed every chicken in the place, it wouldn't be enough to supply even half of the use of the time it took to watch the game. If you killed 65 ,000 chickens, like there were 65 ,000 fans, that would still not be enough to feed all those people who wanted chicken wings because each person's eating like 10, 15 chicken wings.

53:20Yeah, it would only give you 520 cases of wings. And that's not very many. And the vision to me was kind of horrifying and haunting. And I kind of held it to myself because it was ridiculous. You know, it's ridiculous. And I had arguably one of the best restaurant concepts going with phenomenal growth. Tons of development agreements signed, lots of stores under construction. But I was kind of haunted by that vision. And I felt like a huge hypocrite as someone that didn't eat chicken. I just want to reflect on this moment. I think like if the movie of your life, you're there in the stadium, then every person turns into a chicken.

54:06Yes. Right? Like every – okay. So I can see that. And I know that you had become a vegetarian earlier years before. very much impacted by how animals were treated. Cruelty, yes. And I would not ever want to debate that because I think there's such great arguments for not eating meat, even though I do. But I would think that some other people might say, especially in the business, say, listen, hang on. It's a business. And you're also providing, you know, livelihoods for people. And you are, you know, this business is employing thousands of people and has created, you know, wealth for people who didn't and access for people who could not normally buy into a franchise.

54:49So, you know, there are other things to think about here. That's what I'm trying to figure out. Like, it doesn't make sense to me that it was just your conscience. Well, when I gave you the rest of the story, I think it'll come into focus for you a little bit more. at that moment, I didn't decide, oh man, I got to sell this company. I got to get out. I mean, I wasn't necessarily thinking that. And I was loving the growth. And I realized that I really had, finally had a concept that had legs and I was fulfilling my dream of. And by the way, dude, you come from a working class background, truck driver, dad, waitress, mom, barely finished high school.

55:28Like now you've built something really big. Like there's a lot to be proud of? A ton. One of those only in America stories for sure. So about two weeks later from that football game, I remember where I was, defining moment. I was on a ladder doing the interior decor at the Marsh Lane Wingstop. And my phone rang. And I looked at who it was. It was the loan packager guy. Okay. He was a loan packager for SBA loans. So I broke for lunch and I called him back and I said, hey, yeah, what's up? And he said, hey, I just want to ask you, and this is kind of out of left field, but I want to ask you, would you ever consider selling the company?

56:23And it's first time this ever came up. I said, man, I don't know. You know, it seems like we're rolling pretty good. But inside of me, I had this little tick, you know, this thing bothering me. He said, well, listen, I got a guy, a friend of mine that's coming into town in a couple of days. And he's got a lot of experience. He's bought and sold a lot of businesses. And I remember the one thing he said about it is that he's the guy that took Burger King to Saudi Arabia. He's an American guy, lives in Tennessee. and that gave him credibility, I guess, in my mind. He said, would you sit down and at least have a conversation with him?

57:01I said, I guess so, yeah, sure. I'll have a conversation with him. Sure enough, a couple days later, this guy comes into town and we sit down and he said, hey, listen, I think I could sell your business. And I said, oh, really, you think so? And then he said, I think I could get you$20 million. dollars. I'm like,$20 million? You think it's worth$20 million? He said, I think it is. I just couldn't imagine numbers like that. Yeah. And you had no investors, right? 100 % owned it, 100%. Yeah. But I said,$20 million? He said, yeah. I said, well, I don't know. Let me think about it. So I I eventually said, okay, if you could bring me that, you know, I would certainly look at that.

57:55And he brings a guy to meet me, and I liked the guy right away. Experienced restaurant guy, and he turns out he had been watching Wingstop for a number of months, and I was shocked at how much he knew about my company. You know, he drove an old Lexus, and he walked me around to the trunk of his Lexus, and he popped the trunk open, and he had files. He had a file on every store that I had opened. He had built this file, and he was really, really into it. So this guy, his name is George. He said, I'm going to line up the funding. I'm going to be able to raise the money for this. We're going to do this.

58:36I said, all right, George, if you can do it, if you could raise the money, he did. But he brought in some guys from, I believe they were out of Boston, and they were at SBIC, Small Business Investment Corporation, a division funded by the SBA. And I had had great success building this company with SBA money. Yeah. And I sat there and watched them, and George sat there and watched them. And he's just hoping that they're going to say yes and fund the deal for him to buy the company. so the the deal that we ended up with was this 20 million turned into 22 million it's got the deal got sweeter yep but it would only give me 10 million at closing and that's that was part of the reason that we bumped the price up by 10 percent um then i would carry the note for 10 years on the$12 million for 10 years.

59:42I never had that much money in one pile together in my life. So you get$10 million up front and then$12 million basically over a 10-year period or after. Mm-hmm. Okay. That's a pretty fat payment. When you finance$12 million over 120 months, I mean, it's still a nice check. And I thought, man, you talk about mailbox money. This is going to be great. And I was kind of a, I was a babe in the woods. You know, I didn't know about M &A attorneys and people that, you know, specialize on transactions like that. And there's a lot of money at stake here. The lawyer that I used was back to my franchise guy.

1:00:25Okay. The guy that did the franchise documents. It's the only lawyer I knew at the time. And boy, you talk about, you know, what is that expression, taking a knife to a gunfight? I mean, what I had was like my Boy Scout pocket knife. And these guys, they rolled in with big law firm out of Houston and all this stuff. And I didn't realize it at the time, but my lawyer was pretty overwhelmed. well wait there's this i learned this technique where the closer they get you to closing on a transaction like this at this point you're emotionally kind of already there you're yeah you might even be spending the money you know in your mind oh when i get that check here's what i'm going to do first and all that and pretty soon at the end the deal is not exactly the same deal that you lived in, but by this time you're kind of emotionally bought into it.

1:01:22You might've even mentally moved on. You're no longer owning the company. What are you going to do next kind of thing? And I knew what I wanted to do next. I wanted to, now I'm armed with some money and franchising knowledge. And I was going to go back and get my pizza concept turned up, get it ready for prime time. Got it. Okay. So this was your plan. That was my plan. All right. And so what happens when you get close to the closing? So the deal closes. Shortly after the deal close, they fire George, the guy I sold the company to. They had in the documents that they had the ability to get rid of him.

1:02:04He wasn't in the seat two weeks. They unload him and they bring in their own guys. They bring in some of these Boston guys. And the way I set them up, when they took control of the company with the amount of revenue the company was doing based on only royalty revenue, if they didn't sell another franchise, they would have enough money to make my payment. So first payment comes due, nothing go to the mailbox mailbox is empty so the second month comes nothing and and in this in this interim i'm getting pizza patron ready for the big stage reworking the logo reworking all this stuff i mean i know what to do now i'm a dangerous man i got a little bit of money and a lot of knowledge and i love the pizza business i love the concept i'm seeing the explosive growth of the Hispanic community.

1:03:01So my focus is over there. Third month comes, no money. So I get another, I'm introduced to another lawyer who ended up becoming one of my dearest friends. He's a litigator. He's not a franchise specialist or anything like that, but he's just a general litigation lawyer. And we started to dig into the documents. And you have to understand the documents were so voluminous. So buried in the documents was this little provision. And this is a great lesson for people, the use of how a word is used. It came down to, it said the payment would be made based on available cash flow. Available cash flow.

1:03:48So when we got into the documents, basically, well, it's based on available cash flow, and there's no cash flow available. There's not available. But you're still guaranteed to get the rest of the payment before the end of the 120 months. Well, at this point, I was still a little optimistic, but it became clear as the months rolled on that they had no intention of paying me. They had no intention. Instead of using the money to make the payment to me for the company that I built, they took the money and they built corporate stores with it, which was adding to the intrinsic value of the company.

1:04:29They were bonusing themselves. If it ever looked like at the end of the month there was money left over, they made sure there was never any money left over. And they were able to do this because of the way the contract was written. The way it was written. Okay, so I mean, I'm on the edge of my seat here. Did you get the rest of your money?

1:04:54Well, me and that one lawyer, we sued him. Yeah. And keep in mind, they owed me$12 million. Yeah. Okay, that's a lot of money to a young man from Ohio who started off at the dish machine. Yeah.

1:05:14So I sued him. I sued him for my money. When we come back in just a moment, how that lawsuit landed and how a jalapeno infused pizza got a ton of attention when people refused to call it by its name. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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1:07:52Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2003, and Antonio decides it's time to do something that he's wanted to do for a while, franchise pizza patron. But meanwhile, he's got some unfinished business with Wingstop. He's suing the investors that bought it from him. The principal of this group contacts me and he said, hey, I'd like to have a meeting with you because, I said, what's it about? He said, well, it's about paying you your money. I said, well, I've always got ears for that. So by this time, I had bought a building and had a corporate headquarter building for Pizza Patron.

1:08:32And I'm getting ready to roll this amazing franchising program. Yep. And he comes in with his lawyers and all his minions. It's like an entourage of people. And we go upstairs at the Pizza Patron office building. We sit at the conference room. And I said, okay, you said you were here to talk to me about paying me my money. He said, I think I'd be able to buy your note from you. My note's for$12 million. They've paid nothing on it. He said, I think we can give you$2 million for it. Wow. And it took me a moment to comprehend what the guy's trying to do. I said, wait a minute. you want to give me$2 million, but you owe me$12 million.

1:09:23Is that right? He said, you know, one of these faces like, yeah, you could look at it like that. He said, but I want to buy your note. And I'll tell you what, I said this, and I don't think I've ever had, I've never said this before, and I don't think I've ever said this after. And I looked at him. And I said, let me tell you something. I said, I'll spend every dollar I have collecting every dollar I'm owed. And with that, the meeting adjourned. And they got up, all these guys got up, they went downstairs, got in their car and drove off. My next call was to Marty, my lawyer. I said, listen, I just had this meeting.

1:10:05These guys have no intention of ever honoring the agreement in any form or fashion. And you have to understand, the idea with this SBIC money is they buy a company, they grow a company, and then they flip it. And the whole plan is to sell the company in four or five years, make an ungodly amount of profit, and move on to the next deal. We were able to keep the litigation wheel turning with me and one lawyer, one guy, that it was, they were starting to think, I think, that this is going to be hard for us to work our plan and flip this company if it has all this litigation attached to it. Did they, did you eventually get the money you were promised?

1:10:53Or most of it, or some of it? We ended up settling. We never went to court. I eventually got every penny. Oh, wow. And how long did it take before you got that? I mean, did you get it within a few years? Seven years. Okay. So actually, in the end, it worked out that you got it faster than what it would have originally been. I did because it was the only way for them to sell the company. Right. Because there was litigation and this group of investors would turn around and sell Wingstop to another group of investors. So they made some money off of it. But that was it. You You had to fight to get your money, which is, you're right, an important lesson, which is in something like this, you can't mess around.

1:11:42You've got to get very experienced lawyers who are going to look at every single word and line in a document because that's where the conflict begins, when you don't agree on the language. Absolutely. And just the meaning of one word in the document could change the entire spirit and intent of the document. And man, I learned the lesson the hard way. Okay. So now finally, I mean, you're dealing with this litigation, but you finally get paid. And in the meantime, you're trying to turn Pizza Patron into a franchise because that was sort of on hold for several years while you were focusing on Wingstop.

1:12:21But Pizza Patron, if I remember now from our earlier part of the conversation, it was inexpensive and it catered to people in Latino neighborhoods. But how are you going to turn that into a franchise concept that was unique or different? Well, it was unique or different because we focused on that customer, that Hispanic customer, majority of them foreign born and first generation. many of the things we did how we generated business were things that resonated with this particular customer base I don't know if you can remember we had three very successful promotions that made national news the first one was the Pizza for Pesos program you accepted Mexican pesos yeah that which got you a lot of blowback too a lot of people were not happy about that.

1:13:20Yeah. But you got a lot of attention for it. Got a lot of attention, global attention, and it catapulted the brand and the franchising program into a light. I couldn't have bought that much publicity at any price. And that's when we really started to go. But it galvanized that customer base to this brand better and faster than anything else we could have done. It basically said, we stand with you. We know that you travel back and forth. And just like a lot of us that come back from foreign travel, you always come back with a little bit of the currency left over. And what do you want to do with it?

1:13:59Well, you can turn that into a nice pizza. And were you, when you were thinking about, like when you were looking for new locations to open this up, were you specifically looking, again, at predominantly Latino neighborhoods? 100%. Got it. And by this time, you know, things have advanced with this demography has got to the point where you could just put in a, you could put in your parameters in any city in America and they would, would show you the best locations to achieve that density of population that is foreign born, predominantly Hispanic. Here's the income I'm looking for. So you develop a formula.

1:14:42Right. And the stores generated significant volume relative to their investment. And that's one of the – in any successful franchise program, I mean, there's a relationship there. There's a relationship between sales and investment. And both of these concepts were very favorable. And part of – like you mentioned briefly that there were promotions you guys did that got a lot of attention. One of them was you accepted pesos, Mexican pesos. Another one was, I guess you would get a discount if you ordered in Spanish at one point. And then the one that really got a lot of attention was you introduced a pizza.

1:15:21I'm going to say it because, you know, we don't bleep things out. La Chingona, I think. Chingona was the name of the pizza, which you guys translated as badass. But some stations, like Spanish language TV stations, radio stations, would not mention it on air because it was considered to be quite offensive. Yeah. What's interesting is that that became the story. The story was no longer the pizza. The story was, why won't you let us say the name of this pizza? And we were able to convert that to mentions, you know, to build the brand. And again, it was the kind of thing that the customer resonated with.

1:16:04They say it commonly. It's a common thing. And it's not a derogatory thing. It's actually, when you use that expression, something's chingon, you know, chingona, she's a fine lady, you know. It's a term of endearment, to be honest with you. And it was the perfect fit for this particular pizza that we had developed. So it was these kind of things. In the pizza business, I was basically at war with some of the largest companies, the Domino's, the Papa John's. We didn't have the funding to do that. We had to be inventive. We had to come up with things that didn't cost a lot of money but got thousands and millions of brand impressions.

1:16:46And we were successful with that. And I attribute it all to the team that I had working with me. Okay. So you are expanding Pizza Patron and you have the finances to do it because you've got the, you know, you've got the capital and it's growing mainly, I think, in Texas and a couple of other states. And you get, and again, like you get it to a point, I think what by 2015, how many, do you know how many restaurants you had? Like more than 20? Oh, yeah. 2015? Yeah, I think so. Yeah. When I sold the company, it was right at 100. 100. 100 restaurants. Yeah. Yeah. So let's get to this because you grow it again.

1:17:33And 2016, you sell it, presumably again, because it was an interesting offer or you were just tired. You want to just like move on. You were done. Well, let me point out one difference is with Wingstop, I had two company-owned stores, one of each model, the dining model. With the pizza business, I continued to open up my own stores. And at the time, I personally owned 11 stores. And I had another franchisee in the system that also owned 11 stores. He owned the stores in Phoenix. He owned the stores in San Antonio. So he came to me and said, listen. This is Charles Laughlin? Charles, yeah. And I thought that, again, I'd been in the pizza business for 32 years.

1:18:21This goes, the pizza business, I was always in the pizza business. Right, back to 1986. Yes, yes. And at some point in your life, you get to the point and say, man, I love the pizza business, but man, 32 years is long enough. And I thought Charles would be a great fit. And we He came up with a number. He immediately had 22 company-owned stores, my 11 and his 11, and became the franchisor. And that's kind of where it stands today. And you sold your 11 stores as well? Yeah, I packaged it up with the licensing company. Got it. And did you, I mean, it's undisclosed. The deal is undisclosed, but it was, I have to assume it worked out well for you.

1:19:12worked out great. And Charles, unlike the first group, Charles was honorable and he paid me every penny. Every penny. All right. So you are, here you are, right? Almost 70. And I mean, amazing, right? You have built two, you built two franchises that both went in slightly different directions. Before I ask you about that, how do you feel about Pizza Patron today? Because I don't think it's got as many stores as it did when you sold it. It doesn't. And this is, it really comes down to franchising. You know, franchising isn't just about the food or the product in as much as it's about relationship management.

1:19:56You're managing the relationship with the franchisee and the franchisor. And the franchisee believes that they've invested all this money and you get your money first, whether they're profitable or not. So inherently, the relationship kind of has a little bit of a feeling like you're getting over on me. And obviously, that's the result of a lot of litigation and franchising. I sold a very healthy company to a guy that really, it's a great guy, but franchising isn't for him. Developing these relationships and actively selling franchises. It's not for everybody. I think he's more suited to own company-owned stores.

1:20:39But you have to want to develop these relationships with people you haven't met before. You have to believe that you can trust them with your baby, which is your brand. And it's not for everybody, quite honestly. Yeah. And Pizza Patron has a pretty small footprint today. I think about like 70 or 80 stores, mostly in Texas and Arizona. But Wingstop, on the other hand, is a different story, right? I mean, we didn't get into this, but it went public in 2015. And it is a massive multi-billion dollar business. I think there are about 3 ,000 locations around the world, just a massive business, right?

1:21:20And I wonder what you think of that, like what you make of it. I mean, it's kind of mind-blowing to just see how it grew. I know. I've been sitting on my couch watching an NFL game, and now they're buying national ads on Sunday football. I mean, it's amazing, and I'm happy for them. And people ask me all the time, aren't you sorry you sold that company? Not completely, because I tell you, these guys, some very smart people were involved. They were able to grow it. They continue to grow it. And I'm happy for them. I'm not filled with regret in any way. I really don't think of it that way. I'm more living in the moment.

1:22:03And, you know, I'm not – when you live in the moment, you kind of take responsibility for what are you doing today, not what I did years ago. Yeah. Yeah, I wonder – I mean, you think about – we touched on this a little bit, but where you grew up, how you grew up. And I know there have been ups and downs in your life. You've had a lot of ups. How many kids do you have? Two. And you were married and those ended and you remarried. I think you still have a decent relationship with at least one of your former wives, maybe both. Yeah. But life is complicated, right? I mean, that's not – we all have complicated lives.

1:22:50And so you've been through a lot and you have seen a lot and you came from a background that, you know, didn't set you up or tee you up for financial success, right? Because you didn't know anybody. You didn't have a network of people. Like you grew up in Columbus, not a rich kid. And yet you built two really successful franchises. How much of that do you attribute to the work you put in the grind and how much do you think had to do with being lucky? I attribute it to the ability to attract and maintain real excellent people. I read a book years ago by Victor Kayyem, the guy that bought the Remington Shaver Company.

1:23:36Oh, yeah. I remember him. Prior to that, he was the sales manager for Playtex Bras and Girdles. This was years ago. And in his book, he said he had the best sales team because he would sit him down in a chair and he was able to paint the Vista. He'd make him look out a window and he'd call it painting the Vista. He could get people to believe in what he wanted him to believe in and then work towards it. And in my life, I look at, I've built two amazing teams and I was able to convince them to look out the window, look at the Vista and help me row towards it. And when people can see it, and they believe that you see it, and I do see it, they're willing to play above the rim and pull out of themselves abilities and things that they didn't even think that they had inside of them.

1:24:29And nobody achieves anything great alone, and I certainly didn't. I've had many, many great people in my life, and I'm grateful for all of them. That's Antonio Swad, founder of Wingstop and Pizza Patron. By the way, and this isn't exactly a side hustle, but Antonio has also dabbled in national politics. In 2022, he actually ran for Congress as a Republican in Texas's 32nd district. He didn't win, and he says the experience was so unpleasant, he's not interested in ever trying again. 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.

1:25:13And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at GuyRoz.com or on Substack. This episode was produced by Sam Paulson with music composed by Ramtin Arablui. It was edited by Neva Grant with research help from Olivia Rockman. Our engineers are Patrick Murray and Jimmy Keeley. Our production staff also includes Catherine Seifer, Chris Messini, John Isabella, Alex Chung, Carrie Thompson, Casey Herman, Ramel Wood, Norgil, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.