Episode Transcript
[00:00:00] Speaker A: Hey there, Chip Close here, host of the Restaurant Strategy podcast. As many of you know, I travel the world giving talks at conventions, trade shows, conferences. I've traveled as far as Auckland, New Zealand, to give a keynote at the Restaurant association of New Zealand at their annual Hospital Hui event.
I loved New Zealand. I love going to do that.
[00:00:22] Speaker B: I gave the talk I gave there.
[00:00:25] Speaker A: Was about adopting the luxury mindset and I was invited to give that talk just two weeks ago at Bar and Restaurant Expo. So Bar and Restaurant Expo is one of the shows I do every single year. It happens in Las Vegas.
[00:00:38] Speaker B: It is huge.
[00:00:40] Speaker A: It's like 14, 15,000 attendees and they put education front and center. I was invited to give this talk the same talk I gave in New Zealand, all about adopting the luxury mindset. And that is what I want to share with you on today's episode. I'm going to share with you in its entirety. I want to share with you this talk. Now. Really important. If you want the deck that goes along with that, I just need you to email me chipclose.com C-H-I P K-L-O-S-E.com if you want the deck that goes along with this, I think you can follow it pretty well. But if you do want the deck, the slides that go along with it.
[00:01:15] Speaker B: Absolutely free, I'll give it to you.
[00:01:17] Speaker A: But you got to email me and I will send you a PDF version of that. That's what we're going to talk about on today's episode. You're going to listen to my talk, the talk I gave at Bar and Restaurant Expo on today's episode of Restaurant Strategy.
[00:01:29] Speaker B: There's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking.
Hey everyone, thanks for tuning in. My name is Chip Close and this is Restaurant Strategy, a podcast dedicated to.
[00:02:05] Speaker A: Helping you build a more profitable restaurant. Great food is nice. Great service is nice. Cool decor is nice. But you know what's even nicer? Making money with all of those things. Good food, good service, cool decor is in service of the bottom line. The whole point, the whole point is to make money from your business. Said this before, I'll say this again. I say this in the talk that you're going to hear today. What you do is way too difficult and way too important. Not make money doing it. If you are not making what you deserve to be making out of your business. Then I want you to set up a call with me or someone from my team absolutely free. 30 minutes where we get to ask each other a bunch of questions. You can learn more about the the Mastermind program I run and we'll find more about your restaurant. You do that by visiting restaurantstrategypodcast.com schedule grab some time on the calendar and and we will see if you're a good fit for the program and if not, so be it. Send you on your way hopefully with some ideas for how to improve your business. And if you are a good fit, we'll talk about what next steps would look like. Again. RestaurantStrategyPodcast.com Schedule as always, that link is in the show Notes now. Sterling Douglas is the co founder and CEO of a company called Chowley. Chowley does so much for this industry and I want you to hear a.
[00:03:19] Speaker B: Little bit from Sterling.
[00:03:20] Speaker C: In the last few years, restaurants have faced massive changes. Labor costs, food costs, rent, even payment processing costs are up so much that price increases alone can't cover it. And at the same time, their customers are demanding a whole new way to interact digitally. And that's now a requirement to survive, let alone thrive. To their credit, restaurant operators have been resilient. They've survived pandemics, inflation, regulatory environments and more. They've added the tablets, put out the QR codes, took reviews seriously, and their reward? A disjointed collection of tech that doesn't talk to each other and is impossible to manage. I've listened to hundreds of operators tell me the same story with the same problems. And that's why we came out with the Chali platform. One place to manage everything outside of your four walls. Just like everything built at Chale for our 17,000 restaurants. Integrations and connections are at the heart of everything we do. It starts with your digital storefront. Your website has two jobs. More traffic, more orders by connecting to Google Business Profile and your point of sale. We get that done for you. Digital Marketing we'll manage your paid ads, emails and social posts. We'll help you win the hyperlocal knife fight to to maximize your sales. We measure everything so you know exactly where your orders are coming from. Marketplace, email, website, ads, app. All in one place CH gives you more orders by ensuring your entire digital storefront is optimized with the data you already have more time by using our knowledge and a done for you experience and more control by managing it all in one place. The Chowley platform isn't just a Tool. It's a partner in running a more successful and profitable restaurant.
[00:05:14] Speaker B: If you want to learn more about.
[00:05:15] Speaker A: Chowli, go find the link in the show notes.
[00:05:19] Speaker B: Thanks, buddy.
All right, so day one of Bar and Restaurant Expo. This is my favorite show that I do the entire year. I consistently come back to this show because they put education front and center. I love that on the first day, there is no trade show floor. It's just all based on education. So kudos to you guys for showing up a day early and, like, going from all these sessions one after the other after the other. I know many of you have been here all day and you are exhausted because of that. I know that your brains are full with all kinds of ideas, good ideas, things you want to already bring back home. I get it. I also know I'm coming at the very end of the day. Everybody's tired, and I am the only thing standing between you and the welcome kickoff party. I get that. I promise not to waste your time. I appreciate you choosing this session as opposed to any of the other great sessions you could have gone to. I'm going to take really good care of your attention over the course of this 45 minutes, and then I promise you, we will head out to the party. Okay, so 45 minutes. We're going to talk about the luxury mindset. Okay. Understanding how iconic brands drive max profits. Okay. We're talking about the luxury mindset. It's shifting the way you think about your product, your audience, your market. It's shifting the way you think about our industry. Note, I am not going to try and talk you guys into opening a fine dining restaurant in the year 2025. I think that's a horrible idea. It's not about luxury products. It's about learning from some of the biggest luxury brands in the world. Just applying what they have already figured out, looking at how they treat their product, their markets, their customers, and applying those ideas to the things that you guys already do so well. Does that make sense? Great.
Adopting a luxury mindset. Did you know? I know you guys know this. You don't have to be reminded. We're five years removed from the beginning of the pandemic, right? If we think back to March 2020, right now, we're five. Five years removed from that. Those, let's call it two years, right, were about as hard as we could have imagined. And I went on my podcast. I'll talk more about my podcast in a second. But I went on the podcast and said, I think the next two years are going to Be even harder than the ones we just went through. I think the last two years we've gone through have been every bit as hard as those two years of the pandemic because it's like business as usual. We're back to normal and we have a whole new reality, Right? And people are less forgiving, less compassionate, less generous than they were, I think, in, let's say, June 2020. I don't know if you guys feel that way, but I feel it. It's hard. It has never been harder than it is today, right now, to make money in this industry. I was asking who went to Mike's talk earlier, right? Talking all about how to build a more profitable restaurant. Ultimately, that is what I care about. I care about that more than anything else.
We'll get you why I care about that, and we'll tie all the ends together. But this conversation is about helping you be more profitable and therefore building more sustainable business. Does that sound like a good idea? Great. I don't think there's anybody in this room that's like, nope, nope. I'd rather less money. I'm going to get up and go check out one of the other things. All of you guys here are. All of you guys are here to level up, run a more efficient, more effective, more profitable, therefore more sustainable business. That is what this conversation is about. Over the next 45 minutes, we're going to go really far out of the way to come back to something very usable. So trust me on this journey. It's the last session of the day. I promise we're going to have a lot of really good stories and ultimately things you can apply directly to your business. Cool. This is why this industry is so hard right now. I'm not going to ask for a show of hands, because I know the answer. Every single person in this room has been affected by the cost of eggs and. And all the other food increases. Right. Cogs are through the roof. Over the last several years, I know you guys have been affected by wage increases. Yes. Minimum wage is going up. Yes. Our workers are demanding more. And God love you if you're in a state that doesn't have a tip credit anymore. It's California, Oregon, Washington, Minnesota, Michigan. I get it. To anyone else who's from another state, all you have to do is look at what's going on in those states. I promise you, the appetite for the tip credit is not long for this world. We have to look and see what's happening in those states. It's very much going to happen. Here, my Canadian friends know it's up, right? Wage increases, We've all been affected by inflation, right? Here's the beauty part. You guys are not only merchants, right? You have businesses, you sell things to people, but you're also consumers, right? So you run restaurants, but from time to time, you also go out to restaurants. So you feel it on the merchant side, and I know you feel it on the consumer side when you go grocery shopping, when you go to the restaurants, stuff's more expensive, right?
Cogs, labor, and just natural or unnatural inflation, which we've seen over the last couple of years, right? All of that is making our industry harder and harder and harder than ever. That's why we're having this conversation.
We love to talk about this, right? How many times have you heard this? Today alone, there are razor thin profit margins, right? Here's how I feel about this. I hate that phrase.
If it's so hard to make money here, just go do something else.
I know the reason why we do this is because we're very passionate about it. I've made my entire career in this industry, but if we're going to choose to be here and do this, then we might as well make money doing it. And pennies on the dollar is.
Are we all in agreement on that? Okay, great. We're going to get to why I feel that way. You deserve more. So I have a podcast again, which I'll talk about in a second. I say this pretty much every week or every other week. I've got a mastermind program, so I work with independent restaurant owners all over the world, and I say this to them pretty much every week. What you do is too difficult and too important to not make money doing it. Okay? This is me pumping you up, being a little bit of a cheerleader. What you do is too difficult. Let me be absolutely crystal clear. Not everyone could do what you do, okay? It's hard. It's hard to serve people. The compassion that's required, the empathy that's required, the complaints, the stress, the anxiety. It is difficult. And most people don't have the appetite for that. No pun intended. It's also too important, right? Every day, you feed people, you employ people, you collect sales tax revenue for your great state, you support your landlord, all your vendors, your distributors, software companies, all of this. You have an entire economy around your business.
Everybody around you is benefiting from your business existing. So remember what I said. What you do is too difficult and too important to not make money doing it. You have an entire ecosystem around you that Relies on you. I know any of you guys are employing dozens or hundreds of people. There are people who rely on the paycheck you provide. That's a very cool thing. Again, let me pump you up. Let me be your cheerleader. That's a good thing. What you guys do is too difficult and too important to not make money doing it. That's why we're having this conversation. I want to see a show of hands. How many restaurant owners in the room?
Great. How many operators? So chefs, managers, marketers.
Great. Perfect. So almost the entire room is either an owner or an operator. Right. I want you to think back to 2024.
Talking about top line sales revenue. Were you up compared to 2023? So from 22, from 2023 to 2024, how many of you guys were up revenue wise? Yeah, that's what I thought. How many of you were flat? Show of hands? How many were down?
Yeah. Okay, let's wash that away. Talking about profitability. So actually, how much money you got to put into your pocket?
How many of you guys were single digit profits or break even or a loss? Let me see a show of hands.
10 to 15% profit.
15 of the above. 15, 20, 25. Great. So sort of a smattering all across. Right.
I want to be able to come back next year and ask you who is 20% above? And have everybody raise their hands. That's what we target, 20% profit. Right. There are other businesses out there that make 30, 40, 50, 60, 70. Talk to the software people downstairs.
You build something, you just sell it and sell it and sell it. And it's just on a recurring model. Right. How many pieces of software do you have you just pay for every single month? Right. It's great. It's a great business. And they help us. The good ones really help us. What you do is too difficult and too important to not make money doing it. What we're going to target is 20% or more. That's like a bare minimum. Cool.
How about some introductions? Some of you I know, some of you may know me. This is my fourth year, I think, speaking here at Bar and Restaurant Expo, but I'm guessing most of you don't. So, brief introduction. My name is Chip Close, so I am the host of the Restaurant Strategy Podcast. As of Today, there are 431 episodes of the show. If you've never found it, here is my invitation to come join the community. The Restaurant Strategy Podcast. I wrote a book. It's called the Restaurant Marketing Mindset.
Here it is. It came out Last year we just sold out the first printing. We got a whole bunch in the second printing. I'm going to show you at the end of this session how to get a copy of this. Absolutely for free.
You just pay a couple of bucks for shipping and I will send it to you. So everybody in this room, I will send you a copy of this book. It's mercifully short. It is the continuation of the conversation we're going to start today.
So I got a podcast, I wrote a book. I'm the founder of something called the P3 mastermind, which is a group coaching program. I've got four different groups, currently over 150 people in the program. I gather independent restaurant owners from all over the world. We're in six different countries. They get together for a two hour call every single week and we pound through profitability issues and we get laser focused on helping restaurant owners make more money. I've spent my entire adult life working in this industry. So 25 years, the majority of that was in New York City working in fine dining. I've got 13 Michelin stars on my resume. I've worked with three different James Beard award winners. I've done this at a very high level. I've been doing this for a very long time. Time. I care very deeply about this industry. I care very deeply about independent restaurant owners and their ability to make money. Cool. In addition to all of that, I also went back to school. At the age of 40 when the pandemic hit, I decided to get my MBA in food marketing. St. Joe's University in Philadelphia has a one of a kind program. I've never found anything like it. It's literally a MBA in food marketing. So I did that. I killed myself to get through that program. Graduated number one in my class from the Hobbs School of Business. So I've got all this operational experience. I've got the academic know how we sort of merge it together. This conversation we're going to have about the luxury mindset is a strategic 30,000 foot view that eventually is going to wiggle all the way down and we're going to get really granular and specific by the end. Cool. Great. That's me. In order to talk about the luxury mindset, we still have to talk. We first have to talk about the opposite, which is the commodity mindset. So we have luxury goods and we have commodity goods. So what is a commodity? A commodity is a base. Good. It says here, all things being equal, a consumer will make their decision based on one of three criteria. Familiarity, convenience, or price.
So again, a commodity, a base, good, right? Best example that I can use is a gas station.
So gas is. Gas is gas. Unless you have, like a Ferrari or something. God love you. There's a specific kind of thing you got to put in that guy. I'm guessing for everybody else, gas is gas is gas, right? So let me give you an example. So let's say we're going to take a trip upstate, right? I'm going to go up to the mountains. So I get the family in the car Saturday morning, turn on the car. I go to get out of the driveway, and I look at the dial and I'm like, oh, we don't have much gas. We should get gas before we head on the road.
In that instance, what I do is I go to the gas station. I usually go to the one I'm most familiar with, either because, you know, they got a cool convenience store. I can get my coffee, I can get a soda for the road, whatever. I go to the one I know.
Now, let's say in this instance, I get in the car, family piles in the car, turn it on, I get going. And I don't realize that I'm low on gas. And I'm an hour into my trip and I'm, you know, on the highway, and then all of a sudden, bing, the light turns on.
What do we do? Do we just say, well, we'll just keep riding it until we get to a place we know? No, you get off at the next exit, right? You get off at the next exit, and you go to the first gas station you see, and you go there. In that instance, you are making your decision based on convenience. All right? You're not waiting for the brand you love. You're just getting to the next one so you don't run out of gas. Or the third instance, you're on the highway, you realize you're about to run out of gas. You get off of the exit, you get to the first intersection, and this is not unusual, right? You've got two options.
In that instance, you do what any normal person does. You look up at the signs, and as long as it's not inconvenient, you go to the one that's cheaper.
When it comes to gas, most people make their decision based on one of those three criteria. Familiarity, convenience, or price.
When it comes to restaurants, if we play the commodity game, we lose. Okay, it's this. I've looked at this picture so many times, I can only find one fish. There's like 40 sharks. And this One poor fish right here, he's a goner.
Now we can look at this photo and say, well, the feeding frenzy's already done. All the sharks have already fed.
But this is that like the red waters or the blue ocean strategy, right? When we compete as a commodity, it is a race to the bottom, right? It's a feeding frenzy. Here I can show slide after slide after slide of commodity restaurants. Have you ever been to this restaurant?
Of course you have most sushi restaurants in any town. You can plop me in any town. And I do a lot of traveling and I get plopped into towns and I'm in the mood for sushi. I go to this place.
Whatever place I choose, I know has a rainbow roll, spicy tuna roll, California rolls, some salmon nigiri, whatever. And it's going to be okay, right? Sushi is sushi unless you tell me why it's different than sushi.
Taco is a taco is a taco unless you tell me, no, no, this isn't like those other tacos, okay? But you have to tell me that story as to why it's worth it. Pancakes.
Pancakes are Pancakes are pancakes. Think about how many pancakes you've had in your life.
Do any of them stand out?
Maybe you've got one that just popped into mind. But like Denny's, Perkins, ihop, all the diners you've been to at all the truck stops. A pancake is a pancake is a pancake until it's not. Does anybody know this place?
This place is sort of famous all of a sudden. This is the Phoenicia Diner up in the Catskills. If you watch Severance, this is Pip's.
They used this as Pips Restaurant.
This is just a diner on the side of Route 28.
They have the best pancakes in the world.
They tell everybody they're the best pancakes in the world. The guy who bought this diner a handful of years back decided to overhaul it. He closed it and renovated everything, returned it back to the way it must have looked in 1962. So it's new, but it feels really old. And what they did is they turned the menu into this elevated diner fare. It wasn't just like a cheesy Jersey diner on the side of, like, you know, the parkway.
Most other places within 15 minutes of this place, you can get pancakes for, like, seven bucks, eight bucks. Here, the pancakes are 15 bucks. They're the best pancakes in the world. That's what they tell everybody. So my wife's cousin, she works for Penguin Random House. She does a Ton of cookbooks. She did post production. She was an editor on their cookbook. And we were going up there because we ski not far from here. And she goes, oh, my God, you have to go to the Phoenicia Diner. I said, oh, yeah, okay, sure, sure. No, no, no, no. Your look, your look doesn't communicate that you know what the Phoenicia diner is. So I'm going to tell you. They have the best pancakes in the world.
She knows I'm a restaurant person. I was like, okay, so we go and I sit down, I said, I guess I got to get the best pancakes in the world, right? And the waitress looked at me, she was like, yeah, you do have to get them because they're the best pancakes in the world. I'm telling you, I ordered them, they serve them. They are the best pancakes I've ever eaten in my life. Now, that's an opinion. Who cares? But they tell that story, they sell that story. And they charge almost twice what every other place around charges. And everything I've had there is great. The omelets, the skillets, they have, like, Reubens, but they're all elevated. They're using quality products, local, all that garbage, right? They care.
It's different.
It says diner. It's not a diner. It's elevated diner. It's like, again, a diner's a diner. Unless you tell me why it's not a diner. And they charge 2x.
That's going to factor in really prominently. Now, we're going to keep going really far out of the way. I told you, in order to talk about the luxury mindset, we first have to talk about the commodity mindset. Commodity mindset says, remember, all things being equal, consumer will base their decision on those three criteria, right?
So you gotta make it so your product is totally not equal by the time you get to that. Otherwise, it's like when you need flour, like, oh, I'm making cookies with my son. Like, ah, shit, we're out of flour. Okay, well, let me go down to the supermarket. What do you do? You grab the one you know, or you get the one that's easiest, right? Because maybe some of the flour is like all the way down on the floor, right? So you go to buy flour, you get the one you know, right? Meaning the one you just had and you finished and you were just gonna replace it. Or if there's like flour on the bottom or flour like hand level, you're like, ah, forget that. I'm gonna get this one. Right. Convenient. Or you look at the Prices. And you're like, oh, yeah, look, there's a special on this one. Because, you know, flour's flour is flour. Who cares? All the pastry chefs in the room, please don't yell at me.
We gotta talk about the luxury mindset now, right? So now we know commodities. Now what's a luxury? Let's define luxury. The definition for luxury is literally this. A condition of abundance or great ease and comfort. The last part is what I want you to focus on and indulgence.
So when I say luxury, you think of Rolex, right?
You think, oh, look, Mercedes is the Maybach. That's the height of luxury.
That's like Mercedes squared. That's what Jay Z drives in.
Anybody know this?
What are these pictures of?
The Birkin bag. So to everybody who knows this is the Birkin bag, for everybody who doesn't know this is the Birkin bag. Hermes has the most sought after, most famous handbag in the world.
These puppies start at a cool $35,000.
Now, not the little ones. You can get the little ones for cheaper. Nobody wants the little ones. They want the real one. Here's the thing, you go onto the Hermes website, you cannot shop for them. You can't even look at them. You need an appointment. You can't make an appointment. You have to be invited by a sales associate to have an appointment. Do you know how you get an appointment?
Buying a lot of Hermes.
The number I've heard is quarter million dollars.
Has to be registered with a specific sales associate and then they'll give you the appointment. See, the sales associate gets a portion of the sales from the Birkin bag. Appointments that they set up, they're not going to give you the appointment if they think you're not going to buy.
Starts at $35,000.
You can't make an appointment. You're invited to an appointment. The one exception is at the flagship store in Paris, where every morning there's a line like people are lining up for front row Taylor Swift tickets. Okay? Millionaires and billionaires lining up at 4 in the morning for the right to buy a $35,000 handbag.
When I was in Paris back in 2019, I was like, I gotta see this. That's what we do. And at 9:40, sales associate comes out with like little business cards. Say you're 10 o'clock, you're 10:30, you're 11, you're 11:30. All the way down the line until she's out of cards and everybody at the end of the line, she says, so sorry. Better luck Tomorrow.
And here's the deal. You don't walk in, it doesn't look like Foot Locker where you're like, well, which one do I want? You sit at a table, they bring you sparkling water, champagne, and they say, what are you interested in?
Well, I wanted to see maybe like a red or a blue one. Okay, we'll see. They go back to the back. You have no idea how many inventories, how many were in inventory that day? Could be four, there could be 40.
They don't bring them all out and say, which one do you want? Pick one. They size you up and they bring you the one that they think you're going to buy.
Second ago, I said, it starts at $35,000. They go up to $350,000. They eyeball you. They've already googled the entire list.
They know how much you've spent on their mes, and they pretty much know what you do for a living. They have eyeballed your net worth.
If you get to the end of the day and everybody's taken all the bags and the last appointment comes in, they're like, oh, we got us this purple and white ostrich skin. Do you want it? You're like, no, but you've waited for the opportunity to buy a Birkin bag. Or let's say you were like, I can spend like 30, 40 thousand dollars for this bag. And they're like, all we got left is this diamond studded one. That's $350,000. Do you want it?
In that moment, you either have to decide whether you want to pony up or just like, come back tomorrow and see what's in inventory.
You want to know the kicker of the whole story?
These cost less than $900 US to make.
Materials and labor included.
Do you want to know the bigger kicker? We're in the marketing room, right? Hermes is like a 200-year-old company. They have no marketing department. They have no marketing budget.
None. Zero.
Because why would you need a marketing budget when I can tell a story as good as that one? Millionaires and billionaires lining up. You get what you get. If you can't afford it, you can go screw yourself, right?
The luxury brands live on scarcity.
They are untethered from margins. Remember I said before, right? Raise within margins. Big X through. I said, I hate that. I do hate that. I want us to get to a point where we charge what we want to charge.
There are so many different examples of it. This is just the best, most exaggerated version of this.
They do not do Their calculations and they're like, well, cost of goods and then labor and then, well, then we'd have to charge.
They charge what the market will bear. Put another way not to put too fine a point on it, they charge what they can get away with. And if at any point people weren't willing to spend $35,000 for this, they'd lower the prices. But it continues to be the most sought after bag in the world. And on the resale market, take the deep dive on Google. There they go for 2, 3, 4x.
So you want to get them new because they're cheaper.
Here's another luxury brand.
Has anyone been to Applebee's recently? I'm going to lower my hand because I have not. I think we all feel the same way about Applebee's. Here is why. Applebee's is a luxury.
No one needs what we have. Remember I said luxury is an indulgence.
Restaurants are an indulgence. 100 years ago, the average American went out to dinner about twice a year.
The statistics now in the year 2025 say the average American household has food service, meaning food prepared outside of the home twice a week, either going out to restaurants or ordering food in. And we know a lot of households do a lot more than twice.
We are the caretakers of an industry that really didn't exist in the way that we know it 100 years ago, really didn't exist this way. 30 years ago.
I built my entire career, my entire adult life is built on the restaurant industry. And I know most of you guys have as well.
I think it's extraordinary that every so often people are like, fuck it, I don't want to cook.
And they go out and that is an indulgence. We're literally saying somebody else went to school, figured out what recipes are going to be good, put a lot of thought into what's going to be good on the menu, shopped for all the ingredients, prepped the ingredients, made it. They bring it to us. They ask us, hey, man, is there anything else I can get for you? You want a glass of wine? You want a beer? You want a soda?
They take care of everything we need while we're there. At the end, they clear it away and they do all the dishes.
That's an experience no one needs.
But every so often, like twice a week, we want.
We are selling people things they want just like this. Nobody needs a $35,000 handbag.
But there's some people in this world that very much want it. And so they're happy to sell it to them.
That's why Applebee's is a luxury. That's why everything you do is a luxury.
In order to continue on in this conversation, we have to define these three words, transactions, value and price. These are three words we use a lot, and they've totally lost all meaning, and we have no idea what they mean. In the middle, value is the worst. We're going to finish with that one. Oh, it's really good. Value. It's really good.
We're going to come up with a better definition. Transaction. Here we go, the definition. An instance of buying or selling. An exchange between two parties.
You give me $35, I will give you this beautifully cooked piece of halibut. You give me these $14, I will give you this perfectly cooked cheeseburger. It's an exchange. You give me this, I'll give you that.
That's a transaction. Except in our industry, there's three things you have to be aware of. In our industry, transactions last a long time. Think of how quick it is to go shop on Amazon or, you know, Costco, the website or whatever. It's like two minutes, and you've spent like, 50 bucks. You're like, what do I buy?
But for us, it's 20 minutes, an hour, two hours, three hours. Sometimes transactions last a long time. In our industry. They are expected. People sit down and they expect to be sold to.
In fact, if you sit down and you're not sold to, you're like, where's my waiter? I want to be sold to. Of course, that's not how we think. We say, but where's my waiter? I want to order a drink.
But really, we sit down and we expect, as the consumer, the consumers expect to be sold to.
Can I get you a drink from the bar? What sort of appetizer would you like to start with? And what would you choose for your entree? Did you any side dishes to go along with that? Who saved room for dessert? Does anybody want a cup of coffee with dessert? All we're doing is selling to them over the course of the hour, hour and a half. They're with us.
Transactions last a long time. They are expected, and they are about way more than money.
So I'm going to explain what I mean. Here we go. Here's that beautifully cooked piece of halibut. You give me 35 bucks, I will give you this beautifully cooked piece of halibut. Except that's not all that's being traded. There's the merchant side, the restaurant, and then there's the Consumer side, the diner. Right. On the merchant side, we've got experience, expertise, and the service.
The experience, meaning I went to school and I was doing this for a really long time to figure out how to cook this beautifully.
We don't charge for that, but we could, we should. That's something we bring to the table. Expertise, Right. I'm really good at creating beautiful dishes, flavors that go well together. Me, Chip, personally, I am not a chef. Whatever restaurant I go to, they are going to do a better job than I could ever do at home.
I'm like, cool, that's a good trade. So they bring their experience, their expertise, and of course, everything around it. Right. I thought it through, I put the menu together, I shopped, I prepped, I cooked. I'm going to get you everything you need here. The beautiful decor, way more romantic in here than it is at your home and your kitchen table. All of that is part of what's being exchanged.
Does that make sense?
Then on the other side, on the consumer side, and this is really huge.
We have to remember this. Yes, they give us money, but money is a renewable resource.
They go back to work next week, they make more money, and they get more money to give us on food.
But our consumers pay us, our diners pay us in the three most valuable resources they have. Time, attention, and trust. Right. Time. We only got a finite amount of time on this world. Can't get it back. And I choose to give it to you as a diner. That's huge attention. Yeah. I mean, I could be farting around on my phone or whatever, but I have to give my attention to the restaurant, to the food, and to the dining companions I'm with. That's huge.
The last one is the most crucial. Trust. So about 15 years ago, I opened a restaurant for Richard Gere. So Richard Gere, the actor, he bought a big property in upstate New York. Eight room luxury inn, two restaurants, a private dining space, a yoga studio. It was a whole thing. It was a really cool project to work on. And Richard is really, like, generous and warm and down to earth. He's a hugger. Like, if you don't know this about him, he'll just hug anybody right when he meets you. My wife was very excited about that fact.
He is also, like, he's this practicing Buddhist, and he's very, like, grounded in, like, he's just that guy. He's like that crazy Uncle Richard who's, like, married to this, like, you know, really famous model. And then, you know, well, at the time, he was married to The Bond girl. And then he's just like, really in. We're sitting around late one night, we're opening the restaurant and he's like, it's amazing. Do you ever think about this?
I said, what's amazing? He's like, we give people stuff and they just put it into their body.
I was like, oh. He's like, think about how, I mean, how intimate that is. Think about the trust. They order something and some dude they can't see that they will never meet back in the kitchen, 50ft away, is going to prepare it for them. They bring it out and we're like, cool. We don't inspect the food. He's like, he was totally like, woo woo about it. He was like, I'm looking around. Nobody inspects their food for like poison or broken glass. And he's like, and you know, it'd be really easy to put broken glass in a cheeseburger. In like the ground beef. But like, nobody does it and nobody is afraid that they'll do it. And I was like, on the one hand, I was like, okay, dude. But on the other hand, on the very real side, that's huge.
Somebody I don't know can't see, we'll never meet is making something for me that I'm just like, yeah, it looks good. I'm not inspecting it. Like, you know, I just eat it.
Time, attention and trust. It's huge.
Way more is being exchanged in a meal besides just food for money.
Let's talk about price.
Here's the definition for price. The amount requested in exchange for a product or service.
Notice it doesn't say the amount of money.
It's the amount the things that are requested.
So I always use the example of French Laundry. Right. French Laundry is in Yountville, California.
My dad will never go there.
Super high end. It's expensive. Could he afford it for a special occasion? Absolutely.
But in addition to the Money, it's a 10 course tasting menu and there's no choices.
He's like, nope, no way. Some guy I've never met gonna just like pick what I'm gonna eat for dinner tonight. It's also three hours long. If you've ever met my dad. He can't sit still for more than like 35 minutes, three hours. Definitely not gonna do it. So the price is too steep.
The amount requested, he's fine with to splurge for a special occasion. But the trust that's required and the time that's required. Nope, not gonna do it.
So price what we're asking for in exchange for the thing we're giving them which gets us the value.
Value is this word. And you heard me sort of like roll my eyes at it earlier, right?
Value. Oh, there's just such value. There's, you know, it's a word that doesn't mean anything.
So I've created an equation that outlines it.
Worth minus price equals value.
Okay? Price we just defined, it's what we ask for. I'm willing to give you this piece of halibut if you give me $35 and an hour and a half of your time. And your trust worth is what it's actually worth to the consumer.
Seth Godin is a best selling author. He's a marketing guru, brilliant public speaker, and I heard him give a talk once and he said transactions work in a normal civilized society. Transactions work when both sides win. So we're like, yeah, I'd be willing to sell you this halibut for $35 because it only cost me eight to make. Like, good. My cogs are solid. I'm willing to make that trade.
And on the consumer side, I told you, I can't make halibut that's better than any halibut that can be made for me. I'm like, that's really good because I'd only screw it up at home and it wouldn't taste as good. And this is really romantic. And my wife's gonna love me more for like bringing her to a really beautiful, nice, romantic restaurant. It's worth making the trade for me. And what happens is the consumer will never say this out loud, but they think 35. I'd probably be willing to spend 40 or 45.
The gap between what it's worth to the consumer and what we ask for, that's value.
So we hear that, right? Under promise over deliver.
It's not just trite that that's our success.
Why would somebody spend $35,000 for a handbag when they could get one for 35 or 200 or 1,000?
Why spend $35,000? Because to a certain kind of person, a certain demographic, a certain income bracket, that's a signal of status that cannot be replaced.
Birkin bag says something. It's like, oh, all their friends, right? All the friends at the club are like, oh, shit, okay, Birkin bag. Not the ugly purple one. Like, she got a really pretty one. It says something.
It costs 35k, but it's worth way more.
It's worth way more to them.
Does that make sense? Is that anchoring great? So then how do we do it right. How do you adopt the luxury mindset and apply these lessons to your business? This is the million dollar question, right? I told you. This is like a keynote. This is strategic thinking. This is 30,000 foot view. So many other sessions are tactical. I've certainly given a lot of tactical sessions. This is not. This is a mindset talk.
But then how do we make it granular and tactical? How do we bring the blocking and tackling into it?
Here it is by being one of a kind.
If somebody can get what you serve somewhere else, why would they not go somewhere else? Because when they run the Bogo offer, when they run the 20% off discount, when they're whatever, why would they not just go there?
By being one of a kind, A category of one.
Here we go. Show of hands. Who's here? Who's been to Paris?
Perfect. Let's see a show of hands of the people who have been to Paris who did not go see the Eiffel Tower, who did not take a picture of the Eiffel Tower. If you've ever been to Paris, it's impossible to not see the Eiffel Tower. It's the only thing on the skyline.
And yes, I knew you were going to say. I knew somebody was going to say that. There's also one here, sort of.
There's only one, right? There's only one Paris. It's one of a kind. It's a category of one.
You can go to a million other charming European cities. It's not Paris, one of a kind.
This company gets it.
When they put this thing. Can you imagine being in the meeting where they were like, this is what we want. It's like a big golf ball.
Have you ever seen anything like this anywhere else in the world? No, because everyone else in the world's like, fuck. Can't do that. Like, they did it.
It's ostentatious.
Disney is a really good example. It's a more earthly version of the Birkin bag. They charge what the market will bear. They charge what they can get away with. 55,000 people a day go into each park, their gates. Millions and millions and millions of dollars just on tickets at the door.
They're a one of a kind. If you want to go to an amusement park, right? If your kids want to go to Disney, you're like, we can't go to Disney. We're going to go to Six Flags instead.
Kids are like, cool. No. They're like, fuck that we're going to Disney.
They're like, hey, I know. He said Disney. But they're like, where's the golf ball? I don't see this golf ball anywhere. Okay, there's only one. And they charge what they can get away with.
Here we go. Any baseball fans? This is one of a kind. When they were building this stadium, right, Fenway park in Boston, they screwed it up. They didn't leave enough room in left field.
What was a mistake turned into a quirk. If you're a baseball fan, this is a cathedral.
Red Sox fans, this is religious. When you go to Fenway, again, one of a kind. They stand out. It's iconic. The big green monster. Everybody knows it.
Again, I talked about French Laundry earlier, right? This thing's been on the menu for like three decades. It's not going anywhere.
Nobody can ever replace that. It's one of a kind. Does anybody know this? What's this dish? Alinea. Right? So Alinea. Three Michelin stars in Chicago. Chef Grant Achatz. This is the last course at Alinea. It is a helium filled sugar balloon for anybody who doesn't know. So it's this very severe, very expensive, multi course experience. And at the end, they bring everybody a balloon and everybody, you press your lips to it and you suck in. And then everybody's talking like a little chipmunk, like an idiot. And it's like, it's all been like, very, like, precious and this. And at the end, everybody's like, being goofy. It's like a little bit of silliness and whimsy at the end of this meal. And then it, like, as you suck all the helium out, it becomes this like, little piece of candy and you mush it up and then you eat it.
It's genius. There's nobody else in the world that does this. They're one of a kind. Okay? And now I know you guys are going to push back because I just used three, you know, two. Three Michelin starred examples.
High end. So now we're going to go low end. Chef David Burke does the bacon on a clothesline, right? He made this famous 30 years ago. Now it's duplicated and replicated over and over and over again. But for a very long time, he stood out. He was a category of one. Hey, right up the street, go to the Paris. This is Alexa's. This is the disco ball. Punch bowls. I don't know. Do you know how many bachelorette parties go there to get this daily? Like, it's like a 400, 500 seat restaurant. They serve like, I don't know, a million of these a day in N Out burger, right? They're one of a kind.
Black Tap, the milkshakes. They're a craft beer and burger place. And this is what they're famous for, the freak shakes. Because there's, like, hunks of, like, cake and ice cream and, like, candy hanging off them, and they look crazy, and everybody has to go. They're a category of one. Even if somebody tried to replicate it, they wouldn't be able to because they're like, nope, that's blacked out. Everybody knows them, right? This place. Who knows this place?
You know it. This is one of the most famous pizza places in the world. If I walked next door at a pizza expo, they would all know this. This is Di Fara Pizza. It's been there for, like, 80 years. The corner of Avenue J and 15th street in Brooklyn. I live four, four blocks from here. When I lived in Brooklyn, when I was there, the average cheese pizza in Brooklyn in that neighborhood was $17. They charge 36.
And you know what?
This place had a line out the door all the way down the block. I mean, all the way up 15th Street.
They charge what they can get away with because they have a good story, because they've been there forever. They're doing it the right way. Their starter is, like, 60 years old.
This dumpy little hole charges $37. P.S. it's more now. I moved out of the city three years ago. $37 more than twice what the other place is within. And in Brooklyn. Do you know how many Brooklyn pizza joints there were within? You could hold your breath and touch the doors to 10 of them.
Here's one of my clients. Bake shop in Charleston. They're elevated donuts, right? So it's donuts, but elevated. We've seen these before.
So how do they stand out? How do they make sure that people know that they are elevated, that they're worth the extra cost they're charging? They start making their donuts square.
It's a signal that this is not normal, that this is elevated. This is something different.
Are we seeing this? Are we getting it? Here was a client I worked with pre Pandemic.
All my chefs here. You're going to scream when I tell you this.
They did this surf and turf dish. They were famous for this surf n Turf.
Almost every like, they sold 60% of their guests. 70% of the guests were getting surf and turf. And they were breaking off the claws, and they were using it to make the bisque.
They were using lobster claws to make the lobster bisque. Here's your Lobster bisque at, like, 82% cost. I was like, well, no, no, no, no, no, no. You use the carcasses, the shells, you make a stock, and then you thicken it. Like, maybe the knuckles, maybe, but, like, not the claws. He's like, well, what else are we going to do with the claws? I was like, yes, that's the right answer. So we came up with this stupid idea. They were serving their fries in the fry basket. We threw out the fries. I brought this in, and I put seven of those in there. I said, do that. I've never seen that in my life. And they were like, we'll just serve this. I was like, yeah, it's an appetizer.
The very first weekend we put this on the menu, it became the number one item on the pmix.
They charged whatever they were going to charge. And that weekend, since it was pretty much they were wasting it anyway using in the bisque, it was like, at 0% cost, and they charged like 35 bucks for that. And so we would greet the table, right? We have the servers greet the table and say, hey, what's going on? We're sort of famous for this, right? We weren't famous for it yet, but we told people we were sort of famous for these, like, claws in a basket. It's like, you get seven claws. It's really fun to rip into. Do that. Get you some beers from the bar. They're like, yeah, yeah, let's just do.
Was awesome. And it worked.
I don't know this guy, but I want to tell a story about this picture. So this is Crafty Cow in Milwaukee. They got three locations. They're a client of mine.
We were talking about this. How do we separate ourselves out? And they said, well, we have the number one chicken sandwich. We've been voted three years in a row. Number one chicken sandwich in Milwaukee. But nobody really knows. I was like, oh, did you get, like an award? Like a certificate or a plaque or something? He's like, no, not really. I was like, well, then how do you let people know? He's like, I don't know. It's great. But it looks like every other chicken sandwich. Like, it's bread with lettuce, and it just looks like every other chicken sandwich. It's super good. I was like, how do people know this was his answer? He got a chicken trophy made, and you can't read it, but it says you are now eating the number one chicken sandwich in Milwaukee. So then we changed service. So every time they would greet the table, he puts the food down. And then the server would, like, place this precious laces, and people would be like, what's this? You are now eating the number one chicken sandwich in Milwaukee. It was like, oh, okay. And then this happened at every single table. So this girl was like, dad, dad, pick it up, pick it up. I gotta take a picture. And this goofy dude was, like. Grabbed his beer, and he's like, I mean, look at this. He's just cornered by his daughter. There's hundreds of photos on the Internet now since we introduced this a year ago.
If it's the number one chicken sandwich, you gotta tell people you got it. And then here was the brilliance. Eventually, that thing got stolen, unsurprisingly. So they went and ordered, like, 10 more. And what they did is they started moving it around the table. When you get it, they bring it to the table. And then, like, 10 minutes later, they go over. They're like, I'm sorry, I have to bring this over. It's like the Stanley Cup. Like, somebody else ordered the number one chicken sandwich in Milwaukee, and they take it away. But eventually, they started getting stolen. So what they did is they put a little sticker on the bottom with a QR code so people would get home and be like, huh? And they'd, like, take a picture and said, no questions asked. If you return this, get $10 off your next meal.
So you know what you do? You get people coming in. They're like, hey, sorry. My buddy was really wasted the other night. I think he took this. Do I really get $10 off my meal? And it worked as a retention tool to get people back in the door. And it was like, man, they thought of everything. But I've never been to a restaurant and had them put a trophy on my table. Has anyone here gotten a trophy at their dinner table? Never. It's a category of one. They're finding ways to separate themselves. Have fun with it, right? You make those stories.
He just came up out of nowhere through a conversation. I'll get a trophy. I'll get a chicken. Trophy made. You make those stories. They are manufactured. You then tell those stories everywhere you can.
You tell them over and over and over again. Those stories eventually become part of the fabric of who you are and what you're all about. It should be woven through every inch of your restaurant operation.
You make something that people have to talk about. You'll never believe it. I got a trophy with my chicken. They do punch in disco balls, right? We're in Vegas. Everything is big and larger than life. There's so many great examples of it. Don't think that that doesn't belong back home to wherever you're going back to. That's the shit that people talk about. So you make something that people have to talk about, something that people would go out of their way for, something that people would pay extra for. Nobody needs a $35,000 handbag, but they sell a couple thousand of them every single year.
If you do that, you become a true luxury. Because remember, your restaurant is. No one needs it. You feed a family of four at the supermarket, you go get like chicken, broccoli, rice.
You could feed a family of four for less than 20 bucks. And there's no restaurant in the world. I don't think so. Even at McDonald's, you can't feed a family of four for like 20 bucks inclusive of tax. But you could do that easily at a supermarket. So people aren't about getting their base needs covered. If they're hungry and they just need to eat cheap, they'll go do that. They're coming to you for something else to be taken care of, to have an experience.
How do you stand out?
How do you get people to come to you? How do you exist without discounting? Hermes doesn't discount Hermes. Hermes doesn't even have a marketing department. There's nobody to even discuss it.
That's that. Guys, thank you very much. I appreciate you being here. Have a great time at the kickoff party.
So that's it, guys.
[00:53:26] Speaker A: I appreciate you taking time to listen to this. A little bit longer than our normal format, but I think well worth it. I love this talk. Again, I gave this talk all the way down in Auckland, New Zealand, and I was invited to give this same talk in Bar and Restaurant Expo in Las Vegas just a couple of weeks back. I love this talk. I hope you got some value from the talk. One final reminder. If you want the deck that goes along with this talk, I'm happy to share it. I think most of it translates, but if you want some of the visuals, by all means, just email me chip close.com c-h I p k l o s e.com and I will send it to you. And listen, if you want me to come travel to you and give a talk for your organization, your chamber of commerce, your restaurant association, maybe it's just a webinar. I am happy to do that. I'm doing a lot more traveling this year for organizations to work with their teams, to talk to their teams. I'm happy to do it. Same thing you send me an email and we'll start a conversation that way again. Chip close.com c h I p k l o s e.com appreciate you guys.
[00:54:27] Speaker B: Being here each and every week.
[00:54:29] Speaker A: Thank you very much and I will.
[00:54:30] Speaker B: See you next time.
