# How a Chicago Restaurant Has Stayed Open For Nearly Three Decades

An episode of [Odd Lots](https://invisiblenetwork.ai/podcast/1056200096), 24 Oct 2026, 49 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/8a94442e-5a74-4fa2-8b8d-ae27003a8d6b/0e910a81-d26f-4e7f-852a-b4ec0142c272/audio.mp3?utm_source=Podcast&in_playlist=982f5071-765c-403d-969d-ae27003a8d83

Richard Mott's first foray into hospitality was in the 1980s at the University of Chicago, where he started running a coffee shop in the basement of the business school when he was a grad student. By the time he graduated, he helped grow that single coffee shop into four locations across campus. He's a longtime Chicago-based restaurateur and his farm-to-table restaurant North Pond has been around since the late 1990s. Lately, he's expanded his business to include Spark Shared Kitchen, a catering facility and incubator for food entrepreneurs. He knows a lot about the practical economics of restaurants and hospitality at large, and in his decades-long career in the Chicago scene he's seen about everything. On our recent trip to Chicago, we sat down with Mott to talk about the ever-increasing price of food and labor, why diners are drinking less, and the expected and unexpected reasons that restaurants so often fail. Read more: Chicago Seeks to Borrow for Police Settlements, Revive Head Tax Chipotle’s Softening Sales Force Analyst to Throw in the Towel Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots Newsletter Join the conversation: discord.gg/oddlots See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios Podcasts Radio News.
[0:09] Speaker 2: Music Hello and welcome to another episode of the OddLots Podcast.
[0:21] Speaker 2: I'm Traci Alloway.
[0:22] Speaker 1: And I'm Joe Weisenthal.
[0:24] Speaker 2: Joe, we are back in Chicago.
[0:25] Speaker 3: I love Chicago.
[0:26] Speaker 2: It's a beautiful city. I used to live here. It's
[0:29] Speaker 2: always kind of surreal coming back because it reminds me
[0:32] Speaker 2: of middle school, basically. We're actually here for a live show,
[0:37] Speaker 2: but I thought we would squeeze in one additional episode.
[0:40] Speaker 2: It's one of the kind of favorite types of episodes
[0:43] Speaker 2: that we like to do.
[0:44] Speaker 4: Totally.
[0:45] Speaker 3: It's a food service. episode, one of our favorite genres
[0:48] Speaker 3: of episodes. One of our favorite episodes we ever did
[0:51] Speaker 3: was a Chicago-based food service entity, The Baker.
[0:55] Speaker 1: Remember him?
[0:55] Speaker 2: Absolutely. And one of the reasons these episodes are so
[0:58] Speaker 2: interesting to do is, you know, we have a lot
[1:00] Speaker 2: of economists on the show. We have a lot of investors, whoever.
[1:04] Speaker 2: And they kind of talk about business in this conceptual way.
[1:07] Speaker 2: But it's always interesting talking to actual practitioners in the space.
[1:11] Speaker 2: And the thing about food is it touches on so
[1:14] Speaker 2: many different aspects of the macro economy. You know, you
[1:18] Speaker 2: have labor, you have supply chain issues, you have general,
[1:22] Speaker 2: I guess, entrepreneurial issues as well. And so I thought
[1:25] Speaker 2: we would talk to someone a little bit different to
[1:27] Speaker 2: the Chicago-based baker. We would talk to someone who not
[1:31] Speaker 2: only comes from, I guess, sort of a finance background,
[1:34] Speaker 2: but someone who actually left finance at an undergraduate level
[1:38] Speaker 2: in order, he made the conscious decision to become a
[1:42] Speaker 2: practitioner in the restaurant and catering space.
[1:45] Speaker 4: You know, the Big Mac index, right? Yeah, of course.
[1:48] Speaker 3: The reason why that works as a concept is because
[1:52] Speaker 3: embedded within the Big Mac is labor, commodity costs and rent.
[1:58] Speaker 4: And that's everything, right?
[1:59] Speaker 3: And so here you get the reason why these particular
[2:03] Speaker 3: businesses are so fascinating to us is because, as you said,
[2:07] Speaker 3: every input goes into it. Every input in the economy
[2:10] Speaker 3: goes into it in some way. And then, of course,
[2:12] Speaker 3: the chance to someone who sort of knows business both
[2:15] Speaker 3: from a theoretical background and also a entrepreneurial background That's
[2:19] Speaker 3: a good guest.
[2:20] Speaker 2: And someone who's had experience running different types of food businesses.
[2:24] Speaker 2: So this will be really interesting. I'm very happy to
[2:26] Speaker 2: say we have the perfect guest. We're going to be
[2:28] Speaker 2: speaking with Richard Mott. He is the owner of North
[2:31] Speaker 2: Pond here in Chicago. He is also the owner of
[2:35] Speaker 2: the Spark Shared Kitchen, which we'll get into exactly what
[2:39] Speaker 2: that is. And he studied finance at the University of Chicago.
[2:42] Speaker 2: So truly the perfect guest. Richard, thank you so much
[2:45] Speaker 2: for coming on.
[2:46] Speaker 1: Oh, thank you for having me. I'm glad to be here.
[2:48] Speaker 2: So I mentioned finance was your undergraduate expertise, but I
[2:53] Speaker 2: also said you made a decision that you didn't want
[2:56] Speaker 2: to stay in finance. Talk to us about how you
[2:59] Speaker 2: actually got into the restaurant business.
[3:02] Speaker 1: Well, actually, I was a history, urban studies, political science
[3:05] Speaker 1: major as an undergrad at the University of Buffalo. But
[3:08] Speaker 1: I attended Booth, the graduate school at the University of Chicago,
[3:12] Speaker 1: where I was a finance major. And I did my
[3:15] Speaker 1: internship there. I did in the finance department of Progressive Insurance,
[3:20] Speaker 1: which at the time was sort of a young, fast-moving upstart.
[3:24] Speaker 1: I mean, it was a great company to work for
[3:25] Speaker 1: and everything. But I left that summer with just the
[3:28] Speaker 1: realization I really didn't want to work for anyone else,
[3:31] Speaker 1: and I wanted to start a venture of my own.
[3:34] Speaker 1: So three months in a corporate office was enough to
[3:37] Speaker 1: kick me out of that field for the rest of
[3:38] Speaker 1: my life.
[3:39] Speaker 3: These days, if you were to like go to Stanford
[3:42] Speaker 3: Business School or at Wharton for sure, you would find
[3:46] Speaker 3: tons of people who are there because they want to
[3:48] Speaker 3: be entrepreneurs or maybe they want to be VCs or
[3:52] Speaker 3: they want to have a so-called like search fund where
[3:54] Speaker 3: they gather a couple million dollars from their friends and
[3:58] Speaker 3: buy some local pool repair companies or whatever.
[4:01] Speaker 4: And But I guess like that's sort of novel.
[4:04] Speaker 3: And I guess like in the past, like someone who
[4:06] Speaker 3: was at these schools, it was just purely a pipeline
[4:09] Speaker 3: for working at a big firm.
[4:11] Speaker 1: It's very complete, 180 degree sea change on this. When
[4:15] Speaker 1: I was at school, there was no such thing as
[4:17] Speaker 1: entrepreneurial studies. There were no seminars on small business financing.
[4:22] Speaker 1: There was absolutely nothing paid attention to any of those fields.
[4:26] Speaker 1: You were being trained to work for Continental Bank. for Citicorp,
[4:30] Speaker 1: for McKinsey, those types of companies. And my decision to
[4:35] Speaker 1: go off on my own and start a business, which
[4:37] Speaker 1: I had started my second year of business school, was
[4:41] Speaker 1: sort of met with a lot of bewilderment by some
[4:44] Speaker 1: of my classmates. And even to the point where some
[4:46] Speaker 1: were kind of derisively asking questions like, oh, what's the matter, Rich?
[4:51] Speaker 1: Didn't you get a real job offer? That kind of thing.
[4:55] Speaker 1: And the really ironic thing is that now, at Booth,
[5:00] Speaker 1: the largest single concentration, larger than marketing or finance, the
[5:04] Speaker 1: largest single concentration at the school right now is entrepreneurial studies.
[5:08] Speaker 1: And it is a huge part of the business. And
[5:11] Speaker 1: they've also spun off from that the Polsky Center, which
[5:14] Speaker 1: is the university-wide center for entrepreneurship and monetizing advances in
[5:21] Speaker 1: their physics labs and things like that. But It is
[5:24] Speaker 1: a very big and very successful part of the university now.
[5:27] Speaker 1: And if you go to all the top business schools,
[5:30] Speaker 1: you go to the Whartons, the Harvards, the Stanford, Berkeley,
[5:34] Speaker 1: they all have very, very dynamic spaces, entrepreneurial spaces, and labs, classes.
[5:40] Speaker 1: It's an incredibly supportive environment right now.
[5:43] Speaker 2: That's such an interesting shift. But when you were at
[5:45] Speaker 2: grad school, I think I read that you bid on
[5:49] Speaker 2: a school project to actually start a coffee shop.
[5:53] Speaker 1: They had a coffee shop in the basement of the
[5:56] Speaker 1: business school, and they would let a couple students run
[5:59] Speaker 1: it every year. And I bid on it and turned
[6:03] Speaker 1: it from a coffee shop into, you know, let's get bagels,
[6:06] Speaker 1: let's get sandwiches. Pretty soon we got a whole little
[6:09] Speaker 1: lunchroom there. Turned out to be quite a successful little venture.
[6:13] Speaker 1: I got approached by a couple other departments of the school.
[6:16] Speaker 1: So one thing led to another. And by the time
[6:18] Speaker 1: I graduated, we had four locations on campus and started
[6:22] Speaker 1: this as a full-time business. And by, you know, eight,
[6:26] Speaker 1: nine years later, we had a chain of 20 of these.
[6:29] Speaker 1: And they were all coffee slash sandwich shops, but they
[6:33] Speaker 1: were all in the academic buildings. So we didn't do
[6:37] Speaker 1: the main board plans, you know, with Compass and Aramark
[6:40] Speaker 1: typically do. We were just doing the small little almost
[6:44] Speaker 1: bespoke operations within the academic buildings.
[6:48] Speaker 2: Did you get to keep the profit from the coffee shops?
[6:50] Speaker 1: Yes, that was a complete P & L. We paid
[6:52] Speaker 1: them a rent and it worked out very well for
[6:55] Speaker 1: us because we'd reached an agreement on the rent based
[6:58] Speaker 1: on basically just being a coffee shop and then kind
[7:01] Speaker 1: of quadrupling the revenue and turning it into a real
[7:05] Speaker 1: sort of lunchroom made it And for an undergrad, more
[7:09] Speaker 1: money than I'd ever seen in my life. I mean,
[7:11] Speaker 1: that wasn't a lot of money, but still.
[7:13] Speaker 3: You know, it's funny because we're like talking about the
[7:15] Speaker 3: evolution of business schools. And that's maybe a lens through
[7:18] Speaker 3: which to understand the history of the American economy. You
[7:22] Speaker 3: could tell probably the history of the American economy through
[7:25] Speaker 3: coffee shops themselves. And you think about like first generation
[7:29] Speaker 3: coffee shops and then the Starbucks's. And then now like
[7:33] Speaker 3: the explosion of like, oh, you have to have, with
[7:37] Speaker 3: pistachio syrup and all these things.
[7:39] Speaker 2: I had a pumpkin matcha cream latte this morning. Don't
[7:44] Speaker 2: judge me.
[7:45] Speaker 4: I don't normally get those.
[7:46] Speaker 1: There's about too, too many ingredients in.
[7:48] Speaker 4: That one right there.
[7:49] Speaker 3: Well, I never drink that stuff. But the other day
[7:50] Speaker 3: I was walking home and I saw this. It was
[7:52] Speaker 3: like a banana pudding flavored latte with cardamom.
[7:57] Speaker 4: And those are like, I was so tempted.
[7:58] Speaker 2: I wish I could say that sounds bad to me,
[8:00] Speaker 2: but it sounds fantastic.
[8:01] Speaker 4: I know, I was so tempted, but it's like, I
[8:02] Speaker 4: can't do it.
[8:02] Speaker 3: But actually, I am curious, like, What years were this?
[8:06] Speaker 3: And what were you serving? What was a coffee shop
[8:09] Speaker 3: expected to have in those years?
[8:11] Speaker 1: Coffee was a very, very different industry. I mean, we
[8:13] Speaker 1: served coffee, soda. We didn't serve water. There wasn't any
[8:17] Speaker 1: bottled water back then. It was coffee and soda, sandwiches, soup,
[8:21] Speaker 1: a lot of pastries and baked goods.
[8:23] Speaker 3: And by coffee, that was just like a cap or decaf?
[8:25] Speaker 1: This was the old one you would have gotten in the,
[8:28] Speaker 1: you know, where you would have gotten in a marine
[8:29] Speaker 1: barracks with the big bun, three-gallon pour-over thing. And I'm...
[8:35] Speaker 1: I'm not a real coffee drinker, but if you were
[8:38] Speaker 1: to go back and taste it now, I'm sure it
[8:40] Speaker 1: would be just wretched.
[8:41] Speaker 4: No, I love that stuff. I'm fine with industrial grade coffee.
[8:43] Speaker 1: Well, the other thing that's kind of funny is we
[8:45] Speaker 1: served coffee. We had two sizes of coffees. We had
[8:48] Speaker 1: a seven ounce, that was our small, and a 10 ounce,
[8:51] Speaker 1: which was the large coffee. And now if you go
[8:54] Speaker 1: to a coffee shop, most smalls are larger than the
[8:57] Speaker 1: large that we had at that time. And don't claim
[9:01] Speaker 1: any great foresight in that you know, back then in
[9:03] Speaker 1: the coffee market. I remember my wife came back, Starbucks,
[9:08] Speaker 1: Chicago was the first city outside of the Northwest that
[9:10] Speaker 1: they'd opened in. And my wife, who's a coffee addict,
[9:14] Speaker 1: came back and said she went to this great store,
[9:16] Speaker 1: they had coffee, and that was pretty much all they served,
[9:19] Speaker 1: but it was great coffee and great service and everything.
[9:22] Speaker 1: And I just poo-pooed the whole thing. I was like, oh,
[9:24] Speaker 1: a store that just serves coffee, yeah, how long is
[9:26] Speaker 1: that going to last? And then I end up opening
[9:30] Speaker 1: 20 coffee shops.
[9:32] Speaker 2: What was the most challenging aspect of running that type
[9:34] Speaker 2: of coffee shop business at the time?
[9:37] Speaker 4: By the way, what years are we talking about?
[9:38] Speaker 1: Oh, I graduated in 82. So I started this in 1981.
[9:43] Speaker 1: So yeah, the very, I think Starbucks might have come
[9:47] Speaker 1: to Chicago mid 80s, 86, maybe 87, somewhere around in there.
[9:52] Speaker 1: So this was still, you bought the coffee, you bought
[9:56] Speaker 1: it in five-pound bags, and you scooped it out, and
[10:00] Speaker 1: that coffee could be sitting around. If you didn't use
[10:02] Speaker 1: it at the end of June when glasses closed, you
[10:05] Speaker 1: just put it in a container and use it in September.
[10:07] Speaker 1: I mean, the kind of things that would get you
[10:09] Speaker 1: shot by a coffee lover these days. So it was
[10:13] Speaker 1: a hot brown beverage is what it was.
[10:15] Speaker 2: And the biggest challenge at that time, what was hardest?
[10:18] Speaker 1: Well, the hardest for me is that I had started
[10:21] Speaker 1: this business with absolutely no idea what I was doing.
[10:23] Speaker 1: If I were to ever counsel someone about this, I'd
[10:27] Speaker 1: go work for someone else, learn the business, and have
[10:30] Speaker 1: them pay for your mistakes. I was a little too
[10:34] Speaker 1: insistent on working for myself at that time, opened the business,
[10:37] Speaker 1: and literally made every mistake you possibly could. Because I
[10:41] Speaker 1: had no reference set. I had no peers to go to, no...
[10:44] Speaker 1: I was just making everything up as I went.
[10:46] Speaker 4: Let's hear some mistakes.
[10:48] Speaker 1: Oh, I got into bad leases. Oh, boy. Hiring people.
[10:54] Speaker 1: I think that was probably the biggest thing was hiring people.
[10:57] Speaker 1: It took a long time to really figure out how
[11:01] Speaker 1: to hire people for the business, not hire them because
[11:04] Speaker 1: you like them, that kind of thing. So personnel was
[11:07] Speaker 1: probably the biggest problem I overcame. And now you go
[11:12] Speaker 1: to business school and hiring and interviewing skills. They're taught
[11:16] Speaker 1: in the school, and these things were never taught. Ours,
[11:19] Speaker 1: going back to the school question and the differences between
[11:23] Speaker 1: now and then, back then, the MBA program, and I
[11:27] Speaker 1: only speak from the University of Chicago's viewpoint, it was
[11:31] Speaker 1: a very rigorous program, very, very academic focused. There was
[11:37] Speaker 1: little There was no emphasis on any of the sort
[11:41] Speaker 1: of soft skills of business, public speaking, interviewing people, things
[11:46] Speaker 1: like this. It was just a large classroom exercise. And
[11:51] Speaker 1: they have completely gotten off of that. Their program now
[11:55] Speaker 1: is a very holistic approach to educating someone to run
[12:00] Speaker 1: a business. And they have this entire environment. environment to
[12:03] Speaker 1: support people who are doing the search funds or doing
[12:05] Speaker 1: the entrepreneurship through acquisition. So it's a very, very different atmosphere.
[12:11] Speaker 1: And if you were to ask me 15 years ago,
[12:14] Speaker 1: before I started working a lot with these entrepreneurial startup companies,
[12:19] Speaker 1: you know, my take would be, oh, it's the success.
[12:21] Speaker 1: It's 80%. It's the business idea. And I would flip
[12:26] Speaker 1: that on the, I said now, and I would say
[12:28] Speaker 1: it's 20% and the idea is it's the team and
[12:31] Speaker 1: it's the, your environment and it's your support network. Those
[12:34] Speaker 1: are the things that make it successful. You know, not
[12:36] Speaker 1: the business side. I'd rather, uh, and, and a great example. Um,
[12:40] Speaker 1: you know, if we get back, we talk about home chef.
[12:42] Speaker 1: When I was approached by Pat, I thought it was
[12:44] Speaker 1: a horrible idea. You know, you get a meal kit,
[12:47] Speaker 1: you're going to buy food online and they're going to
[12:50] Speaker 1: ship it. This is ridiculous. But I absolutely love this
[12:52] Speaker 1: young man. And, um, it worked out. I mean, he
[12:56] Speaker 1: had an incredibly successful run, you know, starting that company.
[13:15] Speaker 3: Tracy, in the introduction mentioned various endeavors that you've had
[13:19] Speaker 3: over time.
[13:20] Speaker 4: What do you give us the.
[13:20] Speaker 3: Sort of broad overview of you're like, footprint, the various,
[13:25] Speaker 3: then we can like dive into these things.
[13:27] Speaker 4: Your portfolio.
[13:28] Speaker 3: Your portfolio of businesses over time so that we can
[13:32] Speaker 3: talk about.
[13:32] Speaker 1: So I started the coffee shop business and grew that
[13:37] Speaker 1: over the years. And we're dealing exclusively with academic locations
[13:41] Speaker 1: for small coffee shops. And we had a portfolio of
[13:44] Speaker 1: 23 shops and we had five universities that we worked for. Unfortunately,
[13:49] Speaker 1: we were sort of swimming upstream in terms of the,
[13:52] Speaker 1: you know, the food service market. That was about the
[13:55] Speaker 1: beginning of the sort of comprehensive contract model with the universities.
[14:00] Speaker 1: So they were going to companies like Aramark and Compass
[14:04] Speaker 1: and not signing them just to do the, you know,
[14:07] Speaker 1: coffee shop. They're signing them. You're going to run our
[14:09] Speaker 1: laundry program. You're going to run our cafeterias. You're going
[14:12] Speaker 1: to run our bus program. Stadium concessions. Yeah, you're going
[14:16] Speaker 1: to run everything. And we were just a tiny little
[14:19] Speaker 1: niche company. So eventually we sort of got swallowed up
[14:22] Speaker 1: by that. But started with the coffee shop company. That's
[14:27] Speaker 1: a very seasonal business. Yeah. We were looking for something
[14:31] Speaker 1: to balance the September to May season. Started doing work
[14:35] Speaker 1: with the Chicago Park District and ran a bunch of
[14:40] Speaker 1: concessions and things like that. And just through a weird
[14:44] Speaker 1: set of circumstances, had the opportunity to bid on a facility.
[14:49] Speaker 1: It was the old warming house out in Lincoln Park
[14:52] Speaker 1: by the Nature Museum. And I mean, I've had friends
[14:55] Speaker 1: ask me now, like, oh, how'd you get that contract?
[14:58] Speaker 1: You know, someone in City Hall and stuff. I was like, no,
[15:00] Speaker 1: at the time, now it's one of the most beautiful
[15:03] Speaker 1: places in Lincoln Park. But at the time, it was
[15:06] Speaker 1: a very neglected corner of the park. It was a
[15:09] Speaker 1: homeless hangout. There was a lot of prostitution going on
[15:12] Speaker 1: in the area. They had not redone the, the pond
[15:15] Speaker 1: actually looked like a drain, a suburban drainage ditch at
[15:18] Speaker 1: the point. So it really wasn't much of a, we
[15:21] Speaker 1: got the contract basically because no one else bid on it.
[15:24] Speaker 1: So opened up a fine dining restaurant. And that helped balance.
[15:29] Speaker 1: That's a very seasonal business too, but the opposite season
[15:32] Speaker 1: from the coffee shop. So there was a nice like
[15:34] Speaker 1: a synergy on there. And then also with the coffee
[15:38] Speaker 1: shops to sort of broaden our reach and take advantage
[15:41] Speaker 1: of some of our facilities, we opened a catering company
[15:44] Speaker 1: and a vending company and ran those. And then just
[15:48] Speaker 1: as a hobby, I invested in, you know, over the
[15:51] Speaker 1: year or the 20 years or so invested in eight
[15:55] Speaker 1: or nine other startup businesses. I'm just, you know, friends
[15:58] Speaker 1: or an associate starting a business and I'd invest or,
[16:01] Speaker 1: you know, be a partner or whatever. But it really
[16:03] Speaker 1: was just a hobby.
[16:04] Speaker 2: What are the difference in economics between running, you know,
[16:08] Speaker 2: a bunch of student coffee shops, university coffee shops versus
[16:12] Speaker 2: a fine dining restaurant like North Pond?
[16:14] Speaker 1: Oh, completely different. You might as well be completely different
[16:17] Speaker 1: industries too. The fine dining, a couple of things. The first,
[16:22] Speaker 1: it's very chef driven. We've been there 30 years. We've
[16:25] Speaker 1: had four chefs. Our newest chef just started. The last
[16:28] Speaker 1: three chefs have all been on the cover of Food & Wine,
[16:32] Speaker 1: won James Beard Awards, et cetera. A lot of it
[16:36] Speaker 1: is sort of a celebrity chef culture. Nobody would see
[16:39] Speaker 1: my picture or my name in the paper and go
[16:41] Speaker 1: to the restaurant because of that. And if you look
[16:43] Speaker 1: at our PR, you know, you Google me and the
[16:45] Speaker 1: restaurant and you're hard-pressed to find any connection between the two.
[16:49] Speaker 1: The idea was always to promote the restaurant, you know,
[16:51] Speaker 1: the restaurant and the chef. The only one who was
[16:54] Speaker 1: ever going to go to the restaurant because I owned
[16:56] Speaker 1: it was my mom, and she already knew I owned it,
[16:59] Speaker 1: so there was no sense putting that out in the PR.
[17:02] Speaker 1: So it's very publicity-based, and there's a lot of sort
[17:06] Speaker 1: of vagaries in the popularity of restaurants. The analogy, and
[17:11] Speaker 1: knock on wood, we've been there 30 years, but in restaurants,
[17:15] Speaker 1: you measure restaurant lifespans in dog years, not people years.
[17:20] Speaker 1: We've been there, oh, yeah, close to 30 years, and
[17:25] Speaker 1: that's so, so unusual for a restaurant. Most, particularly fine
[17:29] Speaker 1: dining independent restaurants, you really have to look at them
[17:33] Speaker 1: as like a Broadway play. You know, they're there for
[17:36] Speaker 1: three years, and then they're gone. Every now and then
[17:40] Speaker 1: there's a cat that's there for 20 years, but that
[17:42] Speaker 1: is very, very unusual. Wow. So the popularity is very different.
[17:47] Speaker 1: We would get a good review in Chicago Magazine and
[17:50] Speaker 1: the place would be booked solid for a month. Now
[17:53] Speaker 1: the coffee shop business, it's really just a matter of traffic.
[17:57] Speaker 1: There's 400 students in the building on Tuesday and we
[18:00] Speaker 1: get 300 visits. And there's 200 students on Friday and
[18:05] Speaker 1: we get 120 visits. I mean, you can really kind
[18:08] Speaker 1: of just take a look at the class schedule and
[18:10] Speaker 1: I can tell you almost exactly what our sales are
[18:12] Speaker 1: going to be because it's It's more of a utility
[18:15] Speaker 1: where the fine dining, that's a luxury. You're going out
[18:20] Speaker 1: for your birthday, you're going out for an event, whereas
[18:24] Speaker 1: the coffee shops, you're going to feed yourself.
[18:27] Speaker 3: Since we talked about the difference between coffee shops in
[18:30] Speaker 3: the 1980s versus the monstrosities that exist in coffee shops today,
[18:35] Speaker 3: another thing that just strikes me about a fine dining
[18:37] Speaker 3: restaurant that lasts as long as yours is tastes different.
[18:42] Speaker 3: change and so forth, what people want. If we had
[18:45] Speaker 3: the menu from the opening day versus now. What stayed
[18:50] Speaker 3: the same and what's different? And how do you evolve
[18:52] Speaker 3: a menu and how do you stay on trend?
[18:55] Speaker 2: I'm trying to think of like a classic 1980s dish,
[18:57] Speaker 2: like chicken marbella or something, chicken Kiev, something like that.
[19:02] Speaker 1: We opened the restaurant in 1997. Okay.
[19:05] Speaker 3: So you probably had pesto. That's what I think of
[19:08] Speaker 3: when I think of mid-90s food.
[19:10] Speaker 1: When we first opened it up, we were leasing the
[19:12] Speaker 1: building from the Chicago Park District. Now, the Chicago Park District,
[19:16] Speaker 1: their paradigm was working with concessionaires who run crappy hot
[19:22] Speaker 1: dog carts that steal from us. So to go to
[19:24] Speaker 1: them with this whole plan of, hey, we want to
[19:28] Speaker 1: do a fine dining restaurant in the park and we
[19:30] Speaker 1: want to get a liquor license, just completely over their heads.
[19:34] Speaker 1: It took a total of about two and a half
[19:37] Speaker 1: years just to get the permission, then about another year
[19:39] Speaker 1: to build the place out. Because like I said, we
[19:42] Speaker 1: had the first liquor license that was in the park.
[19:45] Speaker 1: And even then, they looked at us with quite a
[19:48] Speaker 1: deal of skepticism. We were not allowed to have a bar.
[19:51] Speaker 1: We had to have a takeout window. I mean, things
[19:53] Speaker 1: that were just absolutely incompatible with doing a fine dining restaurant.
[19:57] Speaker 1: So when we first opened it up, we called it
[19:59] Speaker 1: North Pond Cafe, and it was a little more casual.
[20:02] Speaker 1: After a couple years with the park district, and they
[20:04] Speaker 1: also had the new superintendent and the president of the
[20:07] Speaker 1: park board We're two very forward-thinking individuals. And they kind
[20:13] Speaker 1: of recognized what we were doing. So they gave us
[20:14] Speaker 1: permission to remodel the building, add the front room, add
[20:18] Speaker 1: a bar, and started treating us like a fine dining restaurant.
[20:23] Speaker 1: And that was about the time our second chef started.
[20:25] Speaker 1: And our second chef, absolutely brilliant young man, he had been,
[20:30] Speaker 1: ironically enough, he had been a finance major at Wharton.
[20:33] Speaker 1: and decided not to go into finance. Kindred spirit. Yeah.
[20:38] Speaker 1: And one of the smartest, most talented chefs you're ever
[20:41] Speaker 1: going to run into. And back then, we decided that
[20:47] Speaker 1: the focus for the restaurant was going to be on
[20:51] Speaker 1: what now we would call farm-to-table. I mean, that phrase
[20:53] Speaker 1: didn't exist. I had been in California and had visited
[20:58] Speaker 1: Alice Waters' restaurant. Absolutely loved the place. And it just
[21:01] Speaker 1: seemed to resonate that menu and an approach to food
[21:05] Speaker 1: like that in Lincoln Park, you know, just given the
[21:07] Speaker 1: park-like setting. And we had built the building out. It
[21:11] Speaker 1: had been a very workmanlike, just shed almost. We had
[21:14] Speaker 1: built it out in the arts and craft prairie style.
[21:18] Speaker 1: Seemed to be, you know, to fit with sort of
[21:20] Speaker 1: our idea of the craft approach to food and also
[21:23] Speaker 1: the vintage heritage and location of the building. So we
[21:28] Speaker 1: really started what we call a sustainable dining, but we
[21:31] Speaker 1: started what you'd call farm-to-table now. And at the time,
[21:35] Speaker 1: most people didn't kind of know what to do with it.
[21:38] Speaker 1: I mean, we would get our sign, the tagline in
[21:40] Speaker 1: our sign was North Pond Seasonal American Dining. And we
[21:44] Speaker 1: would get people that would call like, you know, oh,
[21:46] Speaker 1: what season are you open? We started doing, on the menu,
[21:49] Speaker 1: we started listing farmers. And people were like, who's this
[21:52] Speaker 1: Mickey Klug guy? And what's a Mickey Klug pear? You know,
[21:55] Speaker 1: that kind of thing. So it's actually, it's really warming
[22:01] Speaker 1: to see, you know, how that whole movement has taken off.
[22:04] Speaker 2: Oh, yeah.
[22:05] Speaker 1: And at the time, I mean, our chef really embraced this,
[22:09] Speaker 1: even more so than I had originally proposed, really embraced it.
[22:13] Speaker 1: became very involved in this movement. He was on the,
[22:17] Speaker 1: you know, the Slow Food Board. He was one of
[22:20] Speaker 1: the founders of the Green City Market. Really helped because
[22:24] Speaker 1: now we have a network now of close to 100
[22:28] Speaker 1: small local craft farmers and producers, you know, fishers and
[22:33] Speaker 1: cheesemongers and stuff like that. And at the time, that
[22:37] Speaker 1: supply network didn't exist. And these are not the 1,200
[22:42] Speaker 1: acres of corn, third-generation farmer in Iowa. This is the
[22:46] Speaker 1: guy who got kicked out of the Ph.D. program at
[22:50] Speaker 1: sociology department at Northwestern and now is farming organic beets
[22:53] Speaker 1: in upstate Wisconsin. So it's a really interesting movement, just
[23:01] Speaker 1: shift in the whole agricultural industry too. I mean, it's
[23:04] Speaker 1: still a very tiny part of it, but these farmers
[23:07] Speaker 1: pretty much didn't exist. And our chef, he had trained
[23:11] Speaker 1: in France. So the theme originally was a very classic
[23:15] Speaker 1: French preparation with this theme of sustainable dining. And he
[23:20] Speaker 1: was with us for 20-something years, left, talk about, you know,
[23:25] Speaker 1: good timing. He left in December of 19. And when
[23:31] Speaker 1: there was one guy coughing into his egg drop soup,
[23:33] Speaker 1: you know, and two months later the whole world shuts down.
[23:37] Speaker 1: The third chef we hired is much more of a
[23:40] Speaker 1: younger guy, much more of an international approach. And the
[23:44] Speaker 1: menu for the last four or five years has been
[23:48] Speaker 1: much more eclectic, much more international, and not as sort
[23:52] Speaker 1: of classically French. So fine dining, but a very different
[23:58] Speaker 1: take on it.
[23:59] Speaker 2: I'm going to ask a very direct question, but what
[24:01] Speaker 2: are the profit margins actually like for a higher-end restaurant?
[24:06] Speaker 1: I think the weather's going to be really good this week.
[24:09] Speaker 2: No, but, like, I get these different senses. So a
[24:12] Speaker 2: lot of people will say, like, oh, never start a
[24:14] Speaker 2: restaurant because it never makes money. But then you see
[24:16] Speaker 2: these restaurants that are incredibly popular in New York, and
[24:20] Speaker 2: people are paying insane prices, and they're all full every night,
[24:22] Speaker 2: and you think they must be making money.
[24:24] Speaker 4: Otherwise, no one would do this.
[24:25] Speaker 1: On an economic basis— The restaurant business is one of
[24:29] Speaker 1: the worst businesses to ever get in. I mean, just
[24:31] Speaker 1: the base economic, I'm talking about the independent, particularly fine dining.
[24:35] Speaker 1: It's one of the worst industries to ever, ever get into.
[24:38] Speaker 1: And a couple of things. The first is it's, it's hyper-competitive. There's,
[24:43] Speaker 1: there's no barriers to entry. Anybody can get into it.
[24:46] Speaker 1: It's also, there's a lot of entry into the restaurant
[24:50] Speaker 1: business from people who don't have access, you know, talented,
[24:54] Speaker 1: hardworking people. but who don't have access to the finance
[24:58] Speaker 1: world or the banking world. You know, someone who's really smart,
[25:01] Speaker 1: who's a first-generation immigrant, did not go to, you know, Wharton. And,
[25:06] Speaker 1: you know, they're a smart, talented, hardworking guy. You can
[25:08] Speaker 1: go start a restaurant. So it's very, very competitive. No
[25:12] Speaker 1: barriers to entry. It's very difficult to build a moat
[25:15] Speaker 1: around your business. There's nothing you can do that's proprietary.
[25:19] Speaker 1: You come up with the latest croissant donut mashup.
[25:23] Speaker 4: And everyone has it around the world.
[25:24] Speaker 1: And everyone has it down. And then the last thing
[25:28] Speaker 1: is that if you are intent on obeying the law,
[25:32] Speaker 1: you're going to operate at a 5%, 10% deficit to
[25:36] Speaker 1: all your competitors. So if you're going to pay attention
[25:38] Speaker 1: to labor laws, immigration laws, overtime laws, things like that,
[25:44] Speaker 1: you are operating at a serious deficit to the rest
[25:46] Speaker 1: of the field. And there has been a little bit
[25:49] Speaker 1: of a reckoning in the industry, but it was an
[25:52] Speaker 1: industry that wage theft, overtime abuse, things like that were
[25:57] Speaker 1: just absolutely rampant. There has been, if you're looking at
[26:01] Speaker 1: sort of changes in this business in the last four
[26:05] Speaker 1: or five years, there has been, and some of it
[26:07] Speaker 1: started with sort of the Me Too movement. You talk
[26:10] Speaker 1: to any woman who's ever been in the restaurant business,
[26:13] Speaker 1: and I don't care whether she's front of the house,
[26:15] Speaker 1: back of the house, cook, waitress, bartender, whatever. I guarantee
[26:19] Speaker 1: you that if she's been in the business for six months,
[26:21] Speaker 1: she's got horror stories to tell you about harassment in
[26:24] Speaker 1: the industry. And that is finally, I would never say
[26:29] Speaker 1: it's eliminated, but people are starting to get held to
[26:32] Speaker 1: account for that. And you see a lot of high-profile
[26:35] Speaker 1: chefs who are getting bounced out of their jobs. And
[26:37] Speaker 1: so that's a good thing. And the same thing with
[26:39] Speaker 1: the abuse of all the labor laws. And a lot
[26:43] Speaker 1: of it was predicated on it was an industry that
[26:48] Speaker 1: was filled with a lot of illegal immigrants. And these
[26:51] Speaker 1: are people that you can abuse and not get called
[26:53] Speaker 1: for it because they're not going to go to the
[26:55] Speaker 1: labor board and complain. Oh, and then the final thing
[26:58] Speaker 1: about why the restaurant business is tough. You never want
[27:02] Speaker 1: to be in a business for economic reasons when you
[27:05] Speaker 1: are competing with people who are in there for non-economic reasons.
[27:09] Speaker 1: It's the same. It would be the equivalent of sports franchises.
[27:13] Speaker 1: You don't spend $ 12 billion to buy the Dodgers because
[27:17] Speaker 1: you think they have great cash flow. You're spending that
[27:20] Speaker 1: money because you're a billionaire and you've got huge ego.
[27:23] Speaker 1: And it's a game of like hot potato. In five years,
[27:26] Speaker 1: you want to sell that franchise to someone else and
[27:28] Speaker 1: the value has gone up. But there's a lot of
[27:31] Speaker 1: people who made money in other fields. If you're a
[27:38] Speaker 1: doctor and you've made millions of dollars and you're looking
[27:42] Speaker 1: for something fun to do, you would never think like, oh,
[27:45] Speaker 1: I'm going to go buy an auto towing business. No,
[27:50] Speaker 1: because you don't know anything about toys.
[27:52] Speaker 4: Right.
[27:53] Speaker 1: But everyone thinks that, one, just because they dine out
[27:57] Speaker 1: and have preferences when they dine out, they think they
[28:00] Speaker 1: can run a restaurant or start up a food business.
[28:04] Speaker 1: My mother's got the greatest chocolate chip cookie recipe. Therefore,
[28:09] Speaker 1: I should have a chocolate chip cookie company. So it's
[28:12] Speaker 1: very different. And also, people have this idea. I talk
[28:16] Speaker 1: to friends, and their idea is, That I go in
[28:21] Speaker 1: on Saturday night, I hang out at the bar, greet friends,
[28:23] Speaker 1: buy people drinks, have a drink at the end of
[28:25] Speaker 1: the bar myself, and then go home. And that's the
[28:28] Speaker 1: exact opposite. Running the restaurant business is six o'clock on
[28:32] Speaker 1: a Sunday morning, unclogging the drain. That's the restaurant business.
[28:36] Speaker 1: So there's a lot of sort of ideas that it
[28:38] Speaker 1: is somehow, you know, glamorous and cool and fun. And yeah,
[28:42] Speaker 1: there can be parts to that, but that's a pretty
[28:45] Speaker 1: small part of the business.
[28:46] Speaker 3: It's sort of the lack of everyone thinking they could
[28:48] Speaker 3: run a restaurant. It's like everyone thinks they could do
[28:50] Speaker 3: a podcast because they have opinions.
[28:51] Speaker 4: They're like, I have takes.
[28:53] Speaker 1: I can do that. That's a good analogy.
[28:54] Speaker 2: Everyone can do a podcast. It's just they might not
[28:57] Speaker 2: be very good.
[28:57] Speaker 4: Right, right. They're like, oh, that seems easy. I can
[29:00] Speaker 4: run my mouth.
[29:01] Speaker 1: And the proof of all this is, and there's very
[29:04] Speaker 1: good statistics on it. Wharton has great statistics. The SBA
[29:07] Speaker 1: has great statistics. The failure rate for restaurants is abysmal.
[29:12] Speaker 1: And the figures that I have seen are for the
[29:14] Speaker 1: independent fine dining restaurant that as a whole, that industry
[29:18] Speaker 1: has a negative return. So yes, there are people who
[29:21] Speaker 1: hit it big, make lots of money. And for every
[29:24] Speaker 1: rich Melman that's out there that's making boatloads of money
[29:27] Speaker 1: in the restaurant business, there's 40 other guys you don't
[29:30] Speaker 1: know their names because their restaurant closed and now they're
[29:33] Speaker 1: back to being a dentist or whatever they did before.
[29:35] Speaker 3: So without going into exactly what your profit margins are.
[29:56] Speaker 3: But like, maybe you could talk about like theory of
[30:00] Speaker 3: menu design. Cause there are, there are these things that
[30:03] Speaker 3: people say, Oh, you only make your money on wine
[30:06] Speaker 3: or something like that. What is like this sort of
[30:09] Speaker 3: like you construct a menu. What are the principles of
[30:12] Speaker 3: menu constructing and where do the profits come from on
[30:15] Speaker 3: that menu?
[30:15] Speaker 1: Well, a step back just one second is the profit
[30:20] Speaker 1: margin for restaurants is post-pandemic, it's probably seriously negative. You know,
[30:24] Speaker 1: you had three years where pretty much everybody lost money
[30:27] Speaker 1: and even the recovery hasn't been very good. But in
[30:30] Speaker 1: terms of profitability, menu mix and things like that, there's
[30:35] Speaker 1: one of the biggest sea changes in the last like 23, 20,
[30:39] Speaker 1: 30 years is happening right now. And your statement about
[30:44] Speaker 1: restaurants making money on wine is absolutely true. We do
[30:47] Speaker 1: a prefix menu and it's $ 130, five courses, And I've got,
[30:52] Speaker 1: on a Saturday night, I've got nine to ten guys
[30:55] Speaker 1: in the kitchen in the pastry department who are preparing
[30:58] Speaker 1: that meal. And we've got waiters, back waiters, and busboys,
[31:02] Speaker 1: you know, serving the table. And that's for that $ 130 dinner.
[31:05] Speaker 1: If you're sitting at that dinner, now you order, our
[31:08] Speaker 1: average bottle of wine is about $ 110. You order a
[31:10] Speaker 1: bottle of wine from us, it takes the waiter two
[31:13] Speaker 1: minutes to walk over to the wine cellar, bring it back,
[31:15] Speaker 1: open it. and put it on your table. And the
[31:17] Speaker 1: profitability margin on that wine is about the same as
[31:21] Speaker 1: the food with almost none of the associated costs. Now,
[31:25] Speaker 1: the thing that is kind of got every restaurateur nervous
[31:30] Speaker 1: as hell, and I'll use our figures as an example.
[31:35] Speaker 1: We've been in business almost 30 years. For the first
[31:38] Speaker 1: 28 years, our liquor wine sales, and we're almost exclusively wine,
[31:44] Speaker 1: our wine sales were just a hair over 33%. So
[31:47] Speaker 1: between 33 to 34% every year, like clockwork. In the
[31:51] Speaker 1: last 18 months, that has dropped to 24%. That is
[31:56] Speaker 1: a huge deal because that 8% was the most profitable
[32:00] Speaker 1: sales that we did. And people just are not drinking
[32:04] Speaker 1: like they used to, particularly our younger guests.
[32:06] Speaker 2: I was going to ask, is this the generational.
[32:08] Speaker 1: Shift that we hear about? I mean, some of it
[32:10] Speaker 1: is just people, you know, for health, they're not drinking.
[32:13] Speaker 1: A lot of it also is that people are, you know,
[32:16] Speaker 1: there's an entire industry, you know, the cannabis CBD industry
[32:20] Speaker 1: out there. And you're just starting to see that work
[32:23] Speaker 1: into menus with Lollapalooza this year for the first year
[32:28] Speaker 1: had THC margaritas. So you're starting to see, you know,
[32:31] Speaker 1: things like this show up on menus. We've got a
[32:35] Speaker 1: proposal with the Park District to add them to our menu.
[32:37] Speaker 1: We haven't been approved for it yet. We just put
[32:40] Speaker 1: in a non-alcoholic cocktail menu. But the fact that people
[32:45] Speaker 1: aren't drinking is a really big problem for most restaurants.
[32:49] Speaker 2: Do you see any impact from GLP-1s?
[32:51] Speaker 1: Not specifically because it's hard to identify that versus more global,
[32:57] Speaker 1: other sort of megatrends. I'm sure it is affecting. I mean,
[33:03] Speaker 1: what is it, like 20% of the country is on GLP?
[33:07] Speaker 1: I don't remember the number now, but it's a pretty
[33:09] Speaker 1: significant amount. And I just can't imagine that you're on
[33:13] Speaker 1: a GLP and you want to come in and have
[33:16] Speaker 1: five courses and then finish that with these incredible desserts
[33:19] Speaker 1: we make and then also have a glass of port.
[33:22] Speaker 1: It seems a little incongruous.
[33:24] Speaker 2: Maybe there's still room for a CBD-infused pastry of some sort.
[33:28] Speaker 2: I'd be interested.
[33:30] Speaker 4: Well, the THC infused.
[33:32] Speaker 2: Margaritas, yeah.
[33:32] Speaker 4: Well, that gets people eating more.
[33:34] Speaker 1: Yeah, that's true.
[33:35] Speaker 3: So that might create a positive flywheel.
[33:38] Speaker 1: All right.
[33:38] Speaker 3: It's October 2026 right now. What do you give us
[33:42] Speaker 3: like a little snapshot of what you're seeing in terms
[33:45] Speaker 3: of labor availability, food costs, like the sort of like
[33:48] Speaker 3: basic like economic measures that would go into it?
[33:51] Speaker 1: The restaurant business and those two particular items have been
[33:56] Speaker 1: hit with inflation and scarcity. probably more than any other industry.
[34:02] Speaker 1: Labor has gotten crazy. We pay about 30% more for
[34:07] Speaker 1: starting cooks than we did three, four years ago. And
[34:11] Speaker 1: food costs have just gone through the roof. It's one
[34:13] Speaker 1: of the highest inflation sectors in the economy. Although we
[34:20] Speaker 1: have not had as much of an effect as some
[34:23] Speaker 1: other restaurants have had because we have a whole network
[34:27] Speaker 1: of of suppliers and farmers that to some extent are
[34:32] Speaker 1: isolated from the global economy. So when we're dealing with
[34:37] Speaker 1: Joe's Organic Artichokes from Wisconsin, this man's, his cost basis
[34:42] Speaker 1: is not being affected by tariffs or.
[34:46] Speaker 1: Straight or Hormuz. Yeah, straight or Hormuz, or generally, you know,
[34:51] Speaker 1: not as affected by things like diesel costs and things
[34:53] Speaker 1: like that. But the inflation in this industry has been incredible.
[34:58] Speaker 1: And there's no sort of lag between our sales and
[35:02] Speaker 1: our costs. Everything that we put on the plate, we
[35:04] Speaker 1: bought that week. So when there's inflation, we see it immediately.
[35:08] Speaker 1: We've raised prices four times in the last two years,
[35:13] Speaker 1: about every six months, which we used to sort of
[35:15] Speaker 1: balance it out and do it once a year, unless
[35:17] Speaker 1: there was a specific item that might have particularly whined
[35:21] Speaker 1: that was on allocation or something like that. But generally,
[35:24] Speaker 1: the prices would, once a year, we'd review it. And 1%, 2%
[35:29] Speaker 1: inflation economy, that's not a big deal. But when you
[35:34] Speaker 1: have a 3%, 3.5% inflation, and then 7% inflation in
[35:37] Speaker 1: the food business, you really had to stay on top
[35:40] Speaker 1: of that. And it's tough. I mean, going out, if
[35:43] Speaker 1: you and your partner come out to North Pond for
[35:45] Speaker 1: dinner and you have the wine pairing, It's going to
[35:48] Speaker 1: be $ 400 for the two of you. And you have
[35:51] Speaker 1: to do a lot to justify someone to spend $ 400
[35:54] Speaker 1: with you. So it really has forced us to kind
[35:57] Speaker 1: of up our game in terms of the things that
[35:59] Speaker 1: we do and how we treat our guests. And what
[36:02] Speaker 1: it has become is, you know, people don't dine at
[36:07] Speaker 1: North Pond because they're hungry. They dine because they want
[36:10] Speaker 1: the experience. But we have seen a little bit of
[36:13] Speaker 1: a trend where we're getting more and a higher percentage
[36:16] Speaker 1: of our guests are coming in for very special events
[36:20] Speaker 1: in their lives, the 25th anniversary, the 50th birthday, the
[36:24] Speaker 1: graduated from college, that kind of thing. We don't get
[36:27] Speaker 1: as many, hey, it's Thursday night, let's treat ourselves to
[36:31] Speaker 1: a really nice meal. It's becoming much more of an event.
[36:34] Speaker 2: So I wanted to ask about your other venture now,
[36:37] Speaker 2: which is the Spark Shared Kitchen. What's the difference between
[36:41] Speaker 2: a shared kitchen and a ghost kitchen?
[36:43] Speaker 1: Okay.
[36:43] Speaker 2: Is this rebranding?
[36:45] Speaker 1: It's some subtle changes. The similarity is that they're both
[36:49] Speaker 1: kitchen facilities that are used by multiple vendors and typically
[36:53] Speaker 1: owned by a third party. Ghost kitchens are typically thought
[36:57] Speaker 1: of as someone has a brand, whether it's Popeye's Chicken
[37:01] Speaker 1: or Joe's Italian Subs, and you open a small takeout-only
[37:05] Speaker 1: location and it's in a central facility. It's all set
[37:10] Speaker 1: up for very easy delivery to the DoorDashes and the
[37:13] Speaker 1: Uber Eats of the world. So it's really for... food
[37:17] Speaker 1: delivery companies. Now the shared kitchen model is a little different.
[37:21] Speaker 1: In there, we build out kitchens that people can use
[37:25] Speaker 1: for food businesses. The biggest use of them we have
[37:29] Speaker 1: is by caterers. So you have a small catering company,
[37:33] Speaker 1: you can come in and you can run a kitchen.
[37:34] Speaker 1: And we have two types of rentals too. We have
[37:37] Speaker 1: a couple fully equipped kitchens you can come in and
[37:39] Speaker 1: rent by the hour. So if you have a You know,
[37:43] Speaker 1: you have Tracy's granola and.
[37:46] Speaker 2: No, not granola. It'd be something else.
[37:48] Speaker 1: What would you make?
[37:48] Speaker 4: What would be your thing, Tracy?
[37:50] Speaker 2: To Richard's point earlier, I'd probably make cookies because my
[37:52] Speaker 2: husband does have the best cookie recipe in the world.
[37:55] Speaker 1: You want to start a cookie business, you come in,
[37:57] Speaker 1: you rent our kitchen. You only need a kitchen maybe
[37:59] Speaker 1: five hours a week. You come in, you rent our kitchen,
[38:02] Speaker 1: you make your production, you can rent some storage space
[38:04] Speaker 1: to us, but you're only paying us for those five hours.
[38:08] Speaker 1: We also have kitchens where you can come in and
[38:10] Speaker 1: you can rent this kitchen and And we've got some
[38:12] Speaker 1: small ones that are 400 feet and they go up
[38:14] Speaker 1: to 1,600 feet. You can rent that kitchen. You have
[38:18] Speaker 1: access to it 24-7. You've got your own key. Everything
[38:21] Speaker 1: in there is yours. And we provide you with a kitchen.
[38:23] Speaker 1: And the kitchen has the very basics, the hood, the sinks,
[38:27] Speaker 1: the flooring, the floor drains, all that stuff. You just
[38:30] Speaker 1: have to bring in all your equipment. Now, the advantage
[38:34] Speaker 1: of that is if you were to go out and
[38:36] Speaker 1: open a cookie store, you'd have to go rent a
[38:39] Speaker 1: licensed facility. And, you know, you could spend months looking
[38:43] Speaker 1: for that. Landlords typically want a three to five year
[38:46] Speaker 1: minimum rent. Then you're going to have to put a
[38:47] Speaker 1: deposit down. You're going to have to go through the
[38:50] Speaker 1: whole licensing process. Minimum, it's going to take you six
[38:53] Speaker 1: months to do it. The great thing about shared kitchens
[38:56] Speaker 1: is you can come in and you can open basically
[38:59] Speaker 1: for the price of your ingredients and the license. And
[39:02] Speaker 1: the license, you can go down to City Hall, you
[39:04] Speaker 1: get a shared kitchen user license, and you get that
[39:07] Speaker 1: on Monday and you can come Because we have a
[39:09] Speaker 1: shared kitchen operator license. You get the license on Monday
[39:13] Speaker 1: and on Tuesday you can be in business. So it
[39:15] Speaker 1: is a great way to encourage entrepreneurship. It's one of
[39:19] Speaker 1: the better things that Citi has done over the last
[39:23] Speaker 1: like five, ten years.
[39:24] Speaker 3: You know what it reminds me of, Tracy? The shared
[39:27] Speaker 3: child care space in Mount Airy.
[39:29] Speaker 2: Oh, yeah.
[39:29] Speaker 3: Because if you think of, like, a child care entrepreneur and, like, okay,
[39:32] Speaker 3: they want to take care of children, but do they
[39:34] Speaker 3: want to spend their time thinking about, you know, licensing and, like,
[39:37] Speaker 3: the building codes, et cetera. So let another entity just
[39:40] Speaker 3: sort of do all this sort of blocking and tackling with, like,
[39:43] Speaker 3: all of that and then just, like, do the actual
[39:46] Speaker 3: business that you, like, So talk to us a little
[39:50] Speaker 3: bit of, I guess, like the economics of that business
[39:54] Speaker 3: or like scaling that up or how easy has it
[39:57] Speaker 3: been to get tenants into the kitchen?
[40:00] Speaker 1: It has been very easy getting tenants. The biggest problem
[40:03] Speaker 1: with it, it's a very capital intensive business. Building restaurant kitchens,
[40:09] Speaker 1: short of building hospital rooms, they're about the most expensive
[40:13] Speaker 1: on a square foot basis thing you can do. But
[40:16] Speaker 1: the economics are so compelling on the other end. I'll
[40:18] Speaker 1: give you one example. We have a small 800-square-foot facility,
[40:23] Speaker 1: and we just got it licensed. And it doesn't have
[40:26] Speaker 1: a hood on it. It was made for– I had
[40:29] Speaker 1: three people approach me. They were going to start ice
[40:32] Speaker 1: cream businesses. We went out, built this facility out. And, again,
[40:36] Speaker 1: it doesn't have a hood, so it wasn't as expensive
[40:38] Speaker 1: as most kitchens. And we just ordered a $ 26, 000 five-gallon
[40:43] Speaker 1: industrial ice cream machine for it. Now, these people who
[40:48] Speaker 1: are doing it, one's doing a specialty Hispanic-themed ice cream,
[40:52] Speaker 1: another's doing one with Asian-flavored ice creams. You can come
[40:56] Speaker 1: in in a day and you can make 200 gallons
[40:59] Speaker 1: of ice cream, put them in the deep freeze, plus
[41:01] Speaker 1: your ingredients. You spend $ 1, 000 with us or something along
[41:04] Speaker 1: those lines. where it would be almost impossible to do
[41:08] Speaker 1: that on your own without a complete facility. And you'd
[41:11] Speaker 1: have to go buy that $ 20, 000 ice cream machine, or
[41:14] Speaker 1: you'd buy a $ 5, 000 ice cream machine that has one
[41:19] Speaker 1: gallon capacity and you can make 10 gallons in a
[41:21] Speaker 1: day versus making 50 or 100 gallons in a day.
[41:25] Speaker 1: So the economics are very compelling. Anytime you've got a
[41:29] Speaker 1: lot of capital costs involved, and an individual would use them,
[41:34] Speaker 1: you know, two, four, six, eight hours a week. And
[41:37] Speaker 1: you can get the scale of having three, four, whatever
[41:40] Speaker 1: number of people using them. It's incredibly efficient. And all
[41:44] Speaker 1: the associated costs with it, the licensing, the, you know,
[41:48] Speaker 1: the property taxes, the search costs to find a facility.
[41:52] Speaker 1: So the shared kitchens are It's a great little engine
[41:56] Speaker 1: for the city's economy.
[41:58] Speaker 3: Just real quickly, could they theoretically be used as ghost kitchens?
[42:03] Speaker 1: Oh, yeah, absolutely. Absolutely. The other difference between ghost and
[42:07] Speaker 1: shared kitchens, ghost kitchens typically tend to be smaller and
[42:12] Speaker 1: in much more desirable real estate because they need to
[42:15] Speaker 1: be within five. Like there's one, I live in the
[42:17] Speaker 1: South Loop. There's one about three minutes south of us,
[42:20] Speaker 1: 22nd and 22nd. and Wabash. Now they can get to
[42:25] Speaker 1: the whole South Loop in, you know, in five minutes.
[42:28] Speaker 1: And there's 80,000 people living in the South Loop. Our
[42:31] Speaker 1: facility is in Brighton Park. It's a 60,000 square foot warehouse.
[42:36] Speaker 1: And we're, you know, two thirds of the way to
[42:39] Speaker 1: Midway Airport. And unless you were on the way to the,
[42:41] Speaker 1: got lost on the way to the airport, you'd never realize.
[42:44] Speaker 1: We're an industrial area. You could never run a ghost kitchen.
[42:47] Speaker 1: There's just not the density of apartments and residents. So that's,
[42:51] Speaker 1: that's another one, just the location. Our building is, on
[42:54] Speaker 1: a square foot basis, is probably a third of the
[42:57] Speaker 1: value of what their buildings are.
[42:58] Speaker 2: You mentioned licensing for the shared kitchen. And I feel
[43:02] Speaker 2: like whenever we talk to restauranteurs, dealing with the city
[43:05] Speaker 2: and regulations always seems to be some form of complaint.
[43:12] Speaker 2: Has it changed over the— Yeah, trauma. Shared trauma. Has
[43:16] Speaker 2: it changed over the years? Has it gotten better, the
[43:17] Speaker 2: sort of red tape issue?
[43:19] Speaker 1: Absolutely. Okay. I noticed some real changes when Rahm was mayor.
[43:24] Speaker 1: I mean, the joke was that eighth floor, which is
[43:26] Speaker 1: where all the licensing is, eighth floor was the department
[43:29] Speaker 1: of no. I mean, they would just go out of
[43:31] Speaker 1: their way to find reasons to tell you no. And
[43:34] Speaker 1: it was just an ungodly, burdensome task getting a license.
[43:38] Speaker 1: It is much, much better now, but it is still
[43:42] Speaker 1: not a real efficient process. So it went from a
[43:45] Speaker 1: D minus, now it's a B minus. But generally, when
[43:50] Speaker 1: you go to City Hall now, they are trying to
[43:52] Speaker 1: help you open that business. So there's still a lot
[43:56] Speaker 1: of little vagaries in the licensing and things like that.
[43:59] Speaker 1: But the tone when you talk to people and you
[44:01] Speaker 1: work with them, they're generally much more supportive. And they
[44:05] Speaker 1: are trying to get your business open.
[44:07] Speaker 2: All right, Richard, thank you so much for coming on
[44:09] Speaker 2: All Thoughts. Really appreciate getting your perspective.
[44:12] Speaker 1: Oh, glad to be here. Glad it was very enjoyable.
[44:15] Speaker 1: Thank you.
[44:28] Speaker 2: Joe, that was really enjoyable.
[44:29] Speaker 4: That was so fun.
[44:30] Speaker 2: I thought the comments about restaurants being a competitive industry,
[44:34] Speaker 2: I mean, kind of obvious, but this idea that it's
[44:37] Speaker 2: very hard to draw a moat around your business, especially
[44:40] Speaker 2: when popularity tends to be fleeting for a lot of
[44:43] Speaker 2: the new hotspots, right?
[44:45] Speaker 3: Yeah, and the fact, and I guess it's obvious, but
[44:48] Speaker 3: I hadn't thought of it, that there are just a
[44:49] Speaker 3: lot of people in it, I guess, quote, for the
[44:51] Speaker 3: love of the game, unquote, who are.
[44:53] Speaker 4: Not in it because.
[44:54] Speaker 2: So you're not competing in the same game, right? Because
[44:56] Speaker 2: they don't care about making money.
[44:57] Speaker 3: Yes, you figure like some, you know, athlete or something
[45:01] Speaker 3: like that, for example, and people want to have their,
[45:04] Speaker 3: it's kind of like their clubhouse or something like that,
[45:06] Speaker 3: or some of these vanity endeavors where it's like, oh,
[45:10] Speaker 3: I'm okay losing money. That's really hard to compete against.
[45:13] Speaker 4: And then, of course... The idea.
[45:16] Speaker 3: That it's hard to be competitive if you want to
[45:19] Speaker 3: follow the law, which I think is a really big deal.
[45:22] Speaker 3: And the fact that if you're serious about immigration law
[45:25] Speaker 3: and all these things and proper overtime and all of
[45:28] Speaker 3: these things, that if you take these seriously, if you
[45:31] Speaker 3: want to do it well, you're really worsening your economics.
[45:35] Speaker 2: Yeah.
[45:35] Speaker 1: Also.
[45:37] Speaker 2: The shared kitchen idea is an interesting one because you
[45:39] Speaker 2: basically I guess you pool together all the capital for
[45:43] Speaker 2: that initial investment and the cost of the lease and
[45:46] Speaker 2: stuff like that. And then everyone can benefit from it
[45:48] Speaker 2: rather than having to go out and purchase their own kitchen.
[45:52] Speaker 2: Like you said, it's very similar to the Mount Airy example.
[45:55] Speaker 4: Totally.
[45:55] Speaker 3: Like if you wanted to start your cookie empire.
[46:00] Speaker 2: I would probably do something better than cookies for the record,
[46:02] Speaker 2: but my husband's cookie recipe is phenomenal and also a
[46:06] Speaker 2: source of great drama in our community.
[46:08] Speaker 3: And if you have a great cookie recipe, why do
[46:11] Speaker 3: you want to spend your time... on random things like
[46:14] Speaker 3: licenses and the health inspectors and all that stuff that
[46:17] Speaker 3: has nothing to do with whether your.
[46:18] Speaker 4: Cookie recipe is good.
[46:19] Speaker 2: Just focus on the cookies.
[46:20] Speaker 4: For real.
[46:21] Speaker 3: No, I think those types of businesses where you like identify,
[46:24] Speaker 3: I mean.
[46:25] Speaker 4: Some common constraint.
[46:26] Speaker 2: The other thing is like to Richard's point earlier about,
[46:29] Speaker 2: you know, like a Wharton grad versus a non-Wharton grad,
[46:32] Speaker 2: one person's competitive advantage might be they're just a really
[46:35] Speaker 2: good chef or they just have a really good feel
[46:37] Speaker 2: for flavors and actually they suck at maybe identifying residential
[46:43] Speaker 2: real estate, signing leases, sourcing capital, and all those other things.
[46:48] Speaker 2: They suck at Excel, basically. And so if you can
[46:51] Speaker 2: divide some of that up, it seems like an interesting proposition.
[46:55] Speaker 3: No, there's so much in there. Now that I think
[46:57] Speaker 3: about it, we should do an episode on what you
[46:59] Speaker 3: learn in business school. Because actually, I have no idea
[47:01] Speaker 3: really what you learn in business school. And hearing about
[47:05] Speaker 3: what you learn and how that's evolved over time, that's
[47:07] Speaker 3: super interesting right there. We could have talked for a
[47:09] Speaker 3: long time just about the emergence of all these places
[47:12] Speaker 3: that teach you how to be an entrepreneur rather than
[47:16] Speaker 3: just sort of. You know, go into middle office at
[47:18] Speaker 3: Citigroup or something. There was just a lot in there.
[47:20] Speaker 3: Like I said, we could talk for hours with him.
[47:22] Speaker 2: Absolutely. Shall we leave it there for now?
[47:24] Speaker 4: Let's leave it there.
[47:25] Speaker 1: Okay.
[47:25] Speaker 2: This has been another episode of the All Thoughts Podcast.
[47:27] Speaker 2: I'm Traci Allaway. You can follow me at Traci Allaway.
[47:30] Speaker 3: And I'm Joe Weisenthal. You can follow me at The Stalwart.
[47:33] Speaker 3: Follow our producers, Carmen Rodriguez at Carmen Armand, Dashiell Bennett
[47:37] Speaker 3: at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano
[47:40] Speaker 3: at Kevin Lloyd Lozano. And for more OddLots content, go
[47:43] Speaker 3: to Bloomberg.com slash OddLots for the daily newsletter and all
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[48:36] Speaker 2: Thank you.

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