EXCLUSIVE: Boloco CEO shares brutally honest tale about making it in the restaurant biz
By John Pepper, CEO, Boloco
"They just ain't what they used to be! Very unfortunate, really."
I woke up this morning to a beautiful sunrise on the Atlantic. My second-to-last morning of kids' spring break. Six days in. I'm finally refreshed and rejuvenated. Amazing what fresh Florida beach front air, warmth, sunshine and a little distance from stress can do for one's outlook. I am not looking for sympathy here… I'm blessed to have any time on a beach, with family, removed from New England's often harsh spring weather for a week.
But there's still reality. When you own and run a company, reality doesn't care where you are or if you think you are relaxing. And so, along with the beautiful sunrise, I also woke to this short series of tweets (lesson… don't put your damn phone in your bedroom… ever). And as the tweeters honestly share, with seeming regret, Boloco really isn't what it used to be — both real and perceived.
Some of the real differences are obvious, and are mostly fixable with time and money. As we turn the corner on a horrendous financial run from 2013-2016 (2017 is looking better thankfully) maybe we'll actually — finally — earn enough money necessary to pull off some of these fixes.
Tired, somewhat outdated restaurants, chipped paint, dings in walls, worn furniture — all obvious differences between "what we used to be" and who we are today. Updated menu items would be a nice touch, though our ingredients and recipes haven't changed — at all — if anything we've continued to upgrade both since I returned to Boloco in 2015.
As much as I have been a traditional "hater" of the "LTO" (limited time offer), for all but a few chosen concepts (In-N-Out, Chipotle, perhaps) new specials and variety are the name of the game. The holy grail is to develop a recipe, everyone loves it, it doesn't need to change for 50 years. Try counting those companies using your fingers, and you may not make it to your second hand.
Better technology that doesn't fail so often and constrain our once beautiful dreams to mini nightmares of customer recovery would also be an awesome improvement. All of these are real… we are struggling with much of this stuff.
On the perception side, better messaging and branding to show that what Boloco does behind the scenes is as good or better than our far better-resourced nouveau, cooler-than-everyone-except-the-next-new-competitor competitors. We still source ingredients carefully, give a shit about the environment, and take better care of our people than almost anyone else in the business. We can't assume people know what's truly inside our bowls and burritos, or our culture and vision, if we don't explicitly say so. And we still haven't mastered the professional picture of a perfectly crafted bowl placed on a marble countertop with the camera angle coming in from nearly directly above — that alone could put us back on top, or so social media experts claim.
It's the subtle differences and changes, however, that are the most dangerous threat to our future. The most precarious of all of them? Our own outlook on our own future. How we view ourselves versus our new neighbors. How we stack ourselves up against the "Jones's" of food and restaurants. You don't go through four years of business hell, of no less than weekly seeing the abyss where complete failure seems imminent, without having some scars and remaining open wounds as a result. Fear is powerful, and even a business that once thrived can let fear creep in and take over, starting at the top.
For what seemed an eternity (the last 22 months) I would too often wake up to a negative bank balance, at the lowest of times having to beg our teams to make an extra deposit early in the morning to climb back to zero so the bank wouldn't bounce checks. Too many wire transfers from a once impressive but quickly diminishing personal bank account. A thankless existence. I was not appreciating beautiful sunrises, be assured. You could see the sun rising and setting and the moon too, but you couldn't feel any of it. Numbness only.
Survival is a different kind of challenge than growth. It requires a different mindset than the one that prevailed from 2001, or so to 2013 (2000-2001 were very much survival years, 1997-1999 were just moronic, know-nothing years). In survival mode, I've always strangely been more comfortable. I find it easier, ironically. The options on what to do next are fewer, and therefore decisions are more straightforward. But you don't really get anywhere interesting. You get back to where you were, if you are lucky. You are frequently reminded that you are either treading water or just under the surface breathing through a straw — often feeling like someone or something(s) (usually a few bad landlords, big banks and unforgiving governmental bureaucracy) is(are) pushing you under and simultaneously pinching the straw. But at least its real. And its clear. You know you have to survive. You know you might drown. You know you have to get air, at least I do.
Without money, without resources, certain things feel as though they have to be sacrificed. Or you can just give up. That seems to happen a lot. But I was clear on what I would not sacrifice, even if it meant failure… I certainly wasn't ready to give up without a fight.
My non-negotiables since repurchasing Boloco in June 2015 have been two-fold: our reputation/integrity and our highest-in-industry wages.
We were literally millions of dollars in arrears when I took over. Negative cash position by nearly $300,000 and nearly $15,000,000 in monies owed. For full transparency, here's the balance sheet from May 31, 2015.
Bankruptcy seemed to be the only likely "survival" strategy for the prior management and ownership team in the months leading to my return, and I decided I didn't want to see that happen from the sidelines without trying. I felt a strong urge to step back in and at least attempt to get things back on track.
I moved quickly, at the time of the transaction and in the months that followed. During the first 180 days, we went from over $3,000,000 in vendor payables to less than $1,000,000. The few who worked with us (ie. forgave a portion of what was owed due to the extreme circumstances) we will always be indebted to… the others, well, I suppose they justify their firm stance and demand for full payment as "it's just business."
A month prior, had I not retaken the reins, they may well have been begging for 10 cents on the dollar in bankruptcy court. I assumed they would know they had been "saved" by my irrational commitment and willingness to assume such risk, and that they would perhaps act accordingly, with some consideration and perhaps even a little gratitude for the magically improved scenario related to monies owed to them. I was mostly wrong. Regardless, we remember — at least I remember — how people and businesses treated us when we needed help most. I think we all do, as businesses and as individuals. We know who was there for us when we asked for a hand — we know who wasn't.
Highest-in-industry wages but still pathetically low
With our affairs in order and personal and business risk at nosebleed levels as a result, in December 2015, we turned to our team. While minimum wages in Massachusetts and other states were notably on the rise, they still didn't come close to what MIT considers a livable wage. Having used that MIT benchmark as our compass — our true north — perhaps naively at times, we made a team decision to increase wages across the board by over 10 percent. Just as we were getting out of the woods from a vendor debt standpoint, we were betting the company on the time-tested Boloco strategy that going big on behalf of our people would put us back in the black. If our people know they are taken care of, they will be that much more motivated to delight and dazzle our guests… sales would rise. And voila, turn-around complete.
Quietly, on Christmas Eve 2015, we implemented the raises. Little fanfare. For the first time since inception, Boloco paid its people, on average, the equivalent of the MIT livable wage.
What followed was unexpected, scary, and extraordinarily disappointing.
We lost control of the business — the cost side of the business. Sales did increase for a time through the first half of 2016, but we ran a horrible business. And we lost a LOT of money quickly. As bank account balances typically stay positive starting on Red Sox opening day through early November, I had anticipated a calming of the nerves, a period of relative relaxation, so to speak. A chance to consider next steps before the brutal months of winter took their toll once again on our bank account balances. Could we be like the most responsible of squirrels and store enough nuts away for the winter of 2016-2017?
By April 19, 2016, I had my answer. A definitive, undebatable, all capital letters NO.
Despite pulling all of the "doing the right thing" levers, the business was in a free fall. We gained $700,000 in sales and spent an extra $500,000 in labor to do it. After all other expenses, those extra sales actually cost us hundreds of thousands.
It took me a few weeks to admit it to myself, but I knew we couldn't stop the bleeding fast enough to get enough of those nuts stored away for winter. So on June 18, I brought the dilemma to the team. We could act like nothing was wrong, sail through summer (which doesn't take much skill… you have to try hard to lose money in summer months) and then face the music in the fall. Or, we could take action now and try to right size the company by selling some assets, paying off debt, and fully shutting down any corporate activities that aren't directly related to restaurant operations. Yes — that meant our beloved offices overlooking the Boston Common were going to have to go. Yes — that meant sucking up our pride and putting some of our best locations on the block.
The story of how and why our friends at B.Good purchased five of our restaurants is better left for another time or by reading here. But just when it needed to happen, we completed the sale of Northeastern (2000-2016), Natick (2007-2016), Burlington VT (2008-2016), Concord NH (2008-2016) and Wellesley (2012-2016). We also closed our offices for good and through natural attrition have not one person on a "corporate staff" other than, of course, yours truly. My job covers the gamut, these days — I am still CEO (which simply means the buck stops with me), CFO and Controller, CMO and Social Media intern, HR admin backup, and whatever else comes my way… essentially Chief Fire Fighter.
Matt Taylor, who joined us in 2004, is my first lieutenant, and honestly is the heavy lifter on a day-to-day basis. He does the hard restaurant stuff that someone must do while also leading and inspiring a team of 11 General Managers. And then there is our Catering Department (two) and our GMs, all of whom I admire and think the world of.
So while we are still working our way out of a jam, fighting for a life beyond 2016 and now into 2017, we are enjoying each other and living in a world where we trust each other as good-hearted, hard-working human beings each and every day. Never before have I believed in a team like I do ours at Boloco today. We are not, mind you, the most talented team of individuals in the restaurant business. We don't have smooth talkers or P&L experts or any of the traditional proficiencies most companies require. Instead, we are a team with the right mindset, where we all go into the game every day with a mindset of serving others at all costs, dazzling our guests and each other, and doing what's right for those around us. I sometimes think of the 1980 US Olympic Hockey Team — the right team for this specific job at the right time. That's our turnaround strategy
Turning it around?
And, as a final point, this part of the turnaround strategy at long last seems to be working. In the typically brutal quarter ended March 31 (because weather in New England is horrible and sales suffer accordingly), for the first time in 15 years, the company was profitable, and that's despite sales continuing to slump versus year ago. Our most recent balance sheet, while hardly something to brag about, is much improved. We remembered — finally — how to run our businesses responsibly without the benefit of investor money or constantly increasing sales masking our flaws and mistakes. We took "controlling costs" more seriously than ever… which is very, very different than the yo-yo pattern of "cutting costs" on food quality, wages, whatever, which we simply will not do.
As we enter the spring of 2017, the trees are still mostly bare. And Boloco mostly feels that way, too. It reminds me of Neil Young's "Old Man" at times. We have a number of suitors (the well-funded, mostly cool kind, and most of whom I respect immensely) circling our locations, and perhaps that will be the right call in the end, given that one can only sustain so much risk for so long before something has to give. But if we are lucky, and start letting our own outlook on ourselves catch up with our evolving and improving reality, and if — a very, very big if — our most loyal customers continue to visit us and love us for who we are today — blemishes, imperfections,and all — and grab a few others to join the club, we may be soon (2018?) talking about how to build back our mojo and set our sights beyond survival.
Because working this hard to get back to where we were — while necessary — won't be fulfilling in the long run. You, our customers and our team members, deserve more. I hope we begin delivering on bigger promises soon.
Cover photo: Boloco Facebook