Welcome And Guest Introduction

SPEAKER_00 0:00

Welcome to another edition of Given Ovation, the Restaurant Guest Experience Podcast. I'm your host, Zach Goates, and each week I chat with industry experts to uncover their strategies and tactics to help you create a five-star guest experience. This podcast is powered by ovation, the AI feedback and operations platform built for multi-unit restaurants. Learn what's actually happening in your restaurants and exactly how to improve while driving revenue. Learn more at ovationup.com. And today we have a legend of the industry, Michael Montagano. He is the CEO of Doghouse, but he is no newbie to uh the FB space. He was formerly CEO of Kitchen United. He's been a CFO, he's been a COO. And come to find out, he's actually like third generation food, not a foodie, but third generation in the food business. His grandfather came across the ocean and started a restaurant. Well, first of all, welcome to the podcast, Michael. Always fun to hang out, record it or not. Yeah.

SPEAKER_01 1:03

No, thank you, Zach. And thanks for having me on. Big fan of the podcast, huge fan of ovation in general, has been an incredible tool for us over the years and just excited to chat with you. You're an awesome human being.

SPEAKER_00 1:15

Well, thanks,

A Family Restaurant That Became Home

SPEAKER_00 1:16

man. And I want to talk about another awesome human being who started really started your journey in the food space, your grandfather. And I think that's so cool. For those who aren't listening or those who who aren't watching, there's a really cool sign behind Michael that says Casey's Restaurant. Talk to us about that.

SPEAKER_01 1:34

Yeah. So my grandfather and his brother immigrated from a small village in Italy and originally came into the Chicago area and jumped on the train looking for some work. Generally worked on the train and only made about 100 miles east and got off in a uh large Catholic community, most known for Notre Dame and South Bend, and noticed there was no Italian food and started a couple Italian restaurants. And what was so special about it is the food was obviously great. We all worked in it. Meatballs were rolled in my grandparents' basement, classic family restaurant story. But I'd say more so is it became the fabric of the community. It was where you took anyone for a birthday celebration. My grandfather came out with sparklers and the cake, the jukebox was pranked, the happy birthday. It is where truly everybody knew your name. And for a small community, it was truly a gathering ground. And that's what I love about restaurants. That's how I learned the industry. And it's the people that power it, the value that it adds to the community. And food is something that truly binds us all together. There's nothing better than sitting down and breaking bread with friends, strangers, family, new acquaintances, and what I believe makes the world tick and beat. And that's why it's been a no-brainer on my evolution within the space from a very young age.

Why He Tried To Avoid Restaurants

SPEAKER_00 3:03

So I'm assuming growing up in this, that's where you were just like, I know that I'm going to get into restaurants for the rest of my life, right?

SPEAKER_01 3:10

The answer is absolutely no. I think there's only so many days grinding the parmesan or slicing garlic or whatever it was. You know, you put your family to work in a tight margin business. And I thought, and I, but more so I watched the late hours my grandfather worked, you know, he was always tending bar until late in the evening, weekends, et cetera. And I thought, boy, that's a hard life. It's a hard way to make a living. And I thought, no way that this is how I'm going to spend my career. I ended up going to law school and I thought, I'm just going to get a job at the biggest firm, do what's easy, corporate America, et cetera. And my first day at the office, I got put in the MA and corporate finance group. And I go and talk to my boss, and he goes, You're going to work on the Catterton account exclusively, which is a big PE firm. And I did exclusively restaurant work. So I think they had me coined as like the restaurant guy. And so that was truly my segue, you know, outside of washing dishes in college and obviously working in my grandparents' restaurant growing up, my true segue into really understanding the restaurant business, but particularly its scale and the true business of the business. I did it for about five years, absolutely loved it. And that ended up being kind of the launch pad and the making a living, being in the hospitality space.

SPEAKER_00 4:30

How did you get from the legal side of things over to the finance op side, which then led you to the CEO side? Like the going from legal to finance op seems like it's a little bit of a jump there.

SPEAKER_01 4:42

Certainly a big jump. You learn so much actually practicing law in any discipline, particularly when it's MA and corporate finance, because you spend the first weeks or months of the deal really unpacking the company's history. It's, you know, understanding its contracts, its operating procedures, the legal provisions, management team, who stays, who goes, and kind of understanding everything about this company. And it was a fascinating way to start, is that you're kind of unpacking it in reverse, very mature company, and trying to help the buyer really understand the business from the studs. But what I learned from that is that getting brought in at the term sheet when the company was basically being sold at the end was a lot less rewarding than helping grow it or develop it. You know, I was kind of doing the autopsy after the fact as opposed to being part of the team that was adding and growing value. And so I thought, boy, I'd like to be on the earlier side of the company. And growing up in a family that my mother was a college professor and my dad an entrepreneur, the uh classic way is, well, go get more school, which we all know is probably not actually the best way to do it. But I went to business school, spent a couple years at U Chicago, learned a lot about finance, but more importantly, had a fantastic group of people that I got to know and kind of understand business from a different side, and then segued in to the business side for about the last why I'm gonna date myself a little bit, 15 or 16 years, have been part of great management teams and great group of investors and operating companies and great learning experience and had some great successes along the way, mostly because of the talented people I had the privilege of working with. But but yeah, it's been a nice journey.

Scaling Like A Tree With Roots

SPEAKER_00 6:27

So take me back to your MA days. And as you were, if you're looking at a company today, if a restaurant brand that wants to grow is coming to you and says, Michael, what are some things that we should look out for that are going to most help us or most hurt us?

SPEAKER_01 6:43

Boy, I'll bring this back for a minute to Doghouse because I think it's a perfect example of how to do it the right way from the beginning. I would say that my dad always said that a business or a restaurant in particular should grow like a tree. And many people don't know, but most trees grow down at the same rate that they grow up. So their roots are growing at the same pace that the trunk of the tree is growing. And so when a storm comes, a business like a tree should be able to sustain most headwinds that you can face. And restaurants, as we know, seem to be quite susceptible from time to time to headwinds. And so the important part is build the roots first, or at least at the same pace that you're growing the rest of the business. And I think some people make the mistake of just going too fast. You know, find as many franchisees or as many restaurants you can possibly open on a shorter time frame without really thinking through what am I building? What is the systems and processes? Really focusing on the core aspects of the product, how to deliver that product from a food standpoint, but also from a service standpoint. What is the hospitality? What are your core ethos? What is your mission? What do you want a guest to experience when they come in? What do you want to be remembered for? And then how to build those systems and processes to ensure it's close to perfect every single time. Guests deserve it. You know, they're coming for that release from the rest of the world, and you deserve to deliver that. But we also know if you don't deliver it, they're not going to come back. And the key to our business in our Kedar whole industry is our most loyal guests. And, you know, those reorder rates and bringing them back. It's what you have specialized in, Zach, and how to really take the temperature of your guests and how to engage with them and bring them back. It's your superpower. And I think that is truly what makes the industry work. And it's what makes the restaurant work. It's a hard industry, but it's not hard if you get that right. And I think really taking your time with it. And our founders were so thoughtful in those first three restaurants. Open up one, get it right. Open up the second, get it even better, open up the third, and then that's when they started thinking about franchising is we've perfected this. It took them five years to perfect those first three restaurants, and then it was incremental. You know, some people say, Oh, 15-year brand, 50 units, that's a long time. And I thought, no, that's what attracted me to it, is that they were so thoughtful and methodical about one foot in front of the other. And why I love this brand. And why, you know, I first started as an investor and on the board, and then ultimately honored when the three guys asked me to come and lead the charge.

SPEAKER_00 9:22

And by the way, just quick aside, I think a lot of people don't know that you were not just like plucked out of the ethos of, hey, here's a really sharp, good looking guy. Let's have him run the brand. You were an investor and you were on the board of Doghouse. You were had seen how the sausage was made, so to speak, and literally, then you took the job. I think that speaks really highly of what they thought of you and what you thought of the brand, because this wasn't just like a random chance.

SPEAKER_01 9:50

Yeah, it wasn't a random chance. I think a lot of it is culture. It is such an important part of our brand. It's also what is, I think, attracts so many people to it, not just in the store, but franchisees and employees and so forth, is the guys have just created an amazing culture and to be a part of that is so special and to fit into it and to have a you know a lot of synergies and be very symbiotic, and that was very apparent from the beginning, and to earn their ultimate trust to help bring their baby and make it a full-blown adult, I think has been a really special experience. But yeah, I got to uh got to start that actually one step further. Was they I was a vendor of theirs, just like you are, Zach. They were in our ghost kitchens around the country, and I got to kind of see it from the inside out, outside of like your Jersey mics and your wing stops and your chilies that did very well on the platform. Doghouse way overindexed. It was one of the most successful brands because it had such an interesting ability to capture different audiences through delivery, particularly a much younger generation, while our stores over-index a little bit older and like who's hanging out in the bar and what's families and coming after that AYSO game or grabbing a beer with your buddies and watching NFL Sunday Ticket. Our delivery, particularly with our burritos, tends to index very young. Um, it's that Gen Z early millennial audience. And they travel great too, by the way, those burritos. Food travels great. But for a brand that specializes in in-store experience, you know, watch the game, full service bar, to be able to index so highly on delivery speaks to a really broad audience that the product appeals to. And I thought, boy, that is so interesting that I want to participate in a more meaningful way. And that's what segued into kind of phase two from being vendor to being partner, and then phase three from being partner to helping operate the business. So yeah, it's been a fantastic journey, but it really speaks to the quality of the brand that they ultimately built. And again, you know, kind of the process that they took to your question of what do you do? And I think it's about taking it slow. It's about fine-tuning your product, your process, your supply chain, understanding who your customer is, how to speak to them, how to bring them back. And then once you hit that gold vein, which I think they felt after about year five with their restaurants working in their three corporate stores, then beginning to scale it and then methodically scaling that through selecting fantastic franchisees and territories. And now we're at a whole nother level where it's about how do you take a great concept that has shown legs to be able to appeal to a diverse audience across 12 states, and how do we make it the next national brand? And that's really what I've been focused on over the past three years and happy to talk more depth about that. But yeah, it's been a great journey, fantastic brand, and great overall team.

Unit Economics And Marketing Attention

SPEAKER_00 12:46

Well, and and I do want to hit on on two things real quick here in the last couple minutes. Number one is I'd love for you to explain the operational ownership and the problem you were trying to solve there. And then two, Jake Paul, man, I know that this has been this was like something that I am sure has been a total whirlwind of just like craziness. And Dog House was on the map. This has kind of put them in the stratosphere of like people are talking about doghouse all over the place. And so, what do you think about celebrity endorsements and what would you recommend to others? But first, talk to us about the operator ownership real quick and then the problem you were solving there because I think this is a fascinating, very unique concept.

SPEAKER_01 13:29

Yeah, you know, I think I maybe talking about them both at the same time because they're both part of the larger plan. That plan was to not only earn the attention, but to support engagement and partnership of national operators and franchisees and partners that really have the capacity, the capital, the expertise to take the brand to a whole nother level. And it started with what I would consider to be a very simple four-part plan. The first one was let's take a step back from growth and really mature our unit economics, kind of what Kevin Hockman did at Chili's, although we're not distressed, like Chili's was, but that really emulate that, let's focus on core. So we really focused on things like driving top line growth within our stores and easy stuff, stuff that we collaborated on candidly, but even beyond that, with rolling out loyalty, rolling out an app, rolling out catering, diving in more into your platform, understanding our customer better, and we were able to take just two years, AUVs from one six to closer to one nine. At the same time, we looked at build costs and thought they're just creeping up around the country for every brand. And, you know, as we're inching towards a million bucks, how do we get that into that kind of six to eight hundred thousand dollar range? And what do we have to look at second generation and new innovative ways of building and new equipment in the back of house? Just different ways of thinking about the overall structure. And then third, how do we then focus on our core product? Our product is excellent. No one has ever said that it doesn't taste amazing, but how do we make it more efficient to produce both in back of house as well as from a cost of goods sold standpoint? We took 25 SKUs out of the kitchen without touching our core ethos, which is the quality of our proteins, hormone-free, antibiotic free, responsibly raised, nitrate-free, et cetera. Keeping that at that high standard, but then figuring out more efficient ways in order to do it. And we're able to meaningfully bring down our costs of goods sold and just overall better training in our stores and consistency and so forth. So we spent really our first year doing that and came out with an operating model that was even better than what we had before. The second part was okay, now we got to tell people about it, to your point. And it's hard as a mid-market restaurant group. We don't have a marketing fund like Chili's or McDonald's or these other guys that have hundreds of millions of dollars to be able to spend. And we thought, you know, how do we kind of continue to punch outside our weight class like we've historically done, but do it in a way that really garners a lot of attention?

SPEAKER_00 15:55

And by the way, is that a was that a Jake Paul pun of punch outside your weight class?

SPEAKER_01 15:59

It definitely was. It definitely was. I don't know. Is that going to be cringe when my son watches this? But I think that Jake has been able to deliver on that at scale. He's done a fantastic job of raising awareness for the brand, both on driving people into the stores around unique things like fight nights and elevating our sports experience within the stores, but also he's on the front cover of Franchise Times, you know, within the first six months of watching the partnership, generated a whole lot of awareness within the franchise community. And it was that combination that really elevated us from to be what I think we've always aspired to be. Talk about pun, our a household name and so

Aligning Franchisor And Franchisee Incentives

SPEAKER_01 16:37

forth. And then that led us into this kind of part three, which was how do we rethink about the franchise or franchisee relationship in a meaningful way to attack something that has always been apparent, I think, to most of us, certainly in my career trajectory, from being in the store to doing the legal work to doing the books to raising capital, growing a business, the technology side of restaurants, and now ultimately operating one, is that there's often this disconnect between franchisors and franchisees. And I believe that it is based on interests that are not always mutually aligned. We as franchisors make money off the top line, we take a royalty, and the franchisees make their money off the bottom line off of uh, you know, the ultimate earnings. That's one disconnect. The second is that we are growing in enterprise value in our franchisor brand, um, that ultimately we all aspire to have a liquidity event of some sort or an IPO or a much bigger PE firm or restaurant brand that can help add new value and taking it to a new level at some point. But the franchise are building their own enterprise value in their stores. And how could we align all of that to where we're walking arm in arm? And our franchisees feel as aligned in growing the enterprise value of the larger franchise or company as we feel aligned in growing the enterprise value of their stores. And we believe we've come up with a great solution to do it. It certainly has attracted what I would consider to be the world's best operators around the country who have now chosen to join Dog House after their journeys in places like Jersey Mike's or Dave's Hot Chicken or Taco Bell or Sabaro or Tropical Smoothie Cafe. We would consider to be some of the most successful brands in the world, and they have been leaders in operating those brands. And now they see our vision on how to take Dog House to just a fantastic new height. So they're joining us in a new area director model that we have rolled out, which entails ownership in part of the franchise or it entails board rights, it entails information rights at a franchise or level, and really treating them for what they are, which is our partners in the business. And likewise, they're helping us really regionalize the brand. I'll use this as an example because I know you're based in Utah. We have one store in Salt Lake, one store in the entire state. It's in Sandy, Utah. It's our number one performing store in the system, despite being closed on Sundays. And normal full bar alcohol. And so I it, you know, it would be even better, maybe. So we just haven't been able to grow and expand there because we have a fantastic mother-son franchisee duo that has done an excellent job. And we want to help them have 10 units, and we want to bring someone in that can ultimately coach them on how to navigate Utah real estate operations in Utah, local area marketing, and to do that at scale. And so we've brought in one of the best operators in the country to oversee Colorado and Utah and to help both our franchisees. Utah, we are in Colorado, we have one store as well, which is the second best operating store in the system. And so help both of these franchisees grow, as well as these area directors are self-developing as part of this process. So they're ultimately coming and opening beachhead stores and then helping our existing franchisees grow as well as recruiting others in. So we think it's a fantastic model. While we may be some of the best operators in California, and we have a lot of expertise in that with over 25 stores here. We think that it's an opportunity to partner with fantastic people in other parts of the country to really help expand the brand there and walk and lock step with them. So I threw a lot at you, but that is three of the four steps. And the fourth step is just grow, grow, grow, grow, grow, grow. We're ready for as a brand and super excited for the coming two or three years.

SPEAKER_00 20:43

Oh, that's exciting. And I love that it's beautiful when the actions are part of this just holistic strategy to create a better brand and create excitement. And I love that you start with the foundation and then you're growing from there. And anyway, beautiful, man. And so I'm I'm excited for what you're doing. I've been a huge fan of the brand as both a first as a customer and then as a partner because it's fun to learn from you guys. And every time that we chat, I learn and ovation gets better

Using Customer Feedback To Improve Fast

SPEAKER_00 21:15

because of it. Anyway, and so I guess last question is I'd love to just hear like, how has ovation been helpful for you?

SPEAKER_01 21:22

Yeah, look, I mean, I think I've been inferring it along the way, so I'll be more direct now. And by the way, we don't get paid for this, just for those of you that are out there, you know, um, we actually pay. Um, so like, you know, I think this speaks to the partnership that we feel with your team and you and the product that you've built, is that this isn't a paid cameo. This is because we obviously care and you care about us, and it's been a fantastic relationship over the years. But there's nothing more important than speaking to your customers and understanding what drives both their interest as well as when we make mistakes. And I think. I think that ovation is super differentiated and interesting in that it's doing both. It is your frontline megaphone for your customers to share the wonderful experience that we delivered. It's also the first line of defense when we don't get it right and allows us before it becomes espoused by our customers in that megaphone a right to make it right to our customers on a very micro level where we can tailor our response to in a really thoughtful directed way to the problem that they experienced, or likewise reward them in a very thoughtful, directed way when we get it right. So there's nothing more important in this day and age than having access to data and knowing what your customer is thinking at any given given period of time, so you can adjust your approach to them. And ovation is just a fantastic tool in doing that. And I'd say both granularly at the mechanics of what I was explaining earlier, but more strategically from understanding kind of the sentiment of your customers and how you can tailor whether it's LTOs or as we went through this recalibration of our menu and took these 25 SKUs out, what really matters to our customers? We obviously don't want to impact that, but what are areas for opportunity that are more on the cusp that allows us to become more efficient and profitable without retracting at all from the customer experience? In fact, we have new offerings. We think we're actually enhancing the customer experience by materially saving cost of goods sold. And a lot of that came from the data and thoughtfulness of the information that we got from your team and from your platform. So, anyways, you've been a great partner and uh look forward to many years to come. And hopefully we have a lot more than 60 restaurants two years from uh now, so you guys can share in the spoils of that as as we get bigger and better.

SPEAKER_00 23:50

And I'm excited to share some of the new stuff that we're building with you. And I know you you all have been great thought partners as we are building, and we've got some exciting things coming up that we're excited to share and get your thoughts on as we're in the early phases of it, and some of the things we're excited to start launching with you pretty soon. But appreciate you coming on, Michael. And as I said in the beginning, recorded or not, it's always fun hanging

Who Deserves Ovation And Closing

SPEAKER_00 24:13

with you. Last couple questions who deserves innovation? Who should we be following?

SPEAKER_01 24:18

Boy, but there's so many great people doing great things in our industry. I think it's why we're all blessed to work in it. Uh, I know you feel that that way. You get to work directly with so many great industry executives and marketing leaders. I will tell you, over the last few years, one has stood out to me more than any, and that's the work that Wade Allen has done at Costa Vita. I think beyond being just a fantastic in timed maniacal operator, talk about a guy that is data focused and understands his customer, understands the health of his franchise system and his corporate stores, there's no one better than Wade at being able to do that. Obviously, he came from fantastic background at Brinker and working with Chili's and running kind of the innovation arm. And so early days, understanding the importance of data in restaurants and how he's applied that to Costa Vita is nothing short of amazing. But I'd say what's more, and I aspire to be as good as he is at this, but it really is how he builds the culture on his team, how he focuses on not only the core corporate team, but also on his larger franchise team and his team members around the system. I was noticing he did some big retreat to Mexico with his team and shared all the things that they talked about and how that was so much more impactful than going to the next conference and getting an accolade personally. And I think that just speaks to who he is, but also shows the importance he's placing on putting his money where his mouth is and really kind of building and developing the culture of the brand. And I think it speaks on their growth trajectory, how they've done some of their same store sales growth that he shared with me and so forth. But, anyways, certainly the ovation to Wade is a no-brainer.

SPEAKER_00 26:01

Love Wade, he's been a great help over the years and just such a sharp guy. And uh also love that he's finally here in Utah. So we get to hang out every now and again. Awesome. Michael, thank you so much for coming on Give an Ovation and I appreciate the partnership, appreciate who you are and what you're building, and for showing us that building in chaos is possible. Today's ovation goes to you. Thank you for joining us on Give an Ovation. Thanks, Doc. Thanks for joining us today. If you like this episode, leave us a review on Apple Podcasts or your favorite place to listen. We're all about feedback here. Again, this episode was sponsored by Ovation, a two question estimate based actionable guest feedback platform built for multi-unit restaurants. If you'd like to learn how we can help you measure and create a better guest experience, visit us at ovationup.com.