Future Outlook and Legacy

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Visit linkedIn d. com slash HiBt to learn more I saw something that you talked about in this business and it would just stress me out so much, which is Somebody might go to a restaurant five times love it and then the sixth time, something might happen that is big enough that they'll never go back and they're really mad You know, the more you say what you just said, the more I realize what a stupid business this is tos being And onene of our landlords, Seymour Rubin, said to me goes, Why would you want to be in a business where one guy, a dishwasher, just stopp the whole operation. Yeah. One guy could decide, that's it, I'm leaving whole restaurant fallspart that night Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built Hey Gy Ros on the show today, how Stephven Starr built one of the most beloved and lucrative restaurant groups in the country One hit Compared to almost any other small business, owning a restaurant makes almost no sense The startup costs are high You have to take out a long term lease. your inventory is perishable. Finding staff is a nightmare. The hours are crushing. The customers can be demanding and annoying. And if you execute well At the end of the month, your net margins are around five percent. Tan if you're lucky. If you really want to make money in the restaurant business, you're better off trying to buy a taco Bell franchise where margins are closer to twenty percent Or you can do what today's guest, Stehven Starr has done Build really awesome restaurants that serve lots of guests, do it consistently, and replicate the model multiple times Right now, Stehven Starr owns nine of the one hundred highest grorossing independent restaurants in the United States. These include places like Pastice in Utican in New York, Lint Diplomat in Washington, DC, and Makoto in Miami At Each one of StAR's forty restaurants, you'll find a unique, dazzling design in addition to great food And together, these restaurants pull in nearly half a billion dollars a year in revenue Now you may have heard the statistic that around half of all restaurants in the US don't make it past year five Even Stehven Starr has had to shut a few restaurants down over the years But his incredible track record at building restaurants that even ten or fifteen years in are still hard to get a reservation app. has a lot to do with so many things that Most of us don't even notice the lighting, the temperature inside, the music in the background, the way you're greeted when you walk in. These are things Stehven's been obsessed with ever since he opened his first restaurant, the Continental back in nineteen ninety five And here's the other thing. He's not a foodie. He doesn't really know much about cooking at all. In fact, before he even got into restaurants, He had a whole first chapter as a comedy and music promoter And as you'll hear, For a guy who's launched such forward facing crowd pleasing businesses Ka prefers to stay in the background Which makes sense when you consider his childhood Stephven Starr grew up in the mid nineteen fifties and sixties in New Jersey just outside of Philadelphia He says he didn't have many friends when he was young, so he had to create his own entertainment You know, I was surrounded by televisions because my My father was a television repair guy The whole house had TVs everywhere I watched every TV show in the world and veryer much fell in love with the Dick Van Dyke show back then and I wanted to also be a comedy writer. You know, what I watched on TV was the shows, but you know what I was more obsessed with? the credits. Like I knew the producers. I knew the writer. I remembered, hey Sheldon Leonard. he did that other show too. You know, I had a real real a real to real tape recorder And I created my own little environment in this room And I was obsessed with music, mainly the Beatles and Elvis Presley, so I I'd have my little fantasy imagination periods where I would do Beetles versus Elvis. and I do that for three hours I play one song versus another song and I rate them. So Basically loved TV. I used to do my own skits and radio shows. and then I became sort of intrigued by being an announcer on the radio sort of like radio was a thing that you were really want. you actually got a license I read like when you were a teenager like to be on the radio. Yes I went to the federal courthouse in Philadelphia I took my test and I passed. And what I used to do, I used to go in and sneak into a college radio station in one part of the station at night The young college kid was who seemed like an old guy to me was on the air And I kind of sneak in and go into the production studio And then I learned how to do production by myself just by trial and error And I'd take the albums from the radio station and I would do my own audition tapes One day, however The guy that was on the air caught me And I thought, oh, boy I' And he said, Listen, you can't just sneak into a radio station. like it's not cool. You can get arrested or whatever. He says, but listen, I'll help you. And then I came in like twice a week and he taught me how to edit, splice tape, and all that. And I just made all my little audition tapes I pretty much mimiced the FMDJs at the time, you know, by talking like this. This is Stephven Star at W MMR. R. And then I wanted to be a concert promoter. And I promoted my first big concert in my high school, which was a band called Mat the Hooel. Oh yeah, which has had a hit record called All the Young Dudes. All the Young Dudes, right Right wrritten by David Belly. I got that bug of wanting to be a concert promoter. I loved it, became friends with the band, brought the band to my house. My mom cooked them dinner. So the entertainment bug was now really in me. I'm just wondering, as an eighteen year old or seventeen year old high school kid, how did you become a concert promoter? whos Butike, how did that work? I don't understand I'm imaging today an eighteen year old saying, I want to bring Mck the Hoopool or that's not just you can't just snap your fingers now I'm on a Cert promoter. I wanted to break out of the normal lifestyle that I was in in New Jersey. It was boring. It didn't satisfy me do big things. I became the student cououncil president of the school And somehow they allowed us to have a concert once a year. A So we had the opportunity to book Moby Grape, Alice Cooper, who wasn't big yet, or Mata Hupo, and we chose Mat Hoopo. U Stehven, when your, I know that you went to temple to study communications But I also know that You're You lost your mom at a pretty young age. you were just nineteen. Um, yes. which can't imagine how I mean, with that would have been like to be a kid and and for that to happen I mean, it was awful. I was nineteen. I had younger sisters, three younger sisters, six, seven thirteen, something like that. That was horrible. and It definitely did something to me that made me want to work really hard and maybe try and forget But even prior to that, when I went to college, my goal was to be I wanted to be rich because we didn't we had a middle class family, but we didn't have much And I wanted to take care of everybody. And I remember sending my typing a letter to my mother telling her that Don't worry. by the time I'm twenty one, mom I will be a millionaire Ands there's conflicting, I've heard conflicting things that you did graduate or that you left before you graduate. First, let's just clarify that did you did you finish or did you leave early I left early. I left like the third year Because my sisters were young. And I couldn't I had to be there and help them. So it was I had no choice at that point. But I guess from what I gather in nineteen seventy seven, right? So you are roughly twenty one years old. you open a diner and a comedy club in Philadelphia called Grandma Mini's Tell me the story of how you of how that came about. I mean because you were What was the idea for that I just wanted to do something that could make some money for myself And not that I thought it was beneath me, but it just wasn't in my DNA to like work in a restaurant or be a waiter So I went to this deli. And the deli was called Grandmainn's. and I befriended the owner I said, you know what night, What do you? He goes, Nhing, We closed. I said, I have an idea. What if you did comedy because I have been going to New York to see Comedy shows that catch a rising star in New York City Mhm And u He said, sure, I mean I'm open to it. So I started going back to Catcher Rising Starr and I'd watch the show and the comediian get off the stage and you'd go over to the bar and I'd say, Hi, my name's Stehven Starr. I think I'm going to open a comedy club in Philadelphia. Would you be interested? And they all go, Yes, of course, and I get their phone numbers And then we finally had our first show And I start booking comedy there All right, so just one back. So Grandma Min's was an existing diner. It existed. It was a deli. was. It was a deli. We put a stage up. like after it was closed, there was enough room in there. How big was it? It probably only hold around eighty, ninety people. That's it. And you just got to know the owner or you And he said, yeah, you can use this place at night and we'll just split the ticket sales or something. Like how did that work? No, they said no, No, you said, you keep the door And I'll keep the bar and food. Got it And how did you like Again, you're such a young guy You know, sometimes you hear about, you know, young people in their eighteen, nineteen, twenty who are doing these things that You often hear people in their forties doing and then you find out that, well, maybe they looked older, they were taller, they were bigger, they They had a presence that kind of enabled them to kind of get away with it. Did you have any of those things No, I was't look older or I wasn't like special in that way You know what I think it is This is why I heard you're a good interviewer Bara Walters I don't know that. I mean, my kids have asked me that question. wife I have a couple wives have asked me that question. I do believe I must have had charisma. People liked me. You know, I remember one guy in the very beginning when I first opened my first real nightclub. He was the guy who owned the building and he was a tough guy. and he told me, he says, you know what? You're very disarming. That was the word to use for me because you're very disarming. I just think I was I had a thing. Yeah But there's another there's another piece here. I also worked on the boardwalk in Atlantic City, which is a big piece of who I am and how I became who I am. You worked on the boardwalk when? And when I was sixteen and fifteen, sixteen, seventeen. Yeah. Boardwalk in Atlantic City as a salesman. in a store that sold everything. It sold watches, rings, stereos I learned so much From working on the boardwalk in Atlic, I learned about human nature. I learned how to talk to people. I learn how to sell You know, we were paid on commission and we got paid based upon how much profit we made on each item that we sold In the beginning, we felt terrible. We didn't know how to do that. We you know a ring that was worth twenty bucks. We were being encouraged to try and sell for two hundred bucks, and we thought that was wrong But eventually just like, you know a Navy SEL or a marine, we got to be trained killers and we learned how to sell and how to convince people. So I think the ability to feel confident, my confidence was being a salesperson on the boardwalk in Atlantic City. Yeah. Okay, so you have this burgeoning comedy club at Grandma Mini's And you start to bring comics and how does it do It became very popular. And then the gentlemen around the place. And then all of a sudden one day goes, you know what This doesn't make any sense for me. I could you're keeping the door. I could do it. I want you to leave. I'm doing this myself. Oh, he said he was going am I whyy are you making all the money for booking these gigs? I'm going to just book the comics myself. And he threw me out. I was devastated G I then said, you know, kind of like Rocky I said, you know what? I'm going I'm going to Cy I curse on this thing? Yeah, ye sure. Yeah. I was gonna say, you know, fuck him, I'm gonna come back and I'll fucking put you out of business Okay, because I was the one that knew these comics, you know, people I had befriended. So I started looking for a place to open another club. I found a bankrupt building that was a restaurant, somehow convinced the bank. I had no money to sell it to me Where was it That second in Bainbridge Streets in Philadelphia Price was one hundred fifty thousand dollars Okay, and how are you going to buy that with zero collateral and zero assets? and I didn't even know what collateral was. I saw the sign on the building, someomehow got the appointment with Continental Bank at the time, met with the man and told him my idea. What was your idea? What was the pitch you gave him? Pitch was to open a comedy club like I had opened for someone else. And how why would why would a banker even take you seriously as a twenty two year old with no collateral and no cash? I have no idea except that I think it was a time that wasn't like I think people still believed in people. like bankers still would go on an instinct or a feeling. Yeah. So it was probably a sort of a dead building Maybe he couldn't lease it or rent or sell it for a long time. And this kid came in that sort of disarmed him to use that word. So he us he lent me forty thousand dollars And then there was someone else, I forgot who it was either borrowed or whatever, ten. And for fifty or sixty grand, I piecemeal this thing together. Yeah, it's so interesting because we've had stories like this on the show in the past, like where people got a property or a lease in the seventies or early eighties And it's so clear the contrast between that time and today. you know, the red tape today, the regulations, the corporate own banks, like it's just a completely different It could never happen again. I could never do what I did know backack then Yeah, I mean, it's just a difference. sor right. so you And what did you call this club, by the way? So there was Catcher Rising Star in New York, which was really the godfather of all comedy clubs. I called it stars S T A R S And presumably you could get some of the comics from New York to come to Philly, because it's only an hour a half two hours by train. Oh yeah. I mean, had already numned them and lined them up Tell me some of the people you brought in So the first I believe the first show was Richard Belzer Wow went on to be on law and order, right? Yeah as the cop Pat Benetar. Pat Benetar, the singer. Yeah. but she was known as Patty Benatar back then. She was a comic? No, no, no, she wasn't. Because the shows consisted of a comedian musical act endnding with a headlining comedian. Okay. And Pattty Benatar back then was she sing all cabaret songs. It wasn't like rock and roll then So that was one of our first shows. Jerry Seinfeld played there He was a host of Amateur Night. I paid him seventy five dollars. Bob Saget started in our club. Wow So I tried to run it seriously, but I had no idea what I was doing. Classic story is the opening night We put all the sold out putut all the cover charges, which I forgot what they were then five dollars, eight dollars P put them on the check as opposed to taking the cash out the window. Oh. putut the cover charge on the check and the people drank and they ate on the check Around sixty five percent of the audience walked out on the check. That opening night. So they didn't pay. and I had no money. I remember crying that night. What did I do? Because I didn't have the money to pay the comedians And how did you do the food side of it? I mean, again, like That's a different business. How did you even know what to do I didn't. I hired a chef He was a young guy. I don't know how good he was, but we figured it out. This is why like even today with all the restaurants I own, I see what we do to open a restaurant, the tens of thousands of dollars we spend on training and this and that and audio visual and crazy stuff that we do. And I look back at how I did this and I say to myself, what the fuck? I didn't We never did any of this now. All this training. It was just you just say, come come to the door. You have a young chef, but he would say, Hey, we need a deep fryer. We need a grill, we need prep space and you would say, do what you need to do, just make it happen like I mean, I learned as I was going along And we kept the food light. I mean, we did burgers and fries and whatever we did. So it wasn't very complicated I remember at one point, this is a sad story. You know how when you open a new business in the old days, you put the first dollar like you hang it on the wall. Yeah Right. Yeah, That first buck at one point It got so bad we couldn't pay our bills I had to take the money down off the wall to use it pay for something that was like COD. Yeah, I mean, I imagine that a comedy club even with a two drink minimum You got staff, you've got you've got to pay back the loan. I mean, And from what I've read about about it, stars, it just as awesome as it sounds like it was, I wish I was there. I wish I was there right now But as a business, it doesn't sound like it was sustainable. it was not. It was hemorraging money Yeah, it wasn't sustainable. I wasn't making any money. Maybe I I was able to eat a couple hundred bucks a week for myself. I was always getting behind the eight ball. and then eventually that comedy club evolved and morphed into a club that did mainly music So you just kind of switched it over the same venue, the same exact place. still co the stars callall it stars and did some mind blowing shows, man. I mean, great jazza artists, Nina Simone buddy rich and the four tops and temptations and then things started. So then we started doing the Ramones. Clash and all kinds of punk bands. Very, very memorable shows in such an intimate environment. How many people could you fit in And notot much. like hundred twenty one hundred and twenty people. Okay, so this so you switched over to music and how did that do as a business? It did okay, and it really was the thing that was the catalyst for me to become a real concert prodomoter And that motivated me to look for something bigger, which I did, and stars eventually you know went away. Okay, so this was the transition to a new venue, I think called Ripley Music Hall, right? Yeah And from what I read it's five hundred C So it's a bigger place. Also in center City in Philadelphia? Yeah, a few blocks away on South Street. Okay, going back just quickly to Stars, you got a loan from a bank in ' seventy seven to open it up. Did you were able to pay that back? I don't think so No, I didn't pay it back I was too stupid to realize I just walked away from it The building was one hundred and fifty thousand dollars. I should have tried to sell it. But I didn't. I just walked away And nothing happened. There was nobody get sued or Right. The bank just repossessed it and then they probably figured out, okay. God again, amazing, differentnt time, right? Because today That could have ruined you for a while, right? Like it just it's No, no, but it's true. When people ask me, Hey, what's your advice? I feel so bad because The way things are constructed now J very little room for entrepreneurship. Yeah, unless you have A lot of money or your family has money. I mean, just to have an idea and have virtually no money, it's hard, man. It's hard. It's the same it's not the same country Yeah Okay, so you You go move to music. So now music really becomes your thing. Ripley Music Hall. And this is the early eighties, you're bringing in I've read you too and Springsteeen and Cindy Lopper and Miles Davis and I mean, James Brown, Ray Charles. incredible artists to a five hundred Cat club. Yeah I had this thing in my head that really carried on to the restaurant business that I never wanted to do the same thing every day or all the time. So every night It was my goal was to have something different. so One night you'd have Ray Charles and the next night you'd have, you know, Uhythmics It was like my own Ed Sullivan show And just to kind of go back on the business side, how were you able to finance the Ripley Music hall? I'm assuming you didn't buy that building. Maybe you leased it, but how were you able to do that? I did that one initially kind of on my own, similar to stars. Eventually I got an investor who was participated and transitioning to concerts Be when you did concerts, you needed real money for deposits and stuff like that Stephven, here's what I'm wondering about. I mean, rununning a music venue it's hard, right? And you were notot a guy out of business school or you know, you were really kind of learning as you were going along But it sounds like again, just Figuring out how to make this sustainable was tough for you at that time. like you didn't It was not easy to make a profit doing this. No. A actuallyually, you weren't making a profit. No, very little. And if had if I had gone to business school, I never would have done it becauseone of it none of it made sense. You know, a little of this is you're almost an imposter, you know teending to be something that you're not You know, I was this promoter bringing in this act, that act. We're doing great convincing somebody to play for me as opposed to my competitor when at the end of the day, what was left over was very little But a lot of the brands started developing, right People started knowing that I was this success, but I wasn't What about you? I mean, this strikes me as a kind of a business which really depends on relationships. L I'm in San Fancisco. So I think of Bill Graham, the legendary promoter here, right who lived here And u I mean, what gave you an advantage, do you think? I mean, did have particularly good music taste? Were you like, quote unquote, cool Were you just like why why do you think you were able to even successfully bring these artists into Philly Of course, I was obsessed with music. I loved music Many of the promoters back then were older than me And they were not in it so much for the music as they were in it for the business of it. Right. You know I met Bill Graham a couple times And I think he was the real deal A lot of these guys were just in it because it was a good business and they can get chicks and you know, do drugs. That's what I was getting at. Like you don't strike me, maybe I'm wrong. L you don't strike me as that kind of guy. I was a Girls I always liked and tried to get, but not drugs and all that. No. That wasn't my motivation And at the end of the day, I was always very, very good to the bands. I gave the bands not just what they asked for, but more I always felt I had to perform better than my competition because I was younger, not as successful. so I just tried harder. Right. There's one other thing here that you may have read also A lot of my motivation when I was in college, I had a girlfriend You know, my mom had died And around nine months after my mother died girlfriend who I was in love with left me. Broke up messed me up for a long time That may have been more of a catalyst for my success than my mother actually dying. In the end, my motivation to open that club was two things to get her back or to like say, fuck you, look, I made it. So I have to tell you that because that's such a big part of what motivated me back then. It's like that Michael Jordan line in the in his Hall of Fame speech where he talks about another another log in the fire. Maybe you were motivated by improving yourself, maybe even being a little angry or having a little chip on your shoulder for sure Um, All right, so from what I gather The Ripley Music Hall business side was just not sustainable. and that eventually closed, I think in the mid eighties But you stayed with being a concert promoter. That really became your fromom what I've read, your main thing Like And it sounds like that was actually a much more sustainable, profitable business to do. Yes, becausecause the nightclub part of it the Ripley Music Hall All that really was was a way to get the big agencies to do business with you, say So they have a new act And they say, listen, we have this new ban in excess or REM We need you to book them for three thousand dollars. probably lose money, but Stick with us because if you do us a solid, when they get big, we're going to take care of you And that's so we ended up just losing money to hopefully make money later. It was like a lost leader thing. Right. So the club didn't work out after a while. It was just too much. It was hard to make a living there And then I continued with the concert promoting and did did fairly well with that And for people who don't really know what that means, so if you had like a Madonna, because I know you did promote concerts for Madonna in Philly likeike a huge act like that, right? You know, there's a minimum guarantee for her and maybe a share of the profits and then there's all the ticket sales and you got to do the promotion.'re you're notaying for the venue. That's a different cost, right? No, no, you pay for the venue. You pay for the venue. Okay. So basically they're saying, hey You're like the contractor for my house. You're doing everything Right? You're handling the whole thing And then whatever's left is yours. what would be a sort of a good margin you could make on that I think you make after all the expenses are over, you're only making around fifteen percent So And nowadays, it's a whole different thing. But nowadays the act gets everything And then the promoter, which is really basically one promoter, live nation now They own a lot of the venues, they get the parking And they because they own ticket master, they get that ticket charges. Back then, when I was doing this, we only got the ticket sales Right. So it'd be a modest profit But you probably were making more money than you were running comedy clubs. Oh, absolutely, right. Absolutely, much more And did you, it seems like a very like sharp elbows business? Like you kind of have to be a son of a bitch a little bit to succeed. Is that true, do you think? No, for me, it was different because I was David and there was a Goliath in town who know had been there longer and more entrenched, I had to be the good guy. I had to be the schmoozer. because in the end, the bands only cared about one thing. how much you gave them. money and what the catering was backstage. It was pretty a simple formula. And what about like dealing with the egos of You know, when you I'm always amazed by like real estate agents, they have this ability because they're dealing with people who can be really petty and just petulant and difficult and they're generally very calm and because they're in the client services business. Similarly, when you're dealing with artists, they can be jerks, right? They could just be and their people around them can be worse It never bothered me. honestly, I looked at it like u The as themselves were so they were bigger than life They were not even real. They were almost like cartoons. And whatever it is they wanted that was overwhelming or overbearing, it was part of the game. I knew I was playing the game. I enjoy It was fun to be in the game and have an act tell us, don't look at us when we walk down the hallways on our way to the stage The people that weren't fun were the people that worked behind the scenes, the agents. Yeah. their booking agents. Those were the real assholes back then, obnoxious. because you know there was a food chain. The concert orer was the lowest on the food chain. We were at the bottom I mean, I think there's also something just like a sort of a intrinsic temperament that some people have. L I couldn't do that. I would lose my mind, you know? I mean, do you lose your temper? Do you or are you just kind of even keeled all the time? not even killed. I lose my temper. The restaurant business is what brings out the temper in people Yeah That's when you become like a dictator like Saddam Hussein. the music business No, I didn't lose my temper. It was It was stressful, but it was fun. And, when you're watching something that you love happen Music harmedy It's so satisfying and you could put up with the other stuff Yeah It was also it was a challenge. How do I get this guy is treating me like shed. who is not giving me the acts that I want How can I convince him somehow some way that I'm better at this my competitor And I was young. so I love that challenge. by sheer force of my will. I was able to turn people's minds around. I was able to take I was to be a nobody. in this music business and convince the biggest agents in the world takeake me seriously And that to me was I won You know, it's interesting because you mentioned that as a kid you would be in your room with a realel to reel and on your own a lot of the times and maybe even a bit of an introvert But you were doing a job that really required because you just you mention this idea that I had to outsmooze these people But you don't strike me as somebody who really likes to do that or feels comfortable doing that. So am I right about that? You're right and you're wrong You know, I don't like going to parties and hanging out and Let's have dinner. Let's go out for a drink. I hated that part. Yeah. Yeah. but you know, I ever since I was a kid And then the music the nightclub business, the music business and now the restaurant business We're always throwing the party, right? I've been throwing the party for years I'm never in the party I know exactly what you mean by the way, because I love throwing parties. We throw parties all the time and I cook and I make sureone's glasses filled and I'm just making sure that somebody has somebody to talk to. But I actually am not in the party. I totally. And I actually like that role a lot more. I used to be sad about it because I remember going I own nightclubs, I went to shows, and I'd be like in the back, my arms folded, watching everybody, just watching them And I thought I was pathetic. You're not having fun, you're not part of the event. But eventually, like you just said, I kind of lik that role 'cause I was watching over my little creation and everybody was happy. and that was my satisfaction So I read and I don't know if the year is exactly right, but around nineteen ninety, you sold this company, this promotion company and production company to a bigger or different promoter. To the big guy, electric factory concerts. I imagine you did it because the offer was pretty good The offer was pretty good Also, I saw the way the music business was going Bands were getting more They were sometimes getting one hundred percent of the door. And if we didn't have some sort of ticket master deal, which I didn't have, it was going to be harder and harder to compete. So yeah, I sold my company to my competitor. I felt bad about it, but I felt it was time. Makes sense because you could see where this industry is going Um, What were you thinking about doing? I mean, did you think, all right, I'm done with the music business and I've got to find something new O did you already when you sold the business, did you already have an idea in your mind No I had no idea. I pretended I was still in the music business because I kept the office. I would go to work every day Look at my Roodex and make some calls and then go out to a deli and have coffee and back to my office and look at my roller deecks And then it became it hit me, Oh shit, I'm not in this business anymore. So at that point I had a child So I spend a lot of time with my daughter, Sarah A lot of time going to the gym, a lot of time pretending I was still in business Aen Eventually I said I gott to do something. 'Cause you didn't have like money for the rest of your life, right? fromr that sale. Rest of life, money? No, no, no So again, Just through traveling and stuff, I was in New York one night and went to this restaurant called Global thirty three on F Avenue And I just was totally blown away by this place. It was so cool. But what was so cool about it The walls were cool, they were padded like vinyl walls that were beige and there were greens and the curls were extremely good looking, and I saw these like martini glasses And I didn't even know what a martini was really, never drink martinis. There was a DJ there and I said to this DJ. I said, what is this? He goes it's a Martini bar. And I went back again a couple times and it was packed lying to get in. And then I said, this is something. I got to try and do something like this in Philly And we come back in just a moment, Stehven opens his first bar and restaurant, even though the food part really scares him. 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It's a unified suite that brings your financials, inventory, commerce, HR, and CRM into a single source of truth Connected data is what makes your AI smarter doesn't just guess, it knows how to automate routine tasks, deliver actionable insights, and help you cut costs From software and IT services, to healthcare, equipment manufacturing, financial services, and many other great American industries, NetSuite delivers a customized solution for your business If your revenues are at least in the seven figures, get their free business guide demystifying AI at netsuite d. com slash built The guide is free to you at netssuite dot com slash built, netsuite d. com slash built Hey, welcome back to How I Bilt this. I'm Guy Raz. So it's the mid nineteen nineties, and Stehven is looking for something new to do after selling his concert promotion company He's inspired by a martini bar he visits in New York City, and he starts looking for a location in Philadelphia to do his own version I saw this diner Second of markarket street in Philadelphia continontental It was a Greek guy that owned it. His last name I think was Pulos And I said, you know what? wouldould you ever think about renting this out to me? He goes, Wh? Why would I do that? I said, Because I think I could do something here. He goes, what are you going to do? I'm doing three thousand a week. What are you going to do? Five, six. Eventually he gave in. because he Well, he wasn't busy And he leased it to me. And it had this, I don't want to jump ahe it too much. It had this neon sign out front, that' a continontental. Yes, and it was built in nineteen sixty two. So it was it wasn't a fifties diner fifties niner would not have been cool. This was a sixties diner. had a little different vibe to it. And I say that about the Non sign because anyone who's been to Philadelphia knows that restaurant now. but That sign was there, It was called the Continental Diner. Right, exactly So I went through several different ideas, talked to a few different designers and came back to the idea of doing the Martini bar. And I hired the guy that did global thirty three. His name was Miguel Calvo He happened to be the DJ. He was both the designer of the restaurant and the DJ back then. Okay. And then a local friend of mine named Owen Kamahira, who was a artist in Philadelphia. And the three of us put together the idea and the concept for the design of the restaurant. So I did the whole thing for ninety thousand dollars Drywall what was Home Depot? So the diner was the diner. We took the existing booths and re upholstered them in green Olive, right? green with red piping. There's the pimento. Yeah. So existing booths reuholstered. The bar top, which was for Mica, we encased it in concrete, kept at bar stools and it reuholstered them in red and green. And then Owen Camiira, the artist, brilliant idea, brilliant idea. He created lighting fixtures that were big Olives giant toothpick through the lighting fixture So from the street It was this incredible postcard that you could see through the blinds. And Miguel came up with this great drink rack, a glass rack above the bar and all the martini glasses, he filled them in Lose sight So all the cocktail glasses were hanging above you and they looked like they were full. ninety grand to do all that. ninety grand And I remember the heat, the heater would go out every twenty minutes. I'd have to run down and light the pilot because I didn't have money to replace the heating system You opened it in nineteen ninety five and What happened O the ninety five had this A L lot of incredible buildup. I put these like full page ads in like these sort of hipster local papers. Yeah. It was like studs Turirkele, like these little quotes And people were just they were sort of intrigued by this thing, Martini bar And it was packed from the day I opened it, there was a line around the block. And just like the concert business, I always thought, you know, you knew when a show was a success, and the first five minutes you put the tickets on sale. Hit that ticket machine, boom. you start seeing the tickets flying out. Don, you knew you had a winner. I used to have the same theory about restaurants If it wasn't packed from the day I opened the door, we're gonna fail. So this place had lines around the block to get in. People loved the food. It was sort of global Tapis food. and it just was this huge, huge success And this little restaurant that did three thousand dollars a week being this previous owner, eventually ended up doing one hundred thousand dollars a week. Wow And I imagine like at the time, there were places like this in New York City, which is two hours from Philly, but there was probably not that much like this in Philly. So I mean, I lived in Washington, DC around that time. So I remember if something like that opened in DC, everybody would be like, wow, ' because New York was the center of gravity, still is in a lot of ways, but I imagine it was so popular because it was so different from everything around around there Absolutely. You know, and then that movie came out Swingers. Swingers, ninety six. It came out right afterwards and man, I said God is good to me And then sex in the city and the drinking cosmos and that whole And it was all young people coming out who never knew what a martini was, they were getting drunk on martinis because they didn't know how to handle them Okay, in that bar, obviously Martinis were the star, but was food? I mean, actually before we I asked you about the food there Are you a food person or like And I say that to somebody who is, I love food. I'm a I'm going to be a modest here. I'm a very good home cook. People listening the show know I talk about it I have dinners at my house all the time. I love to cook.'s I've worked in kitchens. It's a huge passion of mine Is that who you are? Are you like a food person No I wasn't it certainly wasn't then I was a rock and roll guy. I was a music guy. I was a loved comedy. Food was just something to do as part my social life. I sort of matured and grew into it and now I know it very well obviously. and I have great respect and reverence for it. Back then, going to a restaurant was just something to do like going to the movies. Right. But when you opened the continontinental, you knew you wanted the Martinis to be great. Yeah. And was food also important? Were you obsessive about food Yes. There's another part of the story. I hate doing this to because I'm skipping something In between when I was still in the music business, a friend of mine wanted to open a restaurant that was based upon a fifties concept like Johnny Rockets or something like that And I opened a place that was like a fast food restaurant It was called Shake Burger and Roll. Cool name. U greatreat little design. I came up with with a guy from a good interior designer from New York The place was packed, you couldn't get in And it went out of business in nine months But why is that I couldn't figure how to run it. It wass like Yogi Yogi Bera who said nobody goes there anymore because it's too crowded. It was just so crowded. We couldn't get the food out. I mean, I remember one time the local police department came over to get like forty burgers. Awesome. The burgers go out The cop comes back twenty minutes later. He goes, what the hell is this? He opens up the thing, he opens the bun. there's forty buns, but no burgers inside the bun. No. So the reason I'm telling you this story, I was scared to death of food. I was afraid to do food. So when I did the Continental, I knew I had to have it, but I actually was so scared. I just wanted to hire a chef Give him or her percentage of the business just to take care of it because I didn't know what I was doing And is that what you did? you would do? Oh, I tried. They all turned me down. They wanted a salary. They just wanted a salary. Yeah. And thank God I would have shot myself if by given them like thirty percent of the business. Look, you know, you learn by making mistakes and I knew all the mistakes I made You know, I couldn't manage a restaurant. I remember at the Continental, Sunday nights I was the manager And I hated it hated being there all night. I hated dealing with drunks. It was it was tough. Yeah, it's a tough business. I want to point something out because and I think it's important to point out, not everything you touch as a restaurantur was gold. L you have had things that didn't work out. And I think early on, you tried a Soviet themed eatery that I'm assuming served Russian food or pierogis or maybe. and that didn't quite I guess it didn't quite work out. I hate using the word Soviet sounds very, very ason It was Russian. It was called Cafe Republic. It served great cocktails, Russian vodka. We had the Siberian S Back, which was six little shot glasses of vodka. One of which was a brand name that I found called Carl Markxs Vodka. I'm sure he would have been proud And we had a statue of Lenin in the bar And we had Russian food, beef Strogenoff, pierogis, caviar. But it was in a weird neighborhood in Philly, had no parking, and it didn't work out. Meantime, the Continental was doing very well. I mean, Continental became an iconic restaurant in Philadelphia. It was, I'd say the most popular restaurant in Philly And it created a renaissance in the old city section of Philadelphia. It really was the catalyst for that renaaissance with restaurants and retail. All right, so on the strength of that, you, I guess see the potential to really lean into restaurants, right? you then open Botacan also in Philadelphia, which Describe it for people. I've been there, but describe it for people who don't know what this restaurant is. Buddacan, the original Buddacan was a Pan Asian restaurant, so it was sort of fusion It's very theatrical in its design And a center piece of it is a like, you know, twelve foot Golden Buddha Aain, I don't take credit for the culinary concept I did not create on my own. It started with Wolfgang Puck at a restaurant he had in California called Shinhua on Maine. Then another gentleman opened a place called China Grill in New York and in Miami And I had gone to all these places loved the energy. and I went and spoke with different designers to ask if they would design my restaurant, One of which was Philiip Stark who turned me down, but said, there's ways of buying my furniture, call these people. So I ended up designing it myself with my friend, Owen Kamahira. This is the same guy who helped you redesign the contact for ninety thousand. Owen. Yeahah. And Philie Stark in the late nineties was he was doing hotels around the world and had aled Target maybe not then, but he would. he was already, I mean, I can't imagine you could have afforded him at that point. I didn't even think about it, but he he wouldn't he didn't want to do it because I think was it was in Philadelphia. But Owen and I said, come on, let's do it bought his furniture, we made it look like his restaurant againgain Owen and I walked out of that restaurant It just got dark and we looked through the windows and we saw this thing and it was just like we got choked up. It was so Awesome And the cash flow from the Continental could support But a Buddacon or did you did you also know? Intercontinental was all mine Boudacan we got an investor. Okay. It was actually a friend of mine who had a venture capital fund and one of his clients was willing to do this. So this particular client put up a one point nine million. Today, kitchens cost one million, just the kitchen. Just the kitchen and the restaurant, o. Yeah. interior, it was going to be like That was going be part of the experience, right? It was dark wood and moody andbs I was very much a part of that Where do you think that instinct came from? Because again, like if you were to do, I don't know, a profile, right? like an AI profile of a guy or a woman, anybody, who is going to design a restaurant like this, you wouldn't say this was a concert promoter and comedy club manager and you know, like you wouldn't naturally think like, oh, that's the person who's going to have these amazing, interesting ideas. Where do you think came from The design aesthetic is something that was just in me that I unleashed once I started seeing things. You know, I wasn't the director, I was the executive producer In the movie business, so I was you know, Samuel Goldwan. But I kind of had an aesthetic of what The right aesthetic to know the right director to hire. the right lead or and actress and maybe what the soundtrack sounded like It just was there. I don't know where it came from. And you knew what you liked I knew what I liked, but I also knew what people liked Back then, restestaurants were a little mundane, people wanted to feel sexy and escape That's what we did in the beginning, we took you to another place. So you were sort of like the guy who unleash other people to kind of make it happen, focus on the big picture and then hire the right people, but they would still come to you with design schemes that you might suggest tweaks to or say, well, let's think about maybe something a little darker or maybe you know teak wood instead of the light blonde w or whatever. Is that fair? Yeah. Again, if you talked to any of the designers that worked with me They'll tell you that I'm a unique client In the sense that I respect what they do. Most business people, and I don't look at myself as a businessman I think it's insulting to be called a businessman. I'm a creative person that happens to end up being a businessman because they have to be. Where a business guy will go, those damn designers, they spend money because they don't give a shit what they spend. they just want to And I don't look at it like that at all. I look at it like, give me the best that you can give me. If it's too much, I'll tell you, I want to blow people away, man. shock and awe. And you know, part of it is a bad thing Because I have to be concerned with money too, with budgets. Yeah. When I saw that movie, the aviator with Leonard DiCaprio about what's his name? Howard Hugh? Howard Hghes ye. It scared me because it f it felt like me because Card Hughes kept going, No, more. Let's do it again. shhoot that scene again. I don't care. the And it was frightening because I said, o shit, I do stuff like this, but on a much smaller level with these restaurants. You know, you got to control yourself at a certain point too. And I think it's just worth kind of noting a quality of many successful entrepreneurs is not that they're the smartest or they have the best ideas or You know, they got the top grades. It's that they're very good at building teams That's really critical And it sounds like that was just a talent you had. I make all these connections to the music business, so it's like being the A and R guy You know, you're out looking for new bands. Yeah. I'm really good at recognizing Also Last night when I was on Instagram I saw this thing that Steve Jobs said that freaked me out because I say it all the time He was being interviewed by Dan Rather What's your business model? He went Beatles because these guys collectively We're the most brilliant people in the world. individually They did really good work, but nothing like they did when they were together I'm not enough by myself to have that group, that core of two to three other people madeade me stronger and made me better. Yeah. All right, so you are you now have Bouicon has really proven the concept, right? And I mean, just to put this into perspective, and again, I love Philadelphia, an amazing city, but it's not New York and it's not Los Angeles. It's not the focus of the world and yet This restaurant you were getting like major celebrities coming to Philadelphia to eat at Boudacon. I read that at a certain point, the wait to get a table on a Saturday night was like two months Yes, was it was like a nightclub. It was like studio fifty four of restaurants Back then people were still there allowed to smoke in the restaurants. Yeah. So we had a smoking section, but then there was like this whole singles thing at the bar and people It was surreal popular it was wereere you seeing profits pretty quickly From the get go, from Continental on. Yeah You know, I was still old school didn't have computers. I had a checkbook And I remember I just figured it wouldn't be that profitable. I'd make some money out of it. I never thought I'd make a lot of money And all of a sudden, I remember telling my wife at the time And, you know, I just looked at the checkbook last week. She goes, ye how much was in there? I said, thirty thousand. And then four weeks later, I said, somethingomet's wrong. Why? I have seventy five thousand dollars in the checkbook. Are you sure you paid everything? Yeah. It just kept growing and growing. When we come back in just a moment, Stehven makes the big leap from Philadelphia to New York City. Tay with us, I'm Guy Ross and you're listening to how I built this When I meet a founder or someone pitches me an idea, one of the very first things I do is pull up their website. A great website is essential for any modern business. 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Rula focuses on quality care. They vet their providers and monitor outcomes, and ninety three percent of patients report feeling better and making real progress. With Rula, you can find a therapist for your specific needs in as little as five minutes and even book an appointment as soon as the next day So instead of overthinking it, you can actually take the first step If you're ready to stop talking yourself out of finding care and making progress, then head to rula. com R youLA. com the first step. Hey, welcome back to How I Built this. I'm Guy Raaz. It's the late nineteen nineties, and Stehven has another hit with Boutican in Philadelphia And he's realizing just how great that city is as a launchpad for new restaurants. Butith Philly, here's the deal. It was like the wild West. It was like opening It was like the West coast when the New Yorkers all moved in and took over Hollywood There was nothing here. It was all old school restaurants. they were boring. So you open continental people freak out. You open Buticon, they'd never saw anything like it Yeah All right, so you start to open a succession of vers, I think between ninety eight in two thousand one. After Budhak Kan, you opened Tangerine, Blue Angel Pod Alma de Cuba in succession. And in terms of like is the formula for a successful restaurant kind of, I don't want to downplay, but is it basically like butts in the chair keep costs slow and tables turning over, like is it as simple as that I mean, no, that's not the formula. That's the goal The formula is a lot of its magic. I mean, it just happens. You got to do Basically, you got to do something that people really like when they walk in There's got to be something that touches them Like L you have to hear that sound in their voice like Like that you take your breath away a little bit. and it could be from a light, a lighting, it could be from a vibe, a smell. Whatever, and it's not an easy for. It's not there's no recipe for it So by two thousand one, I think you at that point, you had maybe six, maybe seven restaurants in Philadelphia operating And you were, according to the reporting at the time, they were doing very well, thirty million in sales, five and a half millionars in profit which is pretty great for restaurants. I mean, a restaurant is lucky if it's doing per Yeah not lucky, but it's like it's doing pretty good. Like that ten percent is kind of standard, right? Yes. We were doing way more than that in the beginning And that's because things again, world didn't completely change yet You know, the same guy that was able to build a restaurant and open it for ninety thousand dollars was able to make a twenty or twenty five percent profit todayod not possible would between the rent labor cost, this cost, that cost, that regulation, this thing, that thing, whatever thing. you're lucky like you said, to make ten percent And your restaurants were still, I mean You still needed investors to help build the next restaurant. But did you have the same investors who helped you kind of finance the six or seven restaurants that you had in the city Yeah. we it was only me myself And one other the venture capital guy who had his client, it was just me and them in the beginning for the first ten, twelve restaurants at a bank loan. So it was good. most people you read about or you talk to in the restaurant business, they got like fifteen people that invest money in them and it's a nightmare Beause you you knowt with fifteen different people who think they own the restaurant How were what were you doing on a day to day basis? Were you going from one place to the next place? Because you weren't managing them. You admitted, you hated that part of it So on a day to day basis, where you just like jumping from one place to the next and checking in on them, like what tell me what you were doing I had a staff of people under me, the directors that were basically, if you look back at old checkers. I had a bunch of checkers What does that mean? they go out and check stuff Go check that, go check that Check that restaurant Now they have fancy names, but they're just checkers and That's what I did. I just checked on things, but my emphasis was on the food Even though I was not a chef, I was not a self proclaimed foodie, but I had a very good p and good palte memory. So I remembered what things should taste like. And my obsession even to this day is to taste the food and make sure the food is consistent. I am the number one person doing that Basically the ambiance, the people will tell you that work for me. I'm obsessed with the air conditioning, the lights, the sound along with the food Yeah, it's interesting because we don't always think of those things as diners when we're sitting in a restaurant So at this point, I guess you decide that you want to expand out to New York City, which is the restaurant capital of the country. So again, it makes sense. And in two thousand six, indeed, you opened two restaurants in New York, Udakan and Moramoto, which al you'd already created in Philly. I assume you're thinking like if I'm going to expand and build, I've got to go to New York, like where the action is And I wanted to do it. I wanted it was, you know, I guess part of it was ego. I had also been nominated for James Beard Award a few times when I was in Philly And I would go there and I get nominated and I never would win because you know, there was I was I don't think I was really taken seriously And I didn't think the people in New York, the chefs and the restaurant owners t be that seriously either I wanted to like make it Big Apple. So we did it. We did it for Buddacan. and Morimoro. Bdacan I got scared with Buddacan because Budacan basically wasn't that novel. I mean really it was like kind of a little bit of a knockoff food wise from China grill. So I knew I had to change the food, make it different, and come up with a design that was spectacular. So who did I go to? I went to Philippe Stark again And it just didn't work out. And I went to planlan B went to Christian Liagre, which is another French architect, designer, who's a genius. He agreed to do it for a giant amount of money, and he put together probably the most spectacular restaurant that I've ever done. Boutican, New York. It's just breathtaking I said to people around me, I said, you know what? This is it. I said, What you mean this is? I said I can't do any better than this. This is Sergeant Pepper. I just did Sergeant Pepper. How am I going to do better than this? It seems like really what just gets you out of bed is working with teams to develop a concept and then like grinding and spending a year or two years just like focused on brring that concept to life. Like that's what you actually love doing. Absolutely. What gets me out of the bed otherther than having to go pee now as they get older is is the excitement of creating. and after it comes to life, I'm not so excited anymore. but I love the process. I love the stress. You mean, you love the process and once it actually opens Like then you're kind of over it. No, no. you w to move on. Mo on. It's sad. That's my sad time when it opens. that's no longer. I mean, of course I pay attention to it. I go to the restaurants all the time. I'm always eating the food unfortunately. But the thrill is gone the day after it opens You know, I saw something that you talked about in this business and it would just stress me out so much, which is You know somebody might love you and love you talk about and then thirty seconds later, if something goes slightly wrong at the restaurant, they're going to hate you with all their passion. like you're in a business where somebody might go to a restaurant five times love it and then the sixth time, something might happen that is correctable but is big enough that they'll never go back and they're really mad The very of all of you are honest with yourselves You've done that before You've gone to a place and then one time they kind of screw you. That's it Fuck damn you can't physically great like you've got to rely on the waiter the Maatri D, every part of that working How do you make sure I mean, I guess you can't guarantee it, but are there things you can do to try and get close? Yes, you can, and I'll tell you what they are. But you know, the more you say what you just said, the more I realize what a stupid business this is Be U You right You're right. Look one of our landlords, Seymour Rubin, said to me, goes, Why would you want to be in a business where one guy a dishwasher just stopp the whole operation. Yeah. One guy could decide. That's it, I'm leaving and the whole restaurant falls apart that night. I said, You know what it seem where you're right. It's stupid business You know, when you send an army into battle The generals give you a statistic of how many casualties you're going to have Every so often, there's got to be something that's too salty, a waiter that was rude, a host that didn't look up when you walked in. There's got to be a cook that walked out, a server that said that he or she were sexually harassed. I mean, it happens all the time. I mean, I have a big staff of people now But I'm still on the phone at eleven thirty at night dealing with Fires Dem You know what? It's made me a smarter, wiser person dealing with all this. Probably Hopefully will delay dementia quite a few years because my brain is constantly victim think. As an opera, yeah. And then customers, right? Like in San Francisco, many restaurants add a fee for mandatory health carere that they have to provide to their employees and that is passed down to the customer who gets mad at the restaurant It feels like there are so many challenges Yes, there is. and that's why I will say this that I could never ever, ever do this again. I don't think anyone could replicate what I did without having some giant money behind them from the beginning By the way When we open new restaurants, I'm not financing them myself anymore. We go in the landlord wants us to open, they have to put up a good significant part of the money now. To open a restaurant that would cost sixteen, seventeen million dollars, it's impossible. So you know, the best advice I have, if you want to I would say don't go into the restaurant business, but if you do keepep it smaller. There's a sweet spot of around I think around eighty five to ninety five seats. Try and turn the tables two and a half three times. And I think you're that's best the best model right now. And if I continue to do this, I'm going to try and stay within that that model Okay, I wanted I mean, we can't magionine all your restaurants, there's forty plus restaurants and you've got Michelin stars now in some of these restaurants, and you've won a James Beard Award for a restaurantur and I mean, again, Michelin Stars is not something that I probably was even on your radar, right? No. W that important to you to be No It wasn't important. It's still not important. I shouldn't say that because now they won't give it me. No they're gonna take your stars away. Yeah. no. I mean, it's it's nice The James Beard Award, that was the thing, man. It was like the Academy Award or an Amm People could say it's not important. It was important. It felt good It was emotional. to be recognized like that. For sure. Yeahah Okay. Let's talk about a low point here COVID You've gott. At that point, almost forty restaurants, thirty seven, I think And then overnight this entire industry and it's still in recovery many cities in the United States colloapses So this thing happened. I was devastated, of course, like everyone else And then I looked and I said, how much How much money we have in the bank A few million dollars Five, seven. I said, OkayK, cool, we're cool. I said, But what about the accounts payable fififteen. Wow ten to fifteen million So I said, how could we possibly ever what are we going do But what happened is that everybody was very all the vendors except for maybe one. was very understanding and we paid a little bit to everybody. so you know our intentions were good But I had and we laid everyone off, but I couldn't lay everybody off because we were too big to do that. How many employees did you have at that point? No, four or five thousand five thousand? Yeah. I mean, well, the servers, managers, wow., couldn't pay them anymore. and we had to lay off most of the office, but it couldn't lay off all of the office because He couldn't lay off the controller. He had the books and I didn't even know how to pay a bill So there were millions of dollars of salaries we had to continue to pay. And then I said, you know what? We know we used to do these gift certificate things every holiday. always sold star gift certificates So I said, you know what? let's what the hell