Master Your Finances Kurt Baker with Kevin J. Gabauer – Transcript

Written by on January 17, 2021

0:00:00.0 Announcer: So, you wanna know the ins and outs of managing your money? Well, lucky for you, you are just in time for another episode of Master Your Finances, with certified financial planner professional, Kurt Baker. Kurt and his panel of experts are here for you, and we’ll cover topics from a legal and personal standpoint. They’ll discuss tax efficiency, liability, owning, managing and saving your money and more. Master Your Finances is underwritten by Certified Wealth Management and Investment. Let’s learn how we can better change our habits with Kurt Baker.
0:00:35.7 Kurt Baker: Morning and welcome back to another addition of Master Your Finances, presented by Certified Wealth Management and Investment. I’m Kurt Baker, a certified financial planner professional, located in Princeton, New Jersey. I can be reached through our website, which is www.cwmi.us, or you can call me directly at 609-716-4700. This week, very pleased to have with us Kevin Gabauer from Bordentown, New Jersey, who holds a bachelor’s degree in Business Management from the College of New Jersey. After graduating from TCNJ in 2009, Kevin began his career as a commercial insurance broker and was named Sales Agent of the Year in 2011 for new revenue generation. In pursuit of a new challenge, Kevin left his comfortable salary, benefits behind in 2013 and formed a new venture with close college friend, Tom Armenti.
0:01:34.6 Kurt Baker: Tom had created a late-night quick service restaurant concept called The Fat Shack, and recently moved the business to Fort Collins, Colorado, home of Colorado State University. In February 2013, Kevin packed his car, drove across the country and got to work. Kevin and Tom opened a second Fat Shack located in Boulder, Colorado. Later that year, began setting their sights on franchise growth. By 2015, Fat Shack was licensed to franchise, the duo quickly opened three new locations over the next six months. Equipped with proof of concept, Kevin and Tom expanded the brand to 11 locations across Colorado, Texas, and beyond, before landing on season 10 finale of ABC’s Shark Tank. With offers from four of the five Sharks, Kevin and Tom locked in a six-figure deal with billionaire Mark Cuban. Fat Shack currently has 22 operating locations across eight states with five additional locations under development.
0:02:36.2 Kurt Baker: As a young entrepreneur who took a leap of faith, Kevin is passionate about mentoring those who dream of becoming their own boss and are ready to pour everything they’ve got into making that dream a reality. Kevin, I really appreciate you coming back on. I know I first met you, quote unquote, at a chamber event and we’re all about promoting business. And as an advisor, I’m all about, you gotta promote the wealth and do it in a way you love, and that managing it is the secondary part, the first part is you’ve gotta love what you’re doing and do well at it. And I think you’re kind of the epitome of entrepreneurship, where you kinda learned this early on, a lot of people don’t learn it until a little bit later on, so I think that’s pretty cool. So, you wanna take us through some of those steps? You’re just hanging out in your college dorm one day saying, “Hey, I’m gonna be an entrepreneur and just take on the country on and hang out with Mark Cuban one day”, right?
0:03:27.8 Kevin Gabauer: Yeah, no, it’s funny. First of all, thanks for having me on. Obviously, I really appreciate the invite and… Yeah, interesting story. I think I had heard everything that everybody else my age at the time had heard. You go to college, you get an internship, you go out into the career world and get yourself a nice salary with benefits package and live a comfortable life and that was kind of my plan. That’s what I did right after school, like you said, I went to the College of New Jersey right over in Ewing, and graduated in 2009, and went right into commercial insurance sales. I liked it. I think mostly I liked the challenge because selling insurance is just… It’s something nobody really likes to talk about all the time, and it’s just a challenging sale for the most part, and so… I did sort of like that.
0:04:20.4 Kevin Gabauer: But I had a buddy who I went to the College of New Jersey with, him and I had pledged a fraternity together, best friends throughout going to school there, and he was just the complete opposite that I was. He was the guy that would show up to class a little late, wait till to the last day to do the projects, and he actually never had an internship, he kinda just played online poker, made some money that way, and got through school. But, just a risk taker, so him and I are very different in that sense. But he had this idea, ’cause we would go out and we’d party on the weekends, and sometimes the weekdays, and in the middle of the night, there was nowhere to go. I mean there was no… None of us could drive, and so we were relying on getting delivery food and, sure, there was a couple of pizza places, a couple of places that had wings and stuff like that. But half the time you’d order and then they either wouldn’t show up, or when they do show up it was just kinda cold and disgusting and so I think Tom knew in his mind like, “Wow, we just… There’s just gotta be a restaurant that cares in the middle of the night, servicing customers and providing great quality food”, and so, we just didn’t have that.
0:05:36.3 Kevin Gabauer: And when we graduated, basically, I had gone off to insurance, and his big thing was, “Hey, I’m just gonna start this restaurant. I was gonna… I don’t have a job lined up”, ’cause he hadn’t had any internships leading up to that point, and no real prospects in the real world, I guess. But anyway, he started getting quotes just from contractors, he started looking at different retail spaces available in Ewing, nearby the college and Rider too, ’cause we, in the beginning, did a lot of deliveries over to Rider. And he was getting quotes back from contractors saying, “Yeah, we could build out the restaurant, but it’ll be 150K or 130K”. And he just graduated school, he had next to no money to his name, like most of us did at the time, and I think he just kinda thought to himself, if this is gonna happen, I’ve gotta get creative because there’s no other way. And so, what he did was he ended up going to several different restaurants in town with the hopes of essentially allowing or having one of the restaurants allow him to use their kitchen in the middle of the night when they were closed because maybe they were open for breakfast or lunch. And then his idea was, maybe I could just go in there and serve my food when they’re otherwise not even in there.
0:06:57.4 Kevin Gabauer: So, he found a bagel shop that was… That like the idea, and so they split the rent. It was a really, really small bagel store, and so the deal was, “Hey, Tom’s gonna pay half of the rent for this guy, and he would operate from 6:00 at night until 4:00 in the morning, and then right when he was done at 4:00 in the morning, they would come in and make the bagels for the day.” But it was such a small bagel shop, he had to agree to store all the food for the Fat Shack off premises, and the only thing he had was his college house and a garage. So he bought a couple of box freezers from Home Depot, and it’s funny ’cause now we look back ’cause all the food distributors, they don’t deliver to residential houses, so he had to find a local company that was willing to kinda say, “Yeah, okay, we’ll deliver the food to this garage.”
0:07:55.6 Kevin Gabauer: So anyway, he had all the food stored there and he would basically just drive it over every night. He would load up his car with French fries and chicken fingers and cheese steak, enough to get through that night’s business. And then… Yeah, and then he just launched. So basically, he started the Fat Shack, it was in Ewing, it was at this bagel shop, there was no signage. I think most people had no idea where it even was. He didn’t have any money to promote it, so what he did was take a bunch of menus and go up and down the dorms at TCNJ and hand out menus, get the word out. I think he started a Facebook group a couple days ahead of the launch. And we had a big network of friends at TCNJ, so a lot of people joined that, and then the staff was predominantly just friends and fraternity brothers that needed some beer money, so that was the staff in the beginning, and nobody knew what they were doing, but it somehow came together.
0:08:55.3 Kevin Gabauer: And then basically what had happened, he operated that for about a year. Tom has family out in Colorado, Loveland, Colorado, not… About an hour, hour or so north of Denver, who saw that the business was doing really well, and obviously TCNJ is a smaller school with, I think it was 4000, 5000 kids at the time. And so they had convinced him, “Hey, the store is doing really well out there, come out to Fort Collins with Colorado State. We’ve got like 30,000 kids out here.” And so he made a trip or two out there and then decided, “You know what? I’m just gonna move my whole life out to Colorado.” And that was back in 2010, and he basically opened up his first full Fat Shack in 2011, and that one was unique. So he ran into the same problems like he did in Ewing, where it was gonna be a lot of money to build it out, and he was starting to do well, but not ready to drop 200K for a kitchen build out. So he had actually found… It was a Chinese place that was going out of business, but they had all the kitchen infrastructure in there, in the space. So the hood, the grease trap, the walk-ins, everything that would otherwise cost a ton of money to put in there, it was already in the space. So he negotiated that deal with a little help from his uncle, and he opened that spot in August of 2011.
0:10:25.6 Kevin Gabauer: And all the while I was in the background, I was being best friends, I was following along with what was going on and I was doing the insurance for the two restaurants, and he was always kind of like, “Yeah, you should quit your job, you should come out. We’ll build this Fat Shack across the country, and we’ll start franchising and all this stuff.” And at the time you just think like, “I’m doing really well at the agency. I don’t think… ” It sounds great, but it’s tough to uproot your life and go against what you’ve been hearing your whole life growing up, “Get yourself a job.” Great, you got it, and now you’re gonna ruin that. But Tom, like I had alluded to a little bit, him and I do really differ in the skill sets, and he’s always said like, “You’re the most organized guy I know, and that’s the biggest thing that I lack.” And so he’s always been hoping that I would make the jump.
0:11:21.3 Kevin Gabauer: And so back in… It was 2012, I started working a little bit behind the scenes with him, just developing ideas, putting a business plan together because that’s a little foreign to him. And basically in 2013, I just… I said, “You know what, I’ll never be this young. I’ve got no things holding me back, like a mortgage or a family or kids. So if I’m gonna do it, I have to do it now, and it’s the only option.” And so it wasn’t… It was definitely not my plan. I thought I would just follow the traditional path like my other friends, but I was like, “You know what? It’s either now or never.” And so I left the career, I said, “Hey, I’m moving to Colorado, and let’s just do this.”
0:12:15.7 Kurt Baker: All right. Well, we’re gonna take a quick break, Kevin. That was excellent background. We’re listening to Master Your Finances, we’re gonna be right back.
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0:13:04.9 Announcer: This is Master Your Finances with Kurt Baker, certified financial planner professional. Learn about tax efficiency, liability, owning, managing and saving your money, and more from Kurt and his experienced panel of guests. Master Your Finances is underwritten by Certified Wealth Management and Investment.
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0:13:28.7 Kurt Baker: Welcome back, you’re listening to Master Your Finances. I’m Kurt Baker here with Kevin Gabauer of Fat Shack and boy, what an interesting story. You said a lot in the first segment. Things that I picked out of there is one, first you followed kind of the traditional path, and I know there are some personalities, some people are identified as just an entrepreneur spirit that you can’t… They just don’t work well with others. And you hear that a lot from entrepreneurs. But the biggest hold back that many entrepreneurs have, is they’re ready to go out and take that risk, solve the problem, move along, but the thing they lack is the organizational skills to do the back end of the operation. So it’s really key for entrepreneurs to realize that part, in fact, they talk about that all the time. When entrepreneurs get to a certain stage, they tend to have a problem because they aren’t documenting their finances, they don’t really know why they’re making money, they just know they’re making money.
0:14:23.4 Kurt Baker: So the fact you guys were good friends and you had the organizational skills, and as you point at anybody who jumps into commercial insurance in their 20s and is able to be successful at it, obviously has a strong set of organizational skills, ’cause that’s one of those things where you sit down and you just have to… It’s a numbers game, man. You’ve gotta sit there, bang, bang, bang, bang, bang, bang, and hit your numbers. It’s all about just being disciplined, doing it, not letting anybody distract you and documenting exactly what you’re doing and why you’re doing it, and fine-tuning the skills based on what you’re trying to accomplish. Whereas his is kind of like, “Hey, I don’t have 50 grand, I need a kitchen. Let me just go and knock on a few doors and find somebody.” It’s like, “Oh, bagel store, they close in the middle of the afternoon, they don’t need their store at night. Maybe they’ll let me… ” Most more organizational type people don’t think, “Hey, let me just go in there and say I’m gonna come in from 6:00 PM in the night until you get ready to make your bagels at 4:00 AM and take over and pay half your rent.”
0:15:20.9 Kurt Baker: Those are two different things that are kind of diametrically opposed in the personality types, but if you get two people together that kinda click and make that happen. And of course, he’s the guy running out there like, “I’m gonna go to Colorado, wherever the opportunity is I’m going.” And the fact he can kinda pull you in, was kind of amazing and that you guys put it all together. I love the story, I just think it’s like that ideal combination of skill set and finding the right opportunity, and the opportunity was amazing, right? So my understanding is like your pizza parlors are closed. So if you’re up studying for an exam, but like one or two… I think you guys stay open pretty late, right? I think that was one of our differentiators. You found a need and you kind of plugged in, right?
0:16:02.9 Kevin Gabauer: Yeah, absolutely. Yeah definitely, we open as late as 4:00 AM.
0:16:05.3 Kurt Baker: And I think Facebook had just started around 2009, getting popular, right? So you guys kinda latched on to that social media deal. We forget, it’s like everywhere now, but back then, that was kind of a new, new thought process. Not everybody was using these social media things. 2009 it was just starting creeping out, so you guys were right on there, nothing like the flyers. Another thing I think is really important to people that don’t understand that are trying to start a business is, they think, I have to have money to start a business. Really you have to have creativity, energy, sales. Then you fund the business. The concept has to work. You can have all the money in the world, if the concept doesn’t work, you’re just gonna lose it. So you’ve gotta kinda reverse that thought process, where I have to have something that at the end of the day, I have more money than I had at the beginning of the day. And if you don’t have that, it’s just not gonna work.
0:16:49.3 Kevin Gabauer: Yeah, 100%.
0:16:50.3 Kurt Baker: You checked all those boxes that many people miss, especially when you guys are younger, like this. This is stuff people go to workshops and seminars and learn their whole lives, and they’re still struggling to make that… Get that in their heads, that’s the way it really works.
0:17:02.9 Kevin Gabauer: Yeah.
0:17:03.1 Kurt Baker: We all have that struggle, right?
0:17:05.7 Kevin Gabauer: Definitely. And, yeah, that is a big difference that, especially nowadays, people are, “Hey, I need all this money in order to start,” but you don’t. You’ve gotta just get creative and you’ve gotta figure out a way to do it without the money, and then the money will come and it’ll help and it’ll help you grow. But yeah, if you start by truly making the model, the model first, for us it’s the only way. And now it serves us really well, ’cause we’ve got no debt, we’ve got nobody to answer to and we’re just on such a great growth trajectory. But, yeah, I mean, you’ve gotta get creative. You’ve gotta try a million things ’cause chances are almost all of them are not gonna work, but maybe one will, you know?
0:17:45.2 Kurt Baker: Right. And the fact that you jump from TCNJ, which is kind of like a safe spot… What did you say, about 4000 students?
0:17:51.8 Kevin Gabauer: Yeah.
0:17:52.7 Kurt Baker: And said, “Hey, there’s 30,000 students,” so almost 10 times, eight or nine times, whatever it is. “Alright, okay, that’s an opportunity.” Most entrepreneurs would not be willing to just uproot that business and say, “Okay, here’s a bigger market. Let me just go for it.”
0:18:08.0 Kevin Gabauer: Yeah, and from the outside looking in, especially looking back, there’s a lot of things we’ve done that make very little sense, I think, from the outside perspective. But yeah, it was interesting too, because our menu is crazy and like you said, the social media too definitely plays into it because we’re serving fat sandwiches. In New Jersey, people know what that is, ’cause they’ve been around for a while, since the late 80s. But we went to Colorado and no one had any idea of what the heck we were putting on the sandwich. They were like, “This is insane. Like, what are you guys doing?”
0:18:40.4 Kurt Baker: How did you educate them about that? I mean, you’ve got a brand new item…
0:18:43.2 Kevin Gabauer: Yeah.
0:18:43.6 Kurt Baker: That’s a challenge, right? I mean that’s a little bit of a… Especially there where they’re really health-conscious. Isn’t that kind of a healthy area, theoretically?
0:18:51.1 Kevin Gabauer: Yeah, Colorado has gotta be top 10, still, like healthiest states. It was a slow grind in the beginning. Tom… The sales weren’t… He had to build them up and they had to get the word out and do all the things that eventually build the business. But yeah, it was definitely a challenge, just kind of bringing that whole concept of a fat sandwich out to the mountains, that no one really knew. But it was cool because we had a lot of guys that… Some people that went to CSU, that were from New Jersey, that kinda heard like, “Oh wait, fat sandwich place in town. Like this is insane.” And so they applied to work at the Fat Shack back in 2011-2012. They’re still with us today, some of which own stores, some of which are working for me corporately now, and they sort of just flocked, knowing what we were doing, but obviously being in an area where it’s not really been done before.
0:19:41.1 Kevin Gabauer: But yeah, like you said, the late nights are our big… That’ll always be our bread and butter. I mean, we’re open as late as 4:00 AM in some of the major markets, like Denver and Fort Worth and Seattle, but yeah, and even 1:00 in the morning on the weekdays. So when all the other restaurants are closed and there’s a handful nowadays that do stay open late, but our thought was, “Hey, let’s specialize in this and let’s make sure that the food’s on point and the customer service is on point. Whether it’s 2 o’clock in the afternoon or 2 o’clock in the morning, let’s make sure we’re there and let’s make sure we’re consistent.”
0:20:12.3 Kurt Baker: So you really focus on the university, which I guess you’re pulling from all over the country. So did that help you out? And how did you market to them? ‘Cause you kind of knew TCNJ, you had been there. You were there. So that… You kinda knew that. So how did you just kind of go… Did you just walk on campus and wander around?
0:20:29.3 Kevin Gabauer: Yeah, we still looked like college kids at the time. So I had gone… For example, our second store in Boulder, Colorado, again, we had gotten a loan from his dad, from Tom’s dad, from a home equity line of credit to start the stores. About $80,000-$88,000. And by the end of it, construction, all this stuff, we got everything ready, but we didn’t have any money left to advertise. So luckily we had a really good spot right on the… It’s called the Hill, it’s right in between where the kids live and campus, so it’s a perfect area for us, and I think a lot of people had walked by leading up to the opening, so they knew about it. But we just printed out a couple of coupons and flyers that we gave away to some fraternity and sorority people at this football game they had the weekend before, and that next year, yeah, we were just hitting the dorms. I would just go in to the freshman and sophomore dorms and I’d just pass out menus. I don’t think you’re allowed to do that anymore. We kinda got in there and got the word out that way, just kind of like a guerrilla marketing initiative. Luckily it kind of spread. And I think what helped us too is the fact that the food is a little wild, so people see it and they wanna talk about it, or share the pictures with their friends, and stuff like that.
0:21:47.5 Kurt Baker: So once you get them in, now you bought… You started hiring some of the students too, right?
0:21:51.3 Kevin Gabauer: Oh yeah.
0:21:51.3 Kurt Baker: So did that help with the actual marketing, if they’re going to work?
0:21:54.5 Kevin Gabauer: Definitely.
0:21:56.0 Kurt Baker: How did you go through that process of hiring? I guess they were people that obviously liked the sandwich, right?
0:22:02.3 Kevin Gabauer: Yeah, definitely. So again, we have a little bit of a unique model, so I feel like in college there are a good amount of people that wanna have a job. The reality is the restaurant industry is tough, especially just the work and being in a hot kitchen and having to be busy and being under pressure to get food out in eight minutes or less. That’s a challenge for sure. And we’ve definitely found as we’ve scaled and getting college kids, especially sometimes in the university town in Boulder, their mom and dad maybe just made them get a job, but now they’re realizing, “Oh crap, this is actually hard,” and then they’ll flake out. But especially with us too, if you’re working, you could be in there as late as 4:00 or 5:00 in the morning after clean up. So that was a concern of ours, just in general, thinking like, “Ah, are we gonna find anybody that is willing to work these hours.” But you get that camaraderie with the people on shift you’re with, and it’s been… People work those shifts all the time and they love them. But yeah, a lot of our staff now, I would say at least 20-30%, is probably the college kids in some capacity, especially in the college markets.
0:23:16.5 Kurt Baker: So how do you address turnover? That’s gotta be tough. You’re dealing with a college town which has turnover automatically, plus the industry has turnover, so you’ve got kind of a double issue going on there. They’re literally leaving every few years and coming in.
0:23:29.8 Kevin Gabauer: Definitely, yeah.
0:23:30.8 Kurt Baker: You’ve gotta constantly promote, I’m assuming. It’s like a constantly hiring process, I would think.
0:23:35.0 Kevin Gabauer: Yeah, absolutely, yeah. So that, yeah, we’re not immune to just the restaurant industry at large in the sense that, yeah, the turnover in the restaurant industry’s tough. I think we’ve found a little bit of a unique niche in the sense that a lot of our people, like I was mentioning, started with us from being a delivery driver, a kitchen worker, and now they’re working corporately, and now they own their own store. And so there is a real path to, sure, you could be on shift, you could be a Shift Manager, Assistant GM, GM. You could own your own store if you want to. We’ve helped, in many cases, finance a lot of these owners that I know that they’ll be there in the middle of the night, dealing with whatever issue is necessary. But you go into a bank and what are they, 23 years old with no money, they’re not getting a loan. You know?
0:24:18.5 Kurt Baker: They don’t lend you money unless you don’t need it.
0:24:20.5 Kevin Gabauer: Right.
0:24:23.5 Kurt Baker: Unless you can prove it.
0:24:23.6 Kevin Gabauer: So we’ve taken a lot of… We don’t view them as risky, but from the outside looking in, a lot of risky bets on people where, yeah, we put up $100.000 or $150,000 for somebody. I know that they’re the right person and they just lack the capital, so great, let us help facilitate that store getting open. So yeah, we’ve definitely taken a few gambles like that and we plan to continue doing that. But yeah, it’s just been wild.
0:24:54.5 Kurt Baker: Your expansion has been fantastic. And we’re gonna take a quick break. When we come back, we’re gonna talk about, your next step was, I guess, going on national TV, maybe tell us a little bit about why you did that and how that turned out.
0:25:04.0 Kevin Gabauer: Sure.
0:25:04.0 Kurt Baker: You’re listening to Master Your Finances. We’ll be right back.
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0:25:56.5 Announcer: This is Master Your Finances with Kurt Baker, certified financial planner professional. Learn about tax efficiency, liability, owning, managing and saving your money, and more from Kurt and his experienced panel of guests. Master Your Finances is underwritten by Certified Wealth Management and Investment.
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0:26:19.6 Kurt Baker: Welcome back, you’re listening to Master Your Finance. I’m here with Kevin Gabauer, and we’re talking about your initial start-up in Colorado when you moved. It’s because you had a bigger opportunity, you saw an opportunity. Little bit of a struggle, more of a healthy kind of area where they wanted healthy food and Fat Shack is not really known for having a lot of the ingredients that might be in other restaurants nearby. But it was different, it was a unique thing, and you went into the college, you promoted, some of the same struggles, but you overcame them, and now you’ve built it up.
0:26:53.4 Kurt Baker: And what I like is that you have the employees, you kinda watch them, it’s almost like an internship. And once you see somebody that looks like a real leader, somebody who knows how to manage the store, you’re willing to bet on them and really expand outside and let them own their own store, which is really cool because a lot of employees may not be willing to take that huge leap. They love to have that backing of somebody that’s kind of already done it, they’ve got the skillsets, they’ve got the drive, they’re willing to do what’s gotta be happening, and you guys have got the template and you’ve got the knowledge and the backing to make that happen. So, the partnership there, I think is awesome for somebody that’s really, literally young and really has never done anything, and the banks are not gonna tie in and lend it, but you guys are ’cause you’ve seen them work, you know how they work. So, you got this thing up to about 11 stores, I think, right?
0:27:37.5 Kevin Gabauer: Yep.
0:27:37.8 Kurt Baker: And then you say, “Hey, let’s go on national TV and meet Mark Cuban maybe.”
0:27:44.0 Kevin Gabauer: Yeah.
0:27:44.0 Kurt Baker: I mean how did that all happen? I mean it just seems kind of interesting, ’cause most entrepreneurs they’re growing, they’re building, they kinda have a template that works. I guess the first question would be, why did you even do that? What made you think to go ahead and do that and what was the benefit to you?
0:27:57.0 Kevin Gabauer: Yeah, definitely. So, a couple of things. Tom and I both had watched Shark Tank since I think it started, big fans of the show, loved it. Loved watching people fail and see what mistakes they’re doing, or see how they’re succeeding and all that. And, yeah, at that point, we had bootstrapped the whole thing. We didn’t need any money, but I think at the time we were kind of thinking that we had 11 stores, we were in Colorado, Texas, and Washington State at the time, we were in a great position. But we thought that if we did go on, we were kinda at the point where, yeah, we could probably actually put a use to the money, predominantly in being able to lend to a couple of other people that we knew would be successful. So, we kinda just… We just decided, “Hey, it’d be cool. Like, let’s maybe… ” [chuckle]
0:28:45.9 Kevin Gabauer: So, there was a casting call in Denver, and I was in New Jersey for a family event, and Tom was in Denver, and his cousin said, “Hey, there’s a casting call, you should go down.” And he was like, “Yeah, maybe.” And he ended up going down there, striking up a conversation with one of the producers, and he didn’t have anything prepared like Tom normally wouldn’t. [chuckle] So, he just brought a couple of menus, had his Fat Shack shirt on, and, yeah, thought the conversation went well, and at the end they kinda just say, “Yeah, you’ll probably probably never hear from us again”, ’cause there’s thousands of people there and they can only, I guess, select a handful. But then we went through the process, and we got an email saying, “Hey, they liked your stuff. And now submit all this information and paperwork and send us a video”, and so yeah, we were just at the point where you know what, it’d be cool if we went on there. Mark Cuban was definitely our top pick, and that was who we were gunning for. And yeah, we just sort of, in Tom fashion, let’s just do it, see what happens. [chuckle]
0:29:46.8 Kevin Gabauer: So, yeah, it was crazy. Like the process to get there obviously is really intense and involved and there’s due diligence that they do ahead of time, and videos we’ve gotta send them about the business and calls with producers, and a couple of months’ worth of back and forth. And all the while they say, “Hey, we don’t wanna get your hopes up though, ’cause there’s 40,000 people that apply and we can only really pick 150.” So, we knew that was a big reality, but every time we had gotten an email or call back saying, “Hey, they loved the story, we’re gonna book your flight.” We’re like, “Okay, great.” Yeah, so that was back in September of 2018 actually. So, we filmed in September 2018, we didn’t air until May of ’19, because they ended up putting us on the very last episode of the very last show, so we had to wait the longest period of time. But anyway, it was just wild too, ’cause you talk about just putting things together and making things work, and as we were talking and communicating with the producers, they said, “Hey, you know, we’ve got this little mini kitchenette that you guys can make the food in before you go on”, and we’re thinking, “Okay, great, cool.” And then they’re kinda letting us know exactly what’s going on in there, and it’s this little closet room with refrigerator and a freezer, and it’s not a kitchen, it’s funny that they even called it a kitchen.
0:31:07.6 Kurt Baker: Sounds like a break room to me. [chuckle]
0:31:09.7 Kevin Gabauer: It was definitely a break room. And so, it’s where like the producers and the staff just put their lunch, and there’s some counter-top space but not really. So, we’re like, “Alright, well, we’ve gotta buy electric fryers from Amazon or somewhere online, a griddle.” I mean we gotta do… We gotta buy all this crap to make this thing happen, and then we also gotta get our food from Denver to LA somehow. And we were working with our food provider at the time who does have a warehouse in LA, but at the last minute they just… It wasn’t gonna work. And so, we were like, “Okay, well, then we’ve just gotta buy coolers and ice packs, and put this on the plane.” Luckily, it’s only an hour and a half flight. And so, it was a super-hot day and we’re concerned, we’re worried. We put it all, check it all as luggage, like these four different big containers with straps to make sure they’re not gonna pop open and we get to LA and luckily, everything’s still frozen. And so, a couple of days later we’re in there, we’re… The refrigerator, the freezer’s just stacked with mozzarella sticks and French fries and chicken fingers, all our stuff’s in there, and we’re getting… We’re using this tiny, tiny kitchen. And the good thing about being a food concept on the Shark Tank is that they do try to put you around lunch time if they can, because it is a long day for the Sharks and they get hungry every few hours.
0:32:30.1 Kurt Baker: Like sharks do.
0:32:30.1 Kevin Gabauer: Yeah, we had the luxury of knowing like, “Okay, we’ll probably be on between, I don’t know, 11:00 and 1:00.” And being a normal company, you don’t get that assurance. It’s, “Hey, you’ve gotta be here in the morning, you might go on at 10:00, you might go on at 9:00 PM,” we just don’t know. So, anyway we’re in there and we’ve got about 45 minutes, everything’s cool, we have everything set up, we’re starting to drop some food, and they tell us, “Hey, you guys are good, you’ve got 20 minutes, no rush.” So, we’re cooking And we’re making sandwiches, and Tom was… He wanted to make a different sandwich for everybody. He wanted Mark to have one sandwich, and Kevin to have another one, and so that was cool, but then you know a couple of minutes later they come back and they’re like, “Hey guys, the pitch before you just ended like way early, are you ready?” And we’re like, “No, we’re not, not even close to being ready.” So we’re in there just…
0:33:20.7 Kevin Gabauer: This is a ridiculous kitchen, it’s so hot and the electrics going out, ’cause they’ve only got two or three plugs and we’ve got them all used up and the circuits are flipping and our producers are running to the back electrical panel, trying to hold it together for us. And Tom’s making sandwiches, and they’re taking me out of the room to get mic’ed up, and then I’m back in there wrapping sandwiches, and Tom’s getting mic’ed up, and then we finally get all this food together and we definitely pushed… We should have went out there to earlier than we did. We got all the food together, we put it on this little cart and they wheeled it up for us, ’cause we didn’t have any time, ourselves to bring it up. And within a minute or two, hair and makeup comes back, make sure everything is looking good, and you’re walking down the hallway just like you see on TV, and it was just such a crazy… I felt like a Friday night rush back in Ewing or any of the stores, and so it was just such crazy hype, and then all of a sudden you’re just standing in front of the sharks and it all begins.
0:34:20.9 Kurt Baker: How was that? How was that experience? Doing the pitch and all that and the responses?
0:34:25.8 Kevin Gabauer: Yes, I think we practiced the pitch one time in front of the other producers prior to the actual performance, but it’s unique in the sense that they say, “Hey, we’re filming once, you make a mistake, we’re not doing this over.” So it’s crazy ’cause it’s… As you’re walking down, you see… There’s literally cameras everywhere. Everywhere, everywhere, and you see the lights and all the stuff, and you know everybody’s in the background looking, but I think because it was such a wild ride getting the food to be ready and feeling like we’re at home, in the middle of the night somewhere, one of the restaurants, I think our nerves were put at ease, and we knew the pitch super well, we talk about business literally 24/7. For us, it’s just a normal conversation, it just happens to be in front of people that are worth quite a bit more money than we are. [chuckle]
0:35:21.2 Kurt Baker: Where there any surprises about the sharks? Like they asked you… Obviously, they’re asking you questions and things like that so how did that interaction go? I know you’re looking for Mark Cuban, but you had four sharks of interest, right?
0:35:32.3 Kevin Gabauer: Definitely, yes.
0:35:33.0 Kurt Baker: What do you think you learned from that process? And were there any surprises?
0:35:36.3 Kevin Gabauer: Yeah, I think the biggest challenge, probably the biggest surprise too, was just the fact that there were so many questions coming from so many directions, and it’s kind of like, “Whoa, okay, let me answer this one first and then I’ll get to you, Robert… ” And its a lot ’cause, they’re just hitting you with left and right. So that was probably the biggest surprise. You see it a little bit on TV obviously, but you don’t get to see the whole pitches of everybody. We were up there for 30-35 minutes, and obviously at TV you only see eight minutes or so. We were… Lori was really… She was the one that didn’t offer us anything, she was… I think she maybe had seen a sandwich or the brand somewhere before on Instagram, she couldn’t… But she’s like, “You guys are awesome. The brand, I just love it. But obviously, I don’t think I could bring any value, and plus, I know, a lot of the other sharks are interested”. So that’s why she went out, but… Yeah, it was awesome. It was great validation to see, “Hey, these guys are interested. This is cool.” And then obviously the negotiating back and forth and it’s tough when you call out one person like Mark, like, “Hey, Mark, will you go down to 15%,” then it could offend somebody else, so it is tricky in that situation, and they try to get you in the corner sometimes if they can, but I think overall, it was really good. We had a lot of fun. A lot of banter back and forth with them. Yeah, we just had a blast.
0:37:03.6 Kurt Baker: So, did you have a kind of a bottom line in mind before you went in like, “This is as far as we’ll go, and if that doesn’t happen, we’re out.”
0:37:11.4 Kevin Gabauer: What you saw on TV was the farthest we were gonna go actually.
[laughter]
0:37:14.0 Kurt Baker: They got you to your number.
0:37:18.7 Kevin Gabauer: Yeah, they did. They did. ‘Cause I think at the time that when everybody was at 17%, 15% was our max, that was all we were gonna do, we already agreed to it, and then we had kinda singled out Mark and said, “Hey, would you be willing to go down to 15%? We can get this thing done.” And yeah, luckily he did, and that was a cool thing about Mark too ’cause when we were up there, he had even said like, “Hey, you guys, everything I look for, checking all the boxes, the one thing I just can’t get past is just the health. The food, the fact that the food is not healthy.” And Mark invests in all sorts of healthy snacks and bars and so getting him over that hump was definitely… ‘Cause we don’t recommend you eat Fat Shack every day, and we said, “Mark, it’s a cheap meal and, people love it. Yeah, you don’t come in every day, but have it when you’re ready, and have it when you’re looking for the best food of your life.”
0:38:11.1 Kurt Baker: That’s a great story. Right. We’re gonna take a quick break. When we come back, we’ll talk a little about what happened once Mark was on board and what you guys did next. You’re listening to Master Your Finances, we’ll be right back.
[pause]
0:38:51.0 Announcer: This is Master Your Finances with Kurt Baker, certified financial planner professional. Learn about tax efficiency, liability, owning, managing, and saving your money, and more from Kurt and his experienced panel of guests. Master Your Finances is underwritten by Certified Wealth Management and Investment.
[music]
0:39:13.2 Kurt Baker: Welcome back, you’re listening to Master Your Finances. I’m Kurt Baker here with Kevin Gabauer, and you guys just finished up the whole process of getting on Shark Tank, after… You had a good business model going, but you said, “Hey, you had some other… ” Now you have some uses for the money, so you actually had some ideas, like where you had some other people that maybe we’re coming up, and you say, “Hey, if we added a little extra money, maybe we could add a store there and add a store here.” But you had a proof of concept, you had actual idea of what you’re gonna do with it, you kinda went through the process, ultimately, you were successful, and you got Mark Cuban on board. And so I know that people talk about, “Well, you wanna get a really wealthy successful person on board, ’cause they have a lot of money,” but I think it’s a lot more than that. I think they bring a lot of expertise. ‘Cause sometimes you’ll see sharks, they’ll step out ’cause, “Look, I just really can’t add a whole lot to this. This is not an area I’m really familiar with, not that I’m not interested or not that I don’t think it’s a great idea, it’s just that I’m not sure what to do.” So I’m going to assume that Mark felt he could add some value. So what types of things have you seen him add other than his financial backing?
0:40:23.1 Kevin Gabauer: Yeah, definitely. Yeah, first off, I think the biggest plus that had come so far for us is the fact that… First of all, once we aired back in May of ’19, we had in the first like month, we had over 3000 franchise requests that had come in through the website, and it just… We were just getting crushed with emails, which was cool to see. And then it was like, “Well, wait a second, now I’ve gotta respond to everybody.” But no, I think the fact that just having Mark on board, I think provided a legitimacy to what we were doing, to the fact that now, “Hey, people are looking to potentially buy a franchise, while Mark Cuban and his team just did a full due diligence on these guys, and they invested, so it’s gotta be a legitimate system.” And so I think just giving us that edge as to, “Hey, these guys are the real deal,” helped us a lot. We had a surge of interest.
0:41:21.2 Kevin Gabauer: The great thing working with Mark, and he knows, so as we’ve built this company, it’s been very, very important to us that we build sustainably and to open up stores with people that we know will be successful. We jump around in different states because the area doesn’t matter to us, more so it’s the actual owner-operator, and so we talk to Mark at lengths saying, “Hey, we’re not gonna just go sell 500 franchises and collect all this money because then in two years, we’re gonna be getting crushed by people not knowing what they’re doing or people trying to do other things and not following the system.” And so he’s on board with us growing at our correct pace where we’re gonna, “Hey, these stores are gonna be around for a long time, these are profitable units, and this is how we wanna build.”
0:42:09.3 Kurt Baker: How did you manage this influx of franchisee requests, because as you did in the past, you kind of knew these people, and they were kind of proving to you that they could manage a store by what they were currently doing, and you’re like, “I’m gonna invest in them.” If you get an email from somebody saying, “Hey, I’m a great person, I wanna open a store.” You really don’t know a whole lot about them. And you had a lot of them, so…
0:42:27.7 Kevin Gabauer: Yeah, we had a lot of… Yeah.
0:42:29.0 Kurt Baker: What did you do and has anything changed about how you do a franchisee since now you have a lot more interest, ’cause you’re known, you’re well known?
0:42:36.0 Kevin Gabauer: Exactly, so we’ve had a few… Prior to launching on the Shark Tank, we did have probably four or five outside people that we had brought up through the system. And the big thing with us is, could we have sold 100 franchises and collected it all? Sure, but obviously, we wanna make sure we’re doing this thing right. So the big thing for us and… It’s funny ’cause you say sell a franchise, our big thing is to convince someone not to buy a Fat Shack franchise because the restaurant industry is tough, you’re gonna be in there in the middle of the night and whatever it takes, and it’s not easy, and it’s not for everybody, and so our goal is to try to push people away as best we can so that when they do sign up and it’s really what they want, they know what they’re getting into. They know what it’s gonna take to be successful. There’s no surprises. So that’s been our big push.
0:43:24.9 Kevin Gabauer: So as all the emails came through, we had to organize them between, hey, top candidates, middle candidates, bottom candidates, let’s get at least a first draft going to each of these so that everybody has a response and, yes, started off with phone calls to the ones that were really promising and over time, now we have quite a few that have come from the Shark Tank. We got our franchise opening up in Las Vegas next year, that was from the Shark Tank, and the guys out in Kansas that we work with had first heard us from the Shark Tank and…
0:43:55.7 Kurt Baker: So, what kind of screening did you use to break those into the different segments? I mean, you have a top candidate, what typical qualities did you see of a top candidate? So what actually were you looking for?
0:44:03.1 Kevin Gabauer: So we actually… Yeah, definitely. So leading up to the… Knowing that there obviously would be more of a surge than normal when we aired, what we did was we beefed up our franchisee request form. So before it was maybe like five or six fields, and it was really easy to just say, “Yeah, I wanna open a Fat Shack, this town. I’m a good guy.” And so now it’s like, “Alright, these people will have to go through like 20 minutes worth of stuff to just get in front of us via email.” So that I think helped curbed a lot of people realizing like, “Ah, I’m not… This isn’t for me.” And then so basically, we’ve got questions on there like, “How much are you willing to invest? How many hours are you able to dedicate?” For those people looking for just a financial model and, “Hey, I wanna invest ’cause I’ve got X amount of thousands of dollars.” Those aren’t the people we’re looking for. We’re looking for those people, “Hey, I’ve been working at this restaurant. I’ve been a GM for four years. I’ve always wanted to do my own thing, and I’ve got some money, and I think I can get there.” But those are the people we’re looking for, the people that know it, the people that’ll be there when they need to be there and be the owner that will make a restaurant successful. So., yeah, just knowing what we’ve seen be successful in the past, that’s kind of how we split everybody up.
0:45:20.1 Kevin Gabauer: But yeah, it was definitely a challenge and we had several people on the email box trying to categorize and write back to people. And it was tough ’cause we literally just… It must have been the week after we aired we were opening our Fort Worth, Texas store and Mark lives North Dallas, probably about 45 minutes from Fort Worth. And so that opening was just out of control to begin with and now we’re there trying to make food and make sure everything’s going well and we’ve got all these emails trickling in, it’s like, “Oh man.” It was probably one of the busier times of our lives, I would say.
0:45:54.1 Kurt Baker: Obviously, Shark Tank and Mark Cuban raised a lot of awareness to the organization, so that’s a plus, of course, but what kind of expertise do you think he’s lent to you guys? Because he’s done a lot and he’s been very successful, so what kinds of things do you think you’ve learned from him that you may not have known before the partnership started?
0:46:13.8 Kevin Gabauer: So our goal with Mark too is more so like a long-term vision and partnership together with him. So we recognize, “Hey, in the beginning, great, we’ll get this surge, a couple of years of legitimacy, Mark Cuban’s involved. Awesome.” We met with him at one of our Texas stores in Denton actually prior to when we aired and we were just sitting down at one of the booths in our store out there for a hour, a hour and a half and he was just spitball… I like to think I operated at a high level, Mark’s just on the next level, whatever that next level is. [chuckle] There’s back and forth, ideas, this… “What about this?” Like, “Okay, okay, yeah, good point. Yeah, let’s not do that. But what about this?” And just little things here and there and just knowing that that’s now the pace we should be operating at. And his big thing too is just, “Listen guys, you’ve gotta be precise, you’ve gotta know what you’re doing and then you’ve gotta put the foot on the gas.”
0:47:06.8 Kevin Gabauer: And so we’ve… In that, knowing that and just thinking in that new way, we’ve restructured a lot of ways that we do things just with our corporate staff and made it so that we’re more efficient to allow for us to open more stores during every year and just doing a lot of that kind of stuff. Knowing like, “Hey, there’s another level we could be hitting here and we’ve gotta be hitting it and we’ve gotta be hitting it now.” And then obviously in the long term, of course, as we continue to scale, I believe there’s gonna be plenty of places where Mark will step in or… We’ve already chatted with him about a couple of spots in Dallas we’re looking at. But the cool thing about Mark, is he knows we’re autonomous and that’s how we’ve always operated and so he’s not stepping in and saying, “Hey, do this and do that,” if that was what it was gonna be, we wouldn’t have been looking for an investment, ’cause we kinda do our thing and he recognizes that and he believes in us, so he kinda lets it all happen and if there’s ways he can help, great.
0:48:04.9 Kurt Baker: Well, it’s great to have such excellent expertise there with you. So I’m gonna touch on… I know your business model is kind of a take out anyway, but what did you notice here in 2020 with the COVID situation? And what do you guys see happening next year, any changes or any developments that may be happening in the future here?
0:48:26.7 Kevin Gabauer: Definitely. A great question, ’cause yeah, COVID obviously put everybody on notice pretty quickly. And in the beginning, we thought, “Hey, what’s gonna happen? This is crazy, unprecedented.” We had to shut down all our dining rooms obviously, but yeah, we’ve had a huge, huge, huge chunk of our business always was delivery and take out. And that was how we started in Ewing. Most people didn’t even know where the bagel shop was, they just knew if they called this number they could get some food. [chuckle] So it was funny ’cause a year or two prior to that, we had recognized we had a point of sale system that was just very clunky and it had online ordering for us, but it just wasn’t good and so we had actually switched to this new point of sale system called Toast, that’s just leaps and bounds above some of the competitors in the space and also cheaper somehow. So we knew that the digital game was important. This is probably two years before COVID even happened. So now we’ve got much more of a seamless experience when you’re ordering delivery or take out or what have you.
0:49:30.7 Kevin Gabauer: And so we, fortunately, were very prepared and so when it did happen and everything went to the third party apps, we were already on there, we were already highly ranked, we were already… Had many, many, many hundreds of reviews, so people see that now, and they’re using the apps for the first time and they’re like, “Oh, this place looks legitimate, like cool, let me try it.” And again, it is something we probably take for granted, but our packaging and the way we operate our businesses, it’s just what we’ve always known, but it’s crazy ’cause I had even ordered just being locked down from restaurants that we’ve gone to and it’s like, “Guys, this is tough. How are you putting it in this package?” And it’s like… I think it’s simple ’cause we’ve just been doing it forever. But there is quite a bit to it that you’ve gotta consider and so yeah, we were just super, super lucky and our sales at our stores, it has kinda crept up and up because I guess less places were open with COVID and yeah, we just sort of really, really were fortunate on that front.
0:50:35.6 Kurt Baker: So what do you see happening for the restaurant business, yours as well as the overall business coming up in 2021 as we hopefully pull ourselves out of this ?
0:50:44.4 Kevin Gabauer: Yeah, no, I think people have formed habits. I think being able to order food online, it’s just getting more and more popular, it’ll continue to go that way. We’ve got three now, virtual kitchens, two of which in Chicago, one in Philadelphia that we already had on the dockets that now are… And these are kitchens that sort of like Ewing where it’s just in a warehouse and there’s 20 kitchens, 20 different restaurants and it’s just delivery, just delivery and just pick up. And so we’ve got… I think there’s gonna be a pretty big surge of that coming in the future and they’re already… The company we’re working with, is already building facilities in major cities across across the country and in other countries, so I think that’s gonna be… Yeah, it’s just gonna keep going in this direction for sure.
0:51:25.6 Kurt Baker: Well Kevin, it’s been awesome man, I really appreciate you coming on and talking to us about it. I can’t wait to get one of those myself. [chuckle] It looks delicious.
0:51:34.1 Kevin Gabauer: Oh, yeah. Yeah, we really appreciate it. For sure. Thanks for having me.
0:51:37.4 Kurt Baker: Excellent, yeah. You’ve been listening to Master Your Finances. I’m Kurt Baker, I can be reached through our website, which is masteryourfinances.us, you can subscribe to this podcast and all of our podcasts. Remember, together we can Master Your Finances, so you can enjoy financial peace of mind.
0:51:55.7 Announcer: That was this week’s episode of Master Your Finances with Kurt Baker, certified financial planner professional. Tune in every Sunday at 9:00 AM to expand your knowledge in building and managing your wealth. Missed an episode? No worries. You can subscribe to a free weekly episode of Master Your Finances to listen to on your favorite podcasting platform, Apple, Spotify, Google Podcasts, whatever. Master Your Finances is underwritten by Certified Wealth Management and Investment. Only on 107.7 The Bronc.

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