May 26, 2020

How to Build a $10 Million Restaurant: Chef Sam Marvin, founder of Bottega Louie

How to Build a $10 Million Restaurant: Chef Sam Marvin, founder of Bottega Louie

I've always viewed the restaurant industry as risky but Chef Sam Marvin sees no risk. He's able to pump out hit after hit without missing a beat. From Bottega Louie to Echo & Rig, the chef has proven that success in the hospitality industry is a formula and it's a formula we can learn. On today's show, we'll be discussing the formula he used to turn Bottega Louie into a 10 million dollar blockbuster.

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SHOW NOTES

Started a consulting job in LA

Met a family who dined at the consulting restaurant 89 times over 10 months

Father of the family was son of CEO of Hilton

Pitched him on the idea for Bottega Louie

Spent 2years working closely to create the restaurant

Restaurants have opened the same way fro 100years

Key pillars of focus

Shift from restaurant business to experience business

Goal to create egocentric gratification in guests

Investing in experience

Keeping average check mid-range

Goal to bring guests back 3 times per week

Industry goal is one guest to come back every 90 days

Focusing on the human psyche

Tapping into subconscious

130 metrics including the 5 key pillars

Example: $1300 leather-bound reservations book

Example: Intentional confusion whe a guest walks in because restaurant is open plan. Create opportunity for connection from hosts

Opportunities during tragedy

Bottega Louie opened during economic crash of 2009

Invested over $6million on the opening

Opportunities and tragedy move at equal pace

Inspiration from European restaurants

Laduree inspired macarons

Italian is the #1 food genre in the world

Why choose Downtown LA

Has a reputation of being homeless town

Research showed surrounding restaurants were doing well

Research on local population

Size of population

Average income

Average check amount per restaurant

Bottega Louie made $8-9million

Zero profit in year one

Investing in the future

Four points for decision-making

Good for employee

Good for investors

Good for guests

Good for community

Why Sam left Bottega Louie

Stayed for 5.5years

Wanted to control his own destiny

Gained business knowledge

Strategy to open a new restaurant

Figuring out what the community needs

Finding gap in the market

Lots of Research and Development

Echo & Rig strategy

Studying surrounding steakhouses in Las Vegas

$28 or $88 check average - nothing in between

Decided on $53 check average

Studying the weight of meat

Steakhouses serve large steak because it is the norm

Do guests really need 30z steaks?

Decided to serve best possible steak at smaller size

Is Covid going back to zero?

Everything has changed

Grand revenue numbers hide flaws

Previously needed to make over $90k a week to make a profit

Retooling to create bigger and better businesses

Feeling excited about the future

Improving delivery

Elevated packaging

Making guests feel special even outside the restaurant

Transcript

Josh Kopel:
Today's episode is brought to you by Yelp, whose mission is to connect people with great local businesses. They're also helping me connect with you, which is totally awesome. Now here we go.

Sam Marvin:
When you're doing grand revenue numbers, it hides all the potential little flaws that are there. You don't see them. But now with the change you see everything.

Josh Kopel:
Welcome to FULL COMP, a show offering insight into the future of the hospitality industry, featuring restaurateurs, thought leaders, and innovators, served up on the house. On today's show, we chat with Chef Sam Marvin, founder of Bottega Louie. We will be discussing the formula he used to create a $10 million restaurant.

Josh Kopel:
I've always viewed the restaurant industry as risky, but Chef Sam Marvin sees no risk. He's able to pump out blockbuster after blockbuster without missing a beat. From Bottega Louie to Echo & Rig, the chef has proven that success in the industry is a formula, and it's a formula we can learn. To begin, the chef takes us back to the moment just before the dream of Bottega Louie was born.

Sam Marvin:
I took a little consulting job at a restaurant in LA on Sunset Boulevard to make ends meet. I was there, it was called The Dome on Sunset, I was there for about 10 months. In that 10 months, this one family showed up for dinner 89 times, literally. They lived up the hill there and they came in for dinner. And one day they came up and said, "You know what? We'd love to speak with you if you have some time about some other projects." And that's how it sort of started.

Sam Marvin:
So I sat down with this gentleman, his name was Bollenbach, and we started a relationship, and I started talking to him about my ideas and he loved my ideas. And he said, "Let's get an office and let's sit in the office and let's iron out your ideas." Okay. That sounded good. I could do that for a little while. I accepted that thought process of what we could potentially do. And then we started to get a little more known with each other, the second meeting, the third meeting, the fourth meeting, and I came to find out that his father was the CEO of Hilton hotels for 10 years. And before that, he was the CFO of Disney with Michael Eisner for about five, six, seven years. His name is Stephen Bollenbach, and he's a financial engineer that specializes in the hotel and restaurant hospitality industry.

Sam Marvin:
And that just, God, for somebody to put that in my path where now I could really talk about these things that were in my head to somebody who might be interested. And I pitched them on an idea for what ended up being Bottega Louie in Downtown LA. And that idea was different for me because everything I saw to that point, and still today, 15 years later, 12 years later, still nothing has changed.

Sam Marvin:
Everything I saw to that point was people were still opening up hotels, and restaurants, and hospitality venues the exact same way that they did it 100 years ago. So the guy who just built the Sawyer Hotel, a new Kimpton hotel that I'm located in Sacramento, he really didn't do anything different than the guy who built the Waldorf-Astoria in New York 100 plus years ago, 120 years ago. Nothing's changed.

Sam Marvin:
And for me, that was just asinine, right? I couldn't understand at the time why everything is changing in the world except this, at the time, $650 billion a year industry, and we're still doing things the way people did it 100 years ago. And I pitched this idea to the Bollenbach's and they liked it. It was in my head and we needed to figure out how to make it executionable, but they really understood the basis of the idea.

Sam Marvin:
And the basis of the idea is that I'm not really in the restaurant business anymore, that was my basis 10 years ago, that I was getting into a new business and it's called the experience business. And my number one goal in my experience business is to create egocentric gratification in my guests. So if I can achieve creating egocentric gratification in my guest, it's over. It's my guest five times a week. Not once a week, not ... Restaurant institutions talks about once every 90 days, if you see a guest, that's a good guest.

Sam Marvin:
Well, when we opened Bottega Louie, I mandated that we see a guest three times a week, not once every 90 days. And they looked at me like I was, "How can you expect that?" And then I explained to them why. We opened in 2009 in Bottega Louie, and it was tremendously horrific times. Different than today, but a lot of similarities. The market crashed, people's spending was dried up. It was just unbelievably horrific times for our industry.

Sam Marvin:
But again, just like today, which we'll talk about in a little while, the opportunity during tragedy, there's tons of opportunity, it's equal. If your life is like this, it goes like that, right? So there's a lot of opportunity and there's a lot of tragedy, but they move at equal spaces. So with as much tragedy if you have, that's how much opportunity you have as well.

Sam Marvin:
So I looked at Bottega Louie, that if we could create egocentric gratification in a guest for 40 bucks, that would be a win for us. Because at that point up until then, everyone's going to The Palm and spending $60 at lunch, and $90 at dinner, and expense accounts. Now they have to all pull back because they can't do that anymore. So if we could deliver a better experience at $45, than you got at $125, wow, right? And that was the goal of Bottega Louie. And we had to do it in a lot of ways.

Sam Marvin:
When I say people are still doing it the same way, they open on a few characteristics: location, location, location, right? That's important. Food is important. Service is important. Design is important. Ambiance is important. Those are like the five basic tools of the industry. They look at those five tools and if you could hit all five of those, I got the best location, great food, great service, the place looks beautiful, and it feels good in here, that's what they're looking for. Well, that's that old asinine thinking for me again, if it's not broke, why fix it?

Sam Marvin:
So we sat in an office and I talked about other things that all have to do with the human psyche, most of them. How you touch on the subconscious of people. How do we do that? How do we make people feel that egocentric gratification? We have 130 different pieces that include those other five, they include location, ambiance, service, food, et cetera. But there's another 125 pieces, and it depends the restaurant. Like there might be 135 pieces instead of 125 pieces. So we formulated to it.

Sam Marvin:
But now you have these 125 pieces that now create the new whole, right? So those other five pieces: location, and service, and stuff, they're important, but they are no more important or no less important than the other 120 pieces, and now we create a whole, and this is our new foundation. And that includes everything.

Sam Marvin:
You'd come into Bottega Louie and we're very busy, and we would spend $1,300 on a leather bound, red leather with gold imprint of our logo, and we would open that big book up and we would grab a pen and we would start writing your name, Joshua Kopel. He's wearing headphones, beautiful, beautiful. And now you would go and we'd find the guy wearing the headphones, "Joshua, your table's ready for you." And we would go through one of those books every 75 days, because we ran out of room where we're writing the numbers.

Sam Marvin:
And people would look at me like I was an idiot, right? "I can't believe you're spending $6,000 a year on paper that you just write your name on and ..." But they didn't understand the subconscious psychological connection that I'm making with the guest, because that's what I've been studying about, really doing a lot of R&D about. But people, as opposed to a hostess looking at a computer screen punching in your name, "Thank you very much," it was that connection.

Sam Marvin:
We did things that, you talked about the 130 points, you'd walk in to steal my restaurants today, especially Bottega, you don't know what to do. You walk in, there's a market to the left. There's a host stand, but it's like 40 feet in the interior. You see a pizza oven all the way in the back, there's this big kitchen that's wide open. They don't even know where they're supposed to walk or what they're supposed to do. And I can't tell you how many people have suggested, "The noise is loud and people don't know what to do when they come in," the amount of comments I would get on that. But that's intentional because that automatically creates an opportunity to develop a relationship with that guest, no matter what, right? "How are you today? You don't know where you're supposed to go? Let me show you, follow me. Are you hungry? You're thinking of the market? You know what, Josh, can you come here and help this gentleman for me."

Sam Marvin:
It's really about building relationships to create that egocentric gratification. So when you leave, you feel like the king or the queen and you can't wait to come back. Not only you can't wait to come back, you can't wait to bring your people that you care about to show them how you are the king or the queen.

Sam Marvin:
So it's a pretty solid formula. I believed in it at Bottega. People thought we were crazy. We put almost $6 million into that restaurant during a recession. People would walk by and see 8,000 feet of Carrara marble on the floor and say, "How dare you? How dare you? Don't you see the homeless people out there?" It was a lot of R&D Downtown. And I believe you can never really, you can't argue with the facts. And so the success of Bottega Louie, yeah, there's success. I lived in Europe, so I took a lot of things like Ladurée, they sold macaroons. Nobody knew what French macaroons were before really Bottega Louie opened. We knew, but they weren't being sold anywhere.

Sam Marvin:
But Ladurée has a line in [inaudible 00:11:02], and Paris has lines, they have three locations, align going down the street every day, every minute. So why wouldn't they do that in LA, right? So, a little bit of Dean & DeLuca, a little bit of [inaudible 00:11:14], an Italian format because that's the number one food format in the world. If I was going to open a Italian restaurant, which is number one, or I could open a Ethiopian restaurant, which is number 36, well, it makes more sense to open Italian because more people are going to come to Italian. It's the number one food gender in the world.

Sam Marvin:
So, everything had a lot of thought process that went into it. We actually ended up sitting in that office on Doheny Place for almost two and a half years. So, pitches nonstop, one thing after another, and this new foundation, how are we going to create business? So on and so forth, but choosing our location, Downtown LA, was about the facts. People say, "How dare you go to Downtown LA. It's homeless." People have been talking about Downtown is going to be up and coming. They've been talking about that since I was 10 years old and it never seemed to materialize.

Sam Marvin:
But then we looked at The Palm Downtown. They were the number two Palm in the entire chain of all their restaurants. We looked at Roy's, Roy's was the number one restaurant in their chain. They had 18 locations, that was the number one grossing revenue. We looked at the Daily Grill, had like 30 restaurants, that was the number one Daily Grill in the chain. We're looking at these numbers that are just ... The Ralphs, there was a Ralphs down there that opened up, and it's the number one Ralphs in all Ralphs in the entire chain of Ralphs, was the Downtown Ralphs location.

Sam Marvin:
So when you see those numbers, you really believe in them, right? Again, in our R&D, which I think is so important if you want to be successful at anything, I mean, we understood 41,000 people live in Downtown LA at the time. 200,000 people were working in Downtown LA. 1.3 people was the average occupancy of living a home in Downtown LA. 93,000 was the average income per person. 107,000 was the average income per family. All these numbers were second to Orange County and Beverly Hills, but way above anything ever you could even imagine them being. So we look at all those statistics and facts. And I mean, it's hard to go against that. Very, very, very difficult to go against that.

Sam Marvin:
Now we open Bottega Louie. We're going jump up to the opening of Bottega Louie. We're very successful like we hoped to be, like we planned to be, right? We had a good plan and we had good expectations. We weren't just swinging from the hip, throwing our hat in the bucket, and hoping that we were going to be successful. We really did a lot of due diligence. Not that that can't go wrong, and I'm going to show you exactly how that did go wrong by the way, but we opened up and we're successful. When I say successful, we're doing eight, nine million out of the gate. It's 9,800 square feet, nine million, that's big for us. That's a successful restaurant.

Sam Marvin:
Year one, we turned zero profits. And all you hear around the whole city, "Those idiots at Bottega Louie. They are so dumb. They're crushing it, they're doing nine, 10 million, whatever the numbers that people are imagining. Every time you go there it's packed, and the rumor is that they didn't make a penny. Those guys are dummies." Right? Well, that was all intentional, Joshua. That was part of our 130 points was not to make any free cash flow at the end of year one. To spend it all, to invest in the business, to create relationships. "You know what? Your mom's not feeling well, Joshua? Here's something for your mom. Take it home with you. This is our lasagna and a little bowl of chicken soup." "Really? You don't even know me." "Yeah. But you told me your mom wasn't feeling well, right?" Well, that's investing in our relationships, investing in our business. Taking care of our employees.

Sam Marvin:
Every decision I make for our business has to fit under four categories, an umbrella. And it has to be good for the employee, good for the investment, good for the community, and good for the guest. So if I have an idea and it fits under all four of those categories, that's a good idea to fit that we can continue to go with. I look at it like this.

Sam Marvin:
You have a black belt in karate. Well, I can almost assure you that that black belt in karate probably has never gotten into a fight. Almost for sure. Most of them haven't, right? Outside of competition and things like that, on the street. But if they did get into a fight, they got this tool belt that they're wearing. And they have all the tools to be very successful. So that's what we really try and do from every aspect of it. When I talked about all that R&D and learning about how many people are in this society and what the businesses are doing around us, and so on and so forth, it's really about having all those tools. Even if I don't need to use them now, if I ever needed to use them, I have them and I understand them. So that's pretty much what we do.

Sam Marvin:
That brought me on to leaving Bottega Louie. So I was there about five and a half years. I got vested in my small part of Bottega Louie after five years. So I was really working for my salary. I didn't see the expansion going the way we planned it to go and it felt like we were slowing down a little bit in our thought process. And it made sense for me to walk away.

Sam Marvin:
I opened my own company now where I was 100% ownership, not a minimal part of it. And because I learned a lot, I learned a lot that, "Yes. Am I chef? Absolutely. Can I cook very well? Can I create menus? Can I do all the chef roles? Absolutely." But to be successful and to control my own destiny, that's the difference, letting someone else control our destiny versus us, I really needed to take all that business knowledge that I have been learning with Bottega Louie and these real smart individuals, and now I sucked it up, right? Remember I told you, you get out of something what you put into it.

Sam Marvin:
So, I studied every publicly traded hotel company at the time, every publicly traded restaurant company, understood. You know why we opened Bottega Louie at 10,000 square feet? Because if you looked at the market, ideally thinking of going public one day, restaurants that were over 8,000 square feet were given a higher value than restaurants that were between 3,000 and 5,000 square feet, or under 3,000 square feet. It's price to earnings ratio. The smaller ones were 10 to one, 15 to one. Well, the big boxes like Cheesecake Factory at the time, or whatever big boxes that were in that 10,000 square foot range, they were 40 to one, 50 to one. So for every dollar, it's worth $40 as opposed to every dollar worth $10, just because of the size of location. That's what the market did. So that's one of the reasons we opened a big restaurant.

Sam Marvin:
So I leave there and now I'm going to take all this business knowledge and I look at what people need, right? Again, we did all that research at Bottega Louie. We didn't just open something that, opened it up and say, "They will come, build and they will come." We didn't put a square peg in a round hole. We did all this R&D to figure out what the community needed, and that was a gathering spot. That was an affordable place where they can come three times a week, where they can come in shorts or they can come in a business suit, where they can come and have a business meeting, or they can stop and get a martini after work, like so many different avenues. And that's part of that 130 points, is if you want someone to come to your restaurant three times a week, you better figure out a reason for them to come there three times a week. If it's just to have dinner, or just to have lunch, well, they can't do that three times a week, right?

Sam Marvin:
We would transition six feet of space four times in one day to create different vignettes where people would be coming for those different things. So a person could actually come two or three times a day if they wanted to for different reasons. And I looked at opportunity in Vegas. I would go back and forth to visit my family. And there was an opportunity there, and gosh, it wasn't a steakhouse in the community. And if you wanted a steakhouse you had to go to the Strip where you had to go spend a lot of money.

Sam Marvin:
Well, I started studying steakhouses. The developer thought it would be a good idea to put a steakhouse in there. It's not like I was craving to open a steakhouse. I said, "Well, if I do it, I do a butcher shop too because every time I go to Vegas and you want to buy a piece of meat, you're at Smith's and it's a barcode, beep, beep, beep, beep." You don't know where that animal came from, you don't know how it was talked to, what it ate, how it was treated. It's a barcode. And that was disgusting for me being a chef and growing up in the philosophies that I learned how to be a chef under. That just didn't make sense for me.

Sam Marvin:
So I said, "I could open a steakhouse and I can open a butcher shop at the same time." And then I started studying, doing my R&D like I do, and I realized that you had Fleming's, and Mastros, and The Palm, and Ruth's Chris, and so on and so forth, and they all were started at an $88 check average and went up from there, all those restaurants. And then you went to Outback, Black Angus, Lone Star, those steakhouses, and they all capped at a $28 check average. So between 28 and $88, you had nothing in the marketplace, zero, right?

Sam Marvin:
If you look at Italian food, every penny, you have tremendous amount of restaurants at every penny level. So at $62, $63, $21 that's stacked. Steakhouse, there was a niche that wasn't being filled. So I created a steakhouse with a $52 check average, right in between both of them. And that was our niche. And that bring us to success.

Sam Marvin:
Another bit of my R&D is if you go out and you have a piece of fish, or you have a piece of chicken, or you have lamb chops, or you have pork chop, that fish weighs six ounces. That piece of chicken weighs nine ounces. Those lamb chops weigh eight, nine ounces. That double thick pork chop weighs 10 and a half ounces. So, really, do people want to eat 30 ounce steaks? No, they don't. But you don't have a choice. All those steakhouses are embedded in their long, long time concepts. They've all been around for 10 years, 12 years, five years, 20 years. So they don't have a choice.

Sam Marvin:
They're serving New Yorks, rib eyes, filets, and they're big cuts because the higher a price meat gets, to give you a little bit of value, they got to charge you $8 more, they give you an extra two, three ounces. So now you walk into places and their steaks are all 22 ounce bone in New York, 28 ounces this, 40 ounce this, you end up taking it all home anyways. Really what you need is you need eight ounce, nine ounces of protein, just like every other protein is.

Sam Marvin:
So I said, "Great. We could do a 10 ounce steak or a nine ounce steak, but we could give you the best steak money could buy." So if you came to us and you said, "I'm going to have a hanger steak," it doesn't matter what it is, and my hanger steak is $28, $27, 10 ounces, that's a USDA natural prime hanger steak. So that is the top 2% of all beef grade in the United States of America, is natural prime.

Sam Marvin:
So it doesn't matter how much money you have. You can't buy a better hanger steak than the one I'm selling you. And it's only $28. "Wow. I'm spending $60 at Ruth's Chris for a petite filet," or whatever the number is, I'm maybe a little exaggerated, maybe it's $45, $48, "But I could buy a best hanger steak in the world for 28 bucks? And now I can also enjoy my salad and a little bit of vegetable or something like that as well? Wow. That's just phenomenal."

Sam Marvin:
So, there's a lot to our success at our other restaurants that goes into the planning stage, the business part of its stage. So now we're open with Echo & Rig. We were very successful from day one, because again, it wasn't really taking a chance because that's what the people wanted, until this craziness came upon us. And I'm sure that's what we're going to talk about a little bit as well.

Sam Marvin:
A lot of people talk about, "It feels like you're going back to zero," right? Like you're rebuilding, those types of feelings that are associated with that, right? The bottom line is everything's changed. 100% everything has changed. This industry has, like I started out earlier, when you're doing grand revenue numbers, it hides all the potential little flaws that are there. You don't see them. But now with the change, you see everything. We're operating our butcher shop in Vegas and the bottom line is that we need to make a profit if we do 3,000 in sales for the week, or we do 15,000 in sales for the week, we need to make a profit.

Sam Marvin:
Where before we would need to do 100,000 in sales to make a profit. And if we're only doing 90,000, we're losing money, but we're doing 130,000, so we're okay. But at 90,000 to lose money, it doesn't make sense to me anymore. It did two months ago because you never did the 90,000. So you were doing your 130,000 or whatever that was. So it never came into existence, but now it does. So yeah. I'm retooling everything for a better and bigger, and it's exciting for me.

Sam Marvin:
People talk to me about my feelings, am I depressed, and do I feel, "How do you feel?" On the contrary, I feel excitement. It's not really zero. We're not starting at zero as opposed to caring, not caring, but as opposed to focusing on potentially how comfortable my chairs are, and I'm going to spend $265 a chair on my new chairs, we're really focusing our efforts into a lot of different things like packaging. Most restaurants like me that didn't do delivery or curbside pickup as much would put your stuff in a to-go box and put it in a bag that had a logo on it, and you'd take it with you, right?

Sam Marvin:
Well, we can't do that anymore. That doesn't work for us. That's not the correct packaging. It's still for me where everybody else is trying to create food for you to take home, food for you to eat, the restaurant in your house, things like that. I'm just going to be trying to create egocentric gratification in our guest. Even if we can't do it in the restaurant, how do we do it so when they're at home, they're still feeling like the king and queen because Echo & Rig and Sam Marvin made them feel that way. They don't know that, it's just in their mind, it's subconscious, but you got that feeling that's like, "Wow, I need to order from Echo & Rig tomorrow as well. I need to go back there and get this and try that."

Sam Marvin:
So it's really about the feeling we're creating, because are there restaurants that have better food than we do? Of course there are. I'd be an idiot if I said no. Are there restaurants that have better service than us? Absolutely. Are there restaurants that look prettier that are more expensive? Of course there are, but are there restaurants that can create a better experience than we do? I don't believe that.

Josh Kopel:
That's just Sam Marvin founder of Bottega Louie and Echo & Rig. Be sure to follow the chef on Instagram using the handle @ChefSamMarvin. If you want to tell us your story, hear previous episodes, check out our video content or read our weekly blog. Go to joshkopel.com. That's J-O-S-H-K-O-P-E-l.com. Thank you so much for listening to the show. You can subscribe wherever you get your podcasts, and while you're there, please leave us a review. A special thanks to Yelp for helping us spread the word to the whole hospitality community. I'm Josh Kopel. You've been listening to FULL COMP.