Joe Bastianich, Tim Love and Antonia Lofaso Talk CNBC’s Restaurant Startup
I loved last week’s season 2 premiere and I can’t wait to watch “The Comeback Cook,” where investors Joe Bastianich and Tim Love hear from two entrepreneurs who had to put their culinary dreams on hold due to terrible setbacks. Everyone loves a comeback story, right?
TV Goodness attended the Winter 2015 TCAs and had the pleasure of hearing Joe, Tim, culinary consultant Antonia Lofaso and CNBC’s SVP of Primetime Alternative Jim Ackerman talk about who they’re looking to invest in, the real stakes of investing in businesses that fail all the time and so much more.
Jim Ackerman: â€œOne reason we’re proud of Restaurant Startup is that the stakes are real. Joe and Tim are putting their own money on the line and giving real opportunities to the entrepreneurs who come on the show.
Now that we’re starting our second season, there’s some updates from the first season I’d like to share. Tim struck a deal with a team of scrappy line cooks from Seattle. He invested $200,000 and this spring, Seattle’s first “congee” restaurant will open in Pioneer Square. If you’re not familiar with congee, it’s an Asian porridge, very popular and very delicious.
Joe did a $250,000â€‘dollar deal with Baby’s Bad Ass Burgers, a popular food truck brand you’ve probably seen on the streets of L.A. Joe and his new partners are buying trucks and are currently looking for a brick and mortar location.
Real deals. Real opportunities.
This season features exciting new concepts, inventive cooking techniques, and for the first time, specially themed episodes, including chefs that are striving to overcome personal setbacks, businesses desperate to change locations, and established restaurants that are looking to launch a second location, among others.”
How would each of the chefs have done at the career stage where the contestants are on a competition like this?
Antonia Lofaso: â€œThat’s actually a great question, because I started my career on Top Chef. I think that really catapulted me into a space where I was able to deliver my ideas and food at the forefront of the restaurant world. You don’t really know until you’re given the opportunity, until you’re put into that situation and you’re under that intense pressure if you can really rise to the occasion and get it done.â€
Tim Love: â€œYou’ve cornered it into a competition. It’s really not a competition. It’s about whether or not these people can show up and actually express what their idea is in a very focused way and the fact that I want to give them some money to make it happen.
So it’s not really a competition per se. It’s more about do you have an idea that is focused and is real that I want to put money into because I understand the business. So on this show, sometimes it gets pigeonholed because food shows tend to be competitions. And this a show about whether or not you have a really good idea and you want to put it in front of Joe and I and get a chance.
Joe Bastianich: I did that and I did great because my grandmother gave me $80,000 in 1992 to open my first restaurant. She’s still my first investor and gets a dividend check every year.â€
Beyond the food, which must be amazing, what is it you’re looking for in these people?
Joe: â€œWe are looking for opportunities to put our dollars to work. So we’re looking at people who are not only talented in the hospitality and food business, but people who know how to create profit margin, how to run a business, how to deliver dividends. We’re looking for partners.
We’re not here to babysit. We’re not here to teach you things. We will teach you, but we want people who bring something investable to the table that I can put my time and my money into that will return dividends to me, because this is a business show. It’s about making investments. It’s about making money.â€
If you guys end up investing in a restaurant startup and they open the doors and then, somewhere down the road, things aren’t working out either between you guys or the business isn’t working out and they want to fold up shop and want to cut their loss and walk away, what happens?
Joe: â€œIt wouldn’t be any different than real restaurants. I’m in 30, 40 restaurants into my career and haven’t closed many, but it’s something that happens. I think we’d cross that bridge when we get to it. We haven’t seen it yet.
But I think it’s about the show and the success of the show is that it really brings reality back into reality television. We are dealing with real people, real lives, real businesses and the ups and downs of what happens in humanity and dealing with other people who become intimate in the sense that you become partners with them. So, we will hopefully not get to that bridge soon, but it will be something that will happen in the future and we’ll deal with it.â€
Tim, have you ever dealt with a restaurant that doesnâ€™t work?
Tim: â€œYeah. Restaurants open and restaurants close. That’s the reality of it.â€
Antonia: â€œNautre of the business.â€
Tim: â€œYou can easily put your money in the bank get 3% all day long. But what we’re trying to do is not only make people’s dreams come true but also take advantage of an opportunity and influence people, mentor people, coach them in, to allow us to get our money, to make money through other people’s passions.â€
Is there a contractual obligation on their part to continue if you don’t want to or vice versa?
Joe: â€œThe deals that you see are real deals. They get made and then we go and live in the world of reality. So restaurants canÂ â€‘â€‘ no matter what contract is there or couldn’t be — which can really exist — it will exist if it continues to make money. I will be interested in it if it’s profitable, if it’s successful. If it’s not, we will close it like any other business, because we live in the real world.
This is not like created for television. This is the reality of investing and running restaurants. I think that’s the greatest attribute of this show, is just how real everything is. It’s visceral. The money’s real. The investment’s real. The restaurants are real.
Antonia: â€œWhat’s so great about it too is seeing so many food shows now are just all about the beauty of the food and it’s all about the food and it’s just the food. And, yes, that’s what drives the business, but there’s such a strong business end to it that a lot of time people don’t get to see. You need to be able to make money at great food that you do. And if you don’t, your business isn’t successful.â€
Jim: â€œAnd in due time, we will tell those stories. We will follow up. We’re a new show. We’ve had our first season. But we will follow up. We’ll track the successes. But if there are failures, we’ll track those too. We want to sort of pull the curtain back and tell a very legit, authentic story.â€
In â€œThe Comeback Cook,â€ the gentleman wants to open his restaurant in Philadelphia and you guys werenâ€™t sure if that’s going to work. Are there any areas in the country where you wouldn’t want to see a restaurant or ones that could benefit from having the entrepreneurs opening restaurants there?
Tim: â€œThereâ€™s not a city in the country that wouldnâ€™t benefit for a great restaurant. So what I look for on the show and I decide to do an investment is whether or not that person or people [have] the ability to bring that restaurant into their own city, which is sometimes a little bit tough.
You have to do a little bit of research. I don’t live in Philadelphia. I don’t hang out in Philadelphia that often. But it’s up to that person to convince me that they know the market and they know the area they want to put their restaurant in.
It’s the same as [â€œVisions of Vietnamese.â€] In Tulsa, I was very interested in that because I know Tulsa’s a thirdâ€‘ or fourthâ€‘tier market. And the guy was cooking some pretty good food and he was aggressive, so why wouldn’t I want to take advantage of that? The rent’s really low. I can influence him, help him and help him do some great things and it’s a good opportunity to make some money.â€
Jim: â€œI think Joe and Tim could speak to this. But I know in our first episode that aired this week, we had to choose between Tulsa and San Francisco. The cost of opening similar restaurants in San Francisco is like four times what it would have cost in Tulsa, which is one of the reasons they got chosen.â€
Joe: â€œI think the nice thing about this show and the way we cast it is that people come from all over the country. So me, I’m mostly a bicoastal guy. I run restaurants mostly in L.A., New York and LasÂ Vegas. It’s interesting for me to see people who operate in places like Tulsa or Pennsylvania or Pittsburgh, these kind of cities that are not cities that I would normally have an insight into, so it’s good.â€
Restaurants have an incredibly high failure rate. What are the business mistakes that most people make when they go into restaurant business?
Joe: â€œYour question gets to the very core of the show. What we’re looking for is to discern talent in the restaurant business. We call it a business because running a restaurant because you think you’re a good cook or you’re a good waiter or you’re a good host is not the reason restaurants exist.
A restaurant without margin is a hobby. We’re not interested in hobbies. We’re interested in businesses and that’s the very essence of the show. We’re looking for people who can not only create delicious food and incredible hospitality, but people who understand what it is to create profit and margins, because none of the restaurants that you go to, your favorite restaurant is probably profitable and it’s profitable because it exists year after year.
That’s a reciprocal relationship. You give money to the restaurant. It makes a profit when you go there. Therefore it’s there when you come back again, reinventing itself, reinvesting itself. There’s a reciprocity that exists between restaurants and their customers. And margin and profitability is not a bad thing.
I think sometimes there’s this concept that, â€˜Oh my God. Restaurants are just about greed and about making money.â€™ That couldn’t be further from the truth, but it is an integral part of the restaurant experience or running a restaurant or being a restaurateur is making money and margin because that’s what allows every restaurant that you guys go to or coffee shop or bakery to exist is margin.â€
Is it the fact that they go in with this passion for food and don’t think about how much it costs to make that food and â€“
Joe: â€œThat’s where restaurants fail, right? They’re going in for the wrong reasons and we are about trying to find the right reasons, the right kind of people to bring on Restaurant Startup.
The whole point of the show is for us to put our money to work in these ideas, so we’re looking at people who not only make a good product, but know how to make money.â€
Tim: â€œYou gotta remember, restaurants are a marriage in two things: art and commerce. It’s the two hardest things that you can ever put together.
So the idea is when you get somebody or you have an opportunity to put that marriage together at the right point, that’s where you make money. But if you have too much art, it’s not gonna make money. If you have too much commerce, nobody comes back.
So to put those two together and marry them is what the restaurant business is and it’s the absolute hardest thing to do, so that’s why you go to the point of failure rate of restaurants is because generally you have somebody who’s really good at one and not good at the other. That’s where we try to come into play is to provide that other side of it.â€
What is the state of the restaurant business today, in your opinion? Looking at television, you would think that Americans are more fascinated with food than ever before and dining out. Do you find that this is a particularly robust time in the restaurant business?
Joe: â€œIt is a golden moment in restaurants, not only on the practical level, because everyone’s probably seen better restaurants where they live and there’s a greater proliferation of ingredients and knowledge about food, and people â€“ consumers — there’s a couple of things going on.
There’s a realignment in our own world of what’s important to us and food and cooking and eating well has really jumped high on the priority scale and a realignment of what is truly living well. The real interesting fact is that public markets are giving multiples to restaurants that were reserved exclusively for tech companies.
You see restaurants where the traditional multiple on earnings would be three, four times earnings ten years ago. Now restaurant IPOs are getting 20, 30 times, 40 times earnings, things that you would only see tech companies, which is amazing, because that means that smart capital believes that there is a future in great dining and the profitability of feeding people is very, very bullish.
That is a great sign for me as someone who lives in that world, when you have smart money investments giving 20-time multiple to restaurant idea concepts in the market, that means we are doing the right thing for sure.â€
Can you make a connection at all between television and the restaurant business and all the, quote, celebrity chefs that are coming up?
Joe: â€œWhy donâ€™t I let the celebrity chefs speak to those.â€
Antonia: â€œI think it is one of the most exciting times in food right now and all the cities you see really great restaurants opening and not just that. There’s so much more education behind it. People are excited to try different things.
I talk about food and learning about people’s cultures and really finding out the history of different places or families through food. I think that’s what’s really brought to life and that I find the most exciting.
We talk about this with our kids. They’re excited to watch. They’re excited to get into the kitchen and cook and I think it really kind of just provides that kind of entertainment but then education at the same time for everyone.â€
Tim: â€œAnd there is a large connection, just to answer what you’re asking. It’s like anything else. The more you see it, the more you want to be involved in it. So by seeing food on TV, it encourages other people to ask themselves the same question every day. Is this avocado good or is the toast toasted right?
It’s very simple mathematics that when viewing it on TV, you want to be a part of it and understand why it happens and that’s what’s great for me about Restaurant Startup is that it encourages conversations, not only amongst businesspeople, but among my kids and young kids where they start thinking through the process as opposed to, like Joe said, opening up a hobby. It’s a business. At the end of the day, it doesn’t change. You still have to make money or you close.â€
Jim: â€œFrom a programming perspective, I would say that restaurants do have such romanticism connected to them and I think we all want to do it. From my perspective, the fact they’re so difficult makes it great programming. It looks romantic. It will kick your ass.â€
Antonia: â€œEvery day.â€
Tim: â€œIt’s the sexiest and crappiest investment on the planet is a restaurant.â€
Joe: â€œWhy? Do you want to invest in a restaurant?â€
Joe: â€œGot an extra $100,000? You should burn it in the street because at least you will have a fire.â€
Tim: â€œStay warm all day.â€
Are there any ideas that you wish people would bring to you?
Tim: â€œYes. The one that’s going to make the most money.â€
I knew that answer was coming. Are there different types of foods or do you feel there’s nothing out there?
Joe: â€œI think keeping up with current themes in the world of food is important in a show like this. We want to know where our food is coming from. Food needs to be sustainable. People need to know where their proteins come from. People want to eat healthily.
So I think, hitting on all the themes that are very, very important in how you decide or why you go to eat at a restaurant, is something that’s important to keep the show very current and very of the moment.
Thematically, not just dealing always in maybe fast food or quick serve, but different types of food decisions and food policies that are important to you as viewers and eaters and how you make decisions about dining. I think it’s important to keep up with those themes. What do you think, Jim?
Jim: â€œA lot of people do come on thinking of the Chipotle model. They see something scaleable, so we get deluged with people that have the next great idea. Some of the ideas are pretty good, actually.â€
You’re here in LosÂ Angeles. When you’re here, for all of you, whether it’s a small restaurant or very expensive restaurant, what’s the mustâ€‘do when you’re all here?
Joe: â€œThey usually go to my restaurants because they’re among the best in Los Angeles.â€
Tim: â€œI just drink a lot of wine.â€
Joe: â€œIf you guys live in LosÂ Angeles, you know it’s a golden moment for restaurants because of people like Antonia and [in] this market there’s an entry level that’s accessible. You see a lot of very, very talented people.
There’s a lot of great food, the fusion, what’s happening downtown, Silver Lake. You’re seeing it growing out of WestÂ Hollywood, more great food, more startups, more of different kinds of ethnic food. I think it’s a real golden moment for restaurants in LosÂ Angeles.â€
Antonia: â€œI’m extremely proud of what’s happening in LosÂ Angeles. I feel like we’re a force to be reckoned with with New York and Chicago and everything else that’s happening throughout the country, so very proud to be part of the LosÂ Angeles food scene.â€
Tim: â€œIâ€™m just happy itâ€™s sunny.â€
Edited for space and content.
“The Comeback Cook” extended preview:
Restaurant Startup airs Tuesdays at 10/9c on CNBC.
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