0:04
Daily talk show and we're still in Los Angeles

0:07
and we're at Bluestone Lane cafe with founder Nicholas Stone.

0:11
Welcome boys Thank you for coming. Thanks I'm

0:14
I mean priorities I feel like this doing a podcast with a couple of gronk low on the priority list so we appreciate

0:22
you know, I had three other meetings cancel it was just

0:31
a pleasure. Thanks for taking the time and you know, we got some fantastic ambience out here. You know, typical Li di 4000 cars

0:41
Bobcat demolition.

0:44
Yeah, it looks like a carving out like some new lines or something like that. Something's going on. Yeah.

0:51
We got a very Melbourne coffee coming our way.

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Milk Piccolo shot

1:00
A very American,

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very, very, very California. Non dairy, very health conscious and setting. aesthetics. I have a Thai smile.

1:11
I tried to wane off any milk or even milk or almond milk style coffee's coming over here. I thought I could go back and it's all black, which I wanted to do. But then you find places like this blue semi and it's it's the quality of Melbourne coffee in the States. And so this establishment, we're in California, you started out in yc. Yes. I think Josh I spent a lot of

1:39
time so I think it was like 2013 or 2014. My girlfriend had this list of places that we had to go. And by the end of it we I reckon we went to more Australian cafes or like the amount of time we spent at bluestone line. It felt like I was in Melbourne, Melbourne the whole the whole time. Is that a common theme? How many Ozzy's directing come through this Door versus Americans it would definitely be sizable and locations like West Hollywood and West Village in New York City without a dad you know I won't be this century like Haitians not many tourists yes are so sort of wandering out there but when you're in residential areas are when people want to hang out and spend time and all that I like, we're on the we're on the path of of travel and it's we're so fortunate to have so many Australians come to the states and look at the blue sign line and want to go to blue sign like the quite parochial and passionate about our coffee culture. And we've been such beneficiaries all that because the Australians that have believed in the states and Australian tourists have acted as is Tyce mica, they've made these organic influences that have introduced that proposition and told their American friends I you know, I should have something slightly better why spend five bucks or four bucks on a coffee at Starbucks when you can spend the same amount but get the blue stone experience and we've been we've got we got the timing right from that perspective of the year we opened our first doors in 2013 the dollar was particularly strong, and I think 5% of all Australians visited the US that you know, 1 million Australians visit the US.

3:18
We have a saying 2012 2012 who was

3:22
in 2012 It felt like Tommy was having the trip of his life, pre marriage and all that sort of thing getting married.

3:32
But um, why why the US? Why did you

3:36
decide to set up shop it? Well, I've always wanted to live in the states and I wanted to live in New York in particular. And I was I went from football playing I fell for six years. Luckily, I went to university the same time because I only applied for six years, not too many games. And then I went into corporate finance and master banking and I met this beautiful woman at Dobie die which is a Obviously one of the major courtship festivals on the Australian calendar, Tommy die and and basically I had this dream of going overseas and I sort of was trying to convince her that it'd be great idea to go and live and work in New York City. And she went along with the audio and she was studying at university as well, but thought, you know, it'd be quite good. She was actually modeling like, on the side and as a part time job and just very focused on a degree which was studying osteopathic medicine and sizes. She got to be Brian to me. And then, long story short, I tried to get transferred, and I wasn't able to, to get Lana job because of the financial crisis. And at that point in time, I'd already completed a postgraduate degree in finance. And I was trying to work out ways in which I could get to the states and one of them was a bad studying it here and doing an MBA or joining exchange. And I was lucky enough to get an opportunity to study in New York City and

5:01
Well, it's very

5:03
lovely this afternoon. And yeah, that acted as a catalyst also, I never bought a job opportunity. And so I ended up moving in 2010 started studying September 2010. And when I got here I just couldn't believe how different the company culture walls and also I just didn't have an appreciation of how successful Starbucks is. Like everyone to Australia is like quite a mall. You know, insula view, the Starbucks is you know, the end Kairos and terrible and you know, inferior but the business model itself and the brand net build is absolutely extraordinary in such a small time period of time building 120 billion dollar us brand $23 billion of revenue a year in 40 years. Yeah. And introducing espresso coffee to the states and I still it's got to be an opportunity to be set to be more effectively Australian to have a better quality, product, better quality service, better quality. They said they can really make people feel like they going to a local establishment and That that was basically the catalyst the Muses opportunity the market opportunity I was I would be a cold customer and but I'd never worked a day in hospitality so that's what's the most unique thing I think about blue stone is like the founder and CEO of probably the largest hospitality Australian export now.

6:18
Never what's

6:19
horrendous Undercover Boss, you're just dropping the coffee.

6:29
Do you think it's an advantage because you you don't have you're not jaded as someone who is experienced the annoyance of maybe, you know, dealing with customers or being on that front line to come in and go, Oh, I see an opportunity. Yeah, I'd say

6:45
on broad opening comment from any preconceived notion of like, you got to do it this way and the steps of service and this is how you treat someone you can't process it that why it's it? I think you can you can draw Thanks. Thanks, Brian. Up I mean, try things without fear. And you probably apply this lesson to so many things in life. But I guess, everyone, a lot of people get caught up in this notion of like, they're, you know, they're an entrepreneur and, you know, they're doing this they're creating a startup, like really bluestones a small, fast growing small basis. And that's the underbelly of all economies globally. And I think it may I just looked at YA and we checked into Kp iterating and learn and and with a real great focus on building a brand. And, and may being, and then the mob walking particular paying customers and like, what would we want if we walked in? And we had fantastic examples by kind of Sue's living in Melbourne, that we felt like we could replicate that here. And so when you moved to the US, what was your previous experience? How long did you spend in the US price actually moving here? So I moved to September 2010 studies Until the end of the year and then started, at IN said, in a corporate finance team in February, and I was really tasked with right building the team in New York and London, because there was obviously a view that, that the world and the financial markets were destined to be obliterated. And that was sort of happening in the US and Europe and Australia was relatively immune. And we had some catalysts that predated the JF say that meant that the regulatory sort of authorities that had way more stringent and we didn't have this massive problem with with dead serviceability at the hassle level, so suddenly went from risk off to risk on and now if you can build a business so we could actually go to market share here and we could grow in Asia, and we had a new CEO was very, very excited about an opportunity. So I would say I started then, and I didn't do anything for a couple of years, even though I'd worked on the business guy set at business school in New York. But then it was July 2013, we opened our first store in midtown Manhattan very close to where our office was, which was on between 4748 on Park and then went from one store to two stores and went to three stores and four stores. No kept working. And I didn't really have any have any ambitions of ever going full time. Yeah. And then I went full time fondling, meet 2016 at 12 stores three years later with nearly 50 stores. So

9:26
what is it? What is an investment banker? actually do? I guess we have this? Tommy imagine banks.

9:35
Yeah, what is an actual day to day I can assume that it's like, you click a few buttons.

9:42
Cocaine for lunch and then you come back. What is that? What is a reality? Definitely.

9:49
We

9:51
got the austerity measures and like Benghazi.

9:55
Oh, listen, I think if you're interested in companies, it's an amazing Job kiss your basic role is to understand how a company creates value and how it grows and what the capital it needs to be out of making investments. And your role is to sort of support that, whether providing them capital or advising on how they spend it. And it's fascinating that you get to work with so many different people, and then brands and companies. And I love that I was so intrigued about like, How does it feel? Let's just take it. Let's take Amazon, Amazon story, absolutely Mako, to lose money for 10 years in a row. And then suddenly, 10 years later be the biggest company in the world. Like, those sort of examples fascinated me. And I love the competitive nature of it. So you're going after market share, and how do you compete against your competitors and your value proposition and I was always intrigued by it. And that's how I sort of fell into my love of business and banking. So you have a portfolio or

10:50
something

10:50
I had I was I basically, in stateside customers work on provide ideas on how they could create more value. So it was pretty broad it was anything from how to enter the Asia Pacific market how to reduce the cost of capital like how much interest they paying on all the capital could be at optimize their capital structure or you know like how to fund their supplies so having fun

11:16
there so you're working with like CFO or

11:19
Treasurer say advice yeah that's that's

11:22
so if it's IN said does that mean that it's Australian businesses wanting to enter into North America or or

11:28
it was primarily American businesses that wanted to grow in Asia Pacific in Australia Alliance It was really making a hot push concerted pushing it back now that's changed a bit with the Royal Commission and and honestly like the banks make more money in Australia than any other nation in the world but the return of equity so high because the defaults are so low because of that. The full accountability on your timeline and Reiko us like people don't really walk away from homes and cars like they do here. You know, So the defaults are so much lower, and it's just a lot more concentrated down there. So yeah, it was primarily us corporates growing in the APAC region. But yes, certainly there were some Australian brands that were trying to land on the US but they're just typically somewhat smaller, like the big Ozzy's that, you know, the biggest, let's say the top 100 is six, like very few, have meaningful market share in the US. Some, obviously, your resources, but that's not really a US story. The banks, they're not really in the US. Yeah, you know, we're still a very Australian domestic focused and Asia Pacific focus sort of economy.

12:37
I look around. There's so much construction going on. And we were in New York last year, and I think, look around so much is happening and I think, how do you even start something over there, especially as someone who isn't from America, where do you start? How much capital Do you need to create a cafe in New York City?

12:58
It's certainly not JE and New York is is just the epicenter of the world it's truly the world city 8 million people a day and it's the biggest influence on Commerce arts fashion. It's It's incredible, incredibly inspiring and electric price for the received God his rent is so expensive there that you get the wrong real estate coat. Yeah, you could be over in a matter of a couple of months

13:30
would like to coordinate like what is how much would a least cost? And is it the same structure is

13:35
in Australia rule? No. So the handy thing in New York is because defaults are so high that they actually rate co structures a lot lower than Australia. So if you sign a lease in Australia, you can be on the hook for 10 days. In New York, you can be on the hook for six months. So that's more favorable. But your probability of filing is so much higher. Yeah, that's a risk reward fly and as it relates to

14:01
Waste lacing costs

14:04
to get it right corner and meet town it can cost you're at $400 a square foot, which is like $4,000 a square meter annually so let's just say we have a site that is thousand square feet, which is 100 square meters. that's costing us $400 a square foot you're gonna have to help us to the bank is $400,000. Yeah, which is which is about like 37,000 now

14:34
it's about do you do it with coffee? How does? How do you sell coffee? And then how does it actually

14:40
work? Yeah, this is the bit I sorta got wrong.

14:45
Like, yeah.

14:49
Like your coffee. Oh,

14:55
wow. I need to sell like 4000 copies a day. Okay. 4000 copies. Bottom by 10 hours. Holy smokes that's 400 copies now

15:05
like I got How long's a company? Michael? 30 minutes. Oh, I can do it Tony. I don't tend to stress.

15:14
So what do you do it? So where is the money inside? Yeah, it's a

15:17
it's a very very very delicate balance between

15:24
managing your lease costs and and driving enough productivity through your staff. It's certainly not an easy you got to get the right brand deal. It takes a long time to get those deals. The landlord's got to trust your brand's going to trust your value proposition and who you are. And, you know, for us, obviously food was a large part of it. We more food names more people, so it's it's not easy. In our case, we won't sign a deal where the landlord doesn't really want us, Siva, anyone else I have to feel so fired up and motivated that we're going to be an amenity to today building where they're happy to take a bit of a hit no subsidize the retail ramp because they get a Nicole renderer all of your co revenue from the office tenants above all that makes us campus stuck. That's how we've we've been added. So and a lot of the big guys, the incumbents like Starbucks, they've been in there through grandfathered laces, which, which really, you know, they probably signed 10 years ago, then is that cheaper

16:29
range?

16:30
Yeah, certainly, because rate goes up like brands basically, index goes up. 3% a year typically. So I've attained news Yeah, okay. 30% increase right in the summer. And when I reset rights rates by up and reset them, I often say you can be paying 30 40% higher than what they were 10 years ago. Now. That's going from $700 a square foot to 370. Now that's a big, big difference. Yeah, I look at we're at I have last night Last week

17:01
on I was a great experience but I've never been I have really

17:11
cornea

17:13
it was I mean there's a fine but it's I was wearing this on Santa Monica Boulevard it's an old building it's a bit run down sinking there wasn't many people in there and I was thinking how these guys surviving when you look at businesses that a franchise is the sum game that's happening with a spreading the costs across a whole bunch of them and that's how they were even able to have

17:38
ones that had not doing that well. Yeah, style style gives you a portfolio approach and ultimately brands like I hope Michael they money in suburban markets and and Marcus said the cost brushes are a lot lotta got a lot lower minimum wise I have significantly lower range. The third the third input costs could be very close to one of these and Li like getting very productive is not an easy win the density is not easy New York is a lot easier out in the suburbs. And honestly like libre could be 50% of the cost that is here and rent could read 30% because it is in the middle of fail IO middle of New York City. So once you got enough scale, you got units like 75% margin, somebody 30% margin, some new 7%, Sunday 27 Blaine's added around anywhere from 15 to 22% profit margin because they can make more money in certain markets and like and in the city centers but the city center gives you the incredible brand awareness and and the momentum to be out of franchise and grow in other markets. You know,

18:50
I show you give me a keynote and you mentioned that next year 2020 you wanted to have 200 stores 200 cafes. But in the same token used in the same keynote, you said, Starbucks has 15,000 which is in perspective, it's a small number, what you were saying, What's the, what's the thought on? Going to a number like 200? How does that how you're feeling from, you know, the first 50? Well, it's interesting

19:21
because I think we have obviously naturally a very Australian centric lens with how we look at hospitality and we pretty much anti Chinese and certainly as it relates to coffee. I mean, you know, the way that you're talking about coffee I like kind of America and was gonna drink black coffee and then I met a blue sign. Their independent offer independent Aryan and aubergine and very high state of the art and ours, everyone really cares about the product. Australia is 25 million people. The US has 320 million people. So if you have four cafes in Melbourne, which a lot of our products do, they just wanted different names. You can Multiply that by 15 times. So four by 15. And you know, it's a lot that's a 60 cafes right? So I think with us like 200 is very, very achievable because the markets so big, the white space is so great, the independent operators on here, and I look at Starbucks I look at just how many This is a trivia question for you.

20:31
Okay, in New York City, New York City, to Starbucks have

20:37
this one on every other street corner. And I'm just doing the math.

20:42
I reckon 200 I

20:45
was gonna say 200 but now I can all say

20:48
to it to it.

20:50
200 240 Oh, it's quite, quite well. process.

21:00
Yeah, congratulations.

21:05
plus two.

21:12
You know, so I look at New York City and Starbucks and Turner 40. Like, you know, I feel sort of with that feels like 200 is very achievable across size 10 cities. The markets we're in now we're in. We're in seven markets if you cost a New Jersey and New York Metro together. And you know, I feel like that's very achievable over the next three to five years. I think that next year, we're actually going to slow right about being down because we want to have a new way to consolidate the Marcus Marine, we're not going to go to any new mom because we need to take on and I think we just want to make sure we're affecting everything we're doing as it relates to systems and time and training and the economics to then rapidly accelerate and 2021 Whether that's on a company owned and franchise construct or just company owned, but I think like next geez that you were We were slow a little bit, get everything right to go fast again. So yeah, I don't know when if I said it 200 by next year, like that's not possible and not not the ambition but 200 I think it's very, very comfortable for us over the next, you know, five years so I feel like coming to the US there's something a bit scary a bit like there's a few things that scare me is seeing all the billboards with the lawyers and then saying the ads where it's like everything from you know, have you been injured at work? Like every spectrum, it seems like every second ad is a lawyer saying cold cold list now so there's there's that element then you've got like everything cold you can see by the sit like it signs everywhere saying this can cause cancer. Do you get the sense or the feeling in the US of that anxiety? Does it sort of not into your system? It's it's an extremely litigious culture like this I think that everyone talks about this is more lawyers than nurses and doctors combined and Yeah it is. It's definitely a major risk with I'm writing in this market often you might not do anything right. So you might not do anything wrong Yeah. Freudian slip it a bit Everyone has the right to sue in a very sort of open why in a flexible why because callsign awarded. So for example, you trip over here and you say, Nick, Nick, trip me it took my leg. I'm gonna see you because I can't go to work. All have to all have to defend myself. But if the court says you're right, Nick, you did nothing wrong. I can't, can't climb. Again. See? So the most Innovation is soo is infinite. And that's very strange in Australia that doesn't exist, right you know, you you sue someone a false pretenses you lose, you pay the other person's lawyer legal fees, the US that's not the case. So that's why that notion of an ambulance chaser, please ride and you know that's definitely one of the challenges in the market you need to be really really careful you need to be what does that sort of compliance like with the compliance costs Maxine absolutely massive the amount of money you spend on on people centric and lawyers is huge. It's a it's a, it's a cost of doing business here and I'm at a very major one. And I guess there's been a lot of discussion around trying to reduce some of the regulations in certain pockets that could make sense and others like the API

24:57
gravy Yeah, yeah. But you know, I think There are a lot of costs in doing business. And I guess the concern a lot of entrepreneurs or small business owners have is that inflection point where suddenly it becomes cost prohibitive or is not sufficient motivation or incentive to take the risk of being able to put your own money and when your reputation align to build, build business and grow, when you know that, that there's such great, this is such an incredible downside and there's not enough upside. You know, like, when you start something you leave a big company like you are taking an incredible amount of risk on yourself on your, on your personal life financially. It's it's way bigger than I ever thought that was. That was probably the biggest lesson I got from banking. You think that you really, you know, important and you're working with these big companies and it's great given the credit is but it's so intangible versus Okay, like, guy there and hot 10 people and everyone's going to get paid every week and it's the Depending on how much money you've got, or how much the business makes and like, those simple operating ship lessons, I think is so valuable and in fact more bankers and more finance professionals and more latest should actually get exposure to real tangible smaller economies. It'll make them a better a better business person without a dad and I feel that that's been one of the biggest gifts and bluestone only working with 700 teammates and making a difference to nearly 12 and a half thousand people a day now but just the lessons around business and how to work in a in a complicated team from different walks of life different backgrounds is man has been really increasingly rewarding. But But challenging nonetheless.

26:47
What lessons from 40 did you learn and that you apply now in business?

26:54
Well, team sports in Australia are incredible because they call it democratizes I and everyone needs to be Pretty cross functional rod ever, you know, you play iPhone 40 everyone needs to know how to kick and bold tackle mock by cricket. You know, it's everyone sort of knows how to bat. The US sports a pretty segmented bicycle. You can't just pitch but never bet you could catch and never be in that field. You can be in the outfield and never pitch the us you know, football fans never on the same side of the field as the day fence. Never on the field the one time he may never touch the ball in your entire career you can make 100 million dollars and never have actually touched the pigskin you describing

27:37
my footy Junior 43

27:42
Yes, I

27:44
you know I think that's such an important part of operating culture is you learn how to deal with people have different skill levels and different motivations and different athletics ism. It's It's It's a great equalizer and Working together concurrently and everyone knowing they were all and executing they were all underpins how businesses operate, right? You need everyone to know what they doing do we focus to execute on those lines and the lane in when others need help? And I've tried to really embrace a lot of those lessons that I've learned from team sports and being part of high performance teams and apply them to not only banking but certainly blue sign and I'm still learning You know, I've moved from saving more captains are all in 40 in banking to now have a coach like my role is to coach the team, I can't go out there and working 50 stores I have to help architect and put people in the right spots and motivate them and inspire them and making sure that we're on the right path and got the right strategy and manage their capital and, and that's that's my role now. It's it certainly be changed and that's it's been

28:57
wonderful is it completely different running cafe versus running many in regards to just how

29:04
the whole operation Yeah, it's just so incredibly different and not only are we now running 50 but we're in ICT markets with I legal structures and I different cultures it's it's, it's the complexity increases exponentially when you go to have different Toronto he's from Philadelphia or how different LA is to San Fran will have different San Fran needs to New Jersey. Yeah, you know, it's there's a lot of complexity. But that was the challenge. That was the risk reward for us. Like if we can execute and pull it off. We would actually have a national brand. Yeah. If we start small and focused in New York, we would probably be far more profitable. How do you create trust? Like I guess you're going to have a bunch of lawyers in different markets. How do you pick those critical parts of the business? I think we with trust the YI establish trust with people Sir dependability, you know, I'm looking for people who are extremely dependable and reliable, who give consistency of, of effort and that they are at work on time and they care and they're committed and passionate. Like I'm not looking for the best barista, you know, I'm looking for someone who again can like play their role and playing a role as part of a barrister is Yeah, you got to make great coffee, but you've got to provide outstanding service you got to have that theatrical element that I think people love about Australia cat nice. What about the senior stuff like in the books like the structure level? How do you like that high up level? How do you gauge that? Because I guess there's a lot like one thing with the US is it feels like people know how to hype they know how to talk. And I feel like I would get a bit paranoid that is this person just really good at talking can they execute?

30:51
I think that sometimes

30:55
paper people in this market so I have a promise and under deliver versus maybe my standards that we were trying to grow faster than most and the premium value proposition and we're trying to do it in complex markets and, you know, you know, to be able to execute effectively, you don't have very, very high standards, unrelenting standards, and sometimes people's expectations on what's premium is different from yours. And that's your over promising to deliver. But I think, you know, you never know, you never entirely know you've just got to ask the right questions and observe and make sure that you have enough critical people in your team that can make calls and provide the right feedback and catch them and if they're either going to get it or not, and you gotta shame getting good intent and give everyone an opportunity. Yeah, but it's not working. It's got to be honest, says it's not gonna work and you're a great person happy to be with you having to have a coffee but maybe not totally different. I'm gonna try and do it as much dignity as possible. That's lock lock because you might have lots of people want to work on sickness Satan cast, but you know, they're not perfect fit for it. Yeah, that's okay. Like, I think you know, in hospitality culture is far more important than any technical component I know other industries technical skills are more important than then maybe the cultural fit but hospitality is about making other people feel happy and satisfied and excited and you got to change the way why they feel so if you're not dedicated to that event the industry is cut out for you and probably not blue start lining

32:45
as a business owner to set up a solid framework to create a great culture

32:52
but your lead by example, right? Yeah, the Fisher House is at the hand as they say and I you need to be very clear on your expectations. You have to be very Clear on your value proposition and why you why blue sunlight should exist and why why wait customers are going to lock us and want to come back and then just be very very clear understand it's out of the guy just know who you are then be so crystal clear on what makes you special and and why you think there's an opportunity for you to grow a business and

33:22
it's just something you you had before you launched your

33:26
first one is incredible amount of work on analyzing how we could compete and how we could grow and what the branches stand for and the way it should feel the experience should, should should be like and the cost structure I came from, I was very fortunate. I had a background a thing like analytical that was mine. That was my skill set. That was my business as usual. And then I could overlay it with real data interesting had a few brands and rather than a collection of stores, how do I do it actual brand to stand for something and another We wanted to be this this extension of Australia. And last all Yeah, we wanted to encourage people to go out and get a coffee and socialize, not just get a coffee to go to drink as you can. So we wanted you to come down with a colleague and chat and, and get that brought us sort of via Skype. And I think that a lesson I you know, I always can invite entrepreneurs is so I jump into these unless you can answer all the questions and

34:28
you don't have to have

34:30
like, just general questions like, you know, can you make a profit? Can you generate revenue? Can you make a profit? Can you employ people? Are they actually going to go to work? Can you generate loyalty with the customers? Yeah, and I think I got a lot of, I got a lot of confidence from people challenging me and saying, Oh, you know, it's too expensive or it's too slow on it doesn't have syrup's and to blue Take it off the boxes. Yeah, but there's a person who doesn't want to because this is a health conscious nation, this nation is this age, and that's an old customer. And if I put the stores where the customer wants to hang out or work or leave, maybe I can compete there. Okay, good point. Okay, take that one and then just working methodically down the list, and then I've suddenly felt like, hey, there's enough. There's enough sort of signals that we could make overcome the barriers.

35:26
Is it the opposite approach to test and learn minimum viable product?

35:31
Well, I think like test and learn and rapid prototyping of really like concepts linked to technology, right, where you're assessing things so dynamically,

35:42
yeah, I can't harder to do with Elise. Yeah,

35:45
exactly. Okay, I'm going to store and got four days in your sales done, you know, my lead time so much bigger, my cap x is so much bigger. So the culture the brand, I think Tommy and I have very comfortable with that sort of stuff. The The thing that I find fascinating is the cost structures and the idea that if you're in all these different markets paying a few cents more on almond milk at the supply level level could be the difference between making money and not making money like how how do you make sure that those things are all dialed in so then you don't have to worry at that sort of cell level of a spreadsheet supply chain is is absolutely critical and so we have a really really good one in fact, the partner in banking I brought in to oversee supply chain never worked in supply Chinese lot, but he just had a fantastic mindset on business and he and he was a he studied law and then he was in banking and he just sort of very practical and pragmatic and like mostly seems like you don't need to be a professor of supply chain like he got to work at a good point it point by the most efficiently the most reliably that the end of the day. quality product you can get for the price like so but supply chain in our case has big received some commodities like particularly coffee prices, paper prices. And what we were experiencing she was avocado prices avocado prices went up 500% in July and August and it really crushed a gross profit line and we are now looking to purchase like have a forward to purchasing obligation where we have the price locked in if we buy a certain amount of volume that that takes time to be able to get to that style and we sort of a now but it's is it's not only just what I'm buying the avocado price is getting the portion control rod is getting your yc try it's making sure that you know that we're not just giving products away and that the staff on having a free for all like 80s It's a it is a business ultimately that needs to be sustainable and that business Is what generates the cash to be out of high everyone's wages and to be at a grow and to invest more into the stores or more into our training and and opportunities to grow so you know we we it's that's an area that we're spending an inordinate amount of time right now on getting the gross profit right and also getting the the labor productivity rod and yeah you know it's so minimum wage in New York City went up 20% this year Can you imagine like the costs like everyone that works for you go to 20% rise one year was mad it is mandatory by by the state government and that's pretty hard to swallow I couldn't put up all my I couldn't put up my avocado toast across 20 absorb and somehow offset it through increased sales volume not really spend. Did you

38:49
say shifting culture I mean teams that are going okay, now we're adding 20% more this is actually live.

38:55
Yeah.

38:58
It's a protocol and like, I think Certain pockets, it's a it was very beneficial and much needed. There is definitely a big disparity here between those who are entitled to tips and gratuities and those who are, it's an archaic system hundred percent don't agree with it. But effectively, those who don't directly serve the customer are entitled to a tip. So you got a coffee here and let's just say you give $1 tip, which is nothing in the US when you consider you go to a bar and you're guaranteed to give one or $2 even though pouring a beer is a lot easier making that meal Piccolo is a big it's another broader issue. That's a bit strange here but you give it all a tip. Like none of that dollar is entitled to go to the back of halfway

39:42
getting a coffee to go.

39:45
I think selecting 18% so I'm giving that's generous. And

39:52
like, really for that long, but I wonder if I was really really appreciate it. Yeah,

39:56
like is that like from a standard? Like what do you feel like the Citizens of the US What are they doing as a standard when it comes to tipping, things like to go so

40:06
coffee to go? I honestly it's 5% which is quite perplexing because if you go to a bar and buy a beer, which literally takes no skill whatsoever, like everyone can pour beer, and the beer is six bucks, you're gonna give the bartender $1 you're gonna pay with a team, and he's gonna give you back full wants, and you gotta leave a one. So $1 on six, you know, it's one of that nearly 20% invalid Kareena coffee. Yeah, that's an option. It's not like just out of the gate Express.

40:44
anymore dislike expressive arts at some.

40:47
This this it's a cultural thing. Right. And, you know, I think we're trying to which we're trying to educate people around that base. People are highly trained and people a soap, so passionate about Coffee like one bad coffee you're set for the morning let them be slightly like all the BS not perfectly called you know God's call but you don't sort of like think are never gonna buy be from that place again you're probably like oh, let's hope the next

41:16
feeling a bit less anxious.

41:18
So do you find that I don't know like from a market right point of view Do you find that because you guys are doing that sort of bespoke

41:27
tourism or whatever the fuck they say a

41:32
couple of gronk is trying to work out what they want. Do you find that you wind up? Do they make more tips here because people customers who come here see it as as more than just that

41:45
they make a lot more tips in our cafes because food and hospitality elements a lot more experiential. So your table service here someone's working with you and looking after you and and educating you and helping you so Certainly the tip the tip percentage of the lot high multiples high then just to go but that's that's that's legacy that's not us that's what that's the US system you know eventually they'll be that we change I think but we're in a marina tough I would say transition right now and minimum wage has gone up so much, but tips is still the same. So if anything, it's almost like accelerating the some guy maybe be accelerating the the divergence in wise between backup house and front of house which definitely wasn't the intention of the increasing meeting wise in certain cities. And

42:42
I think there's a lot of allergies that come over here and they might think things are backwards or just totally different. To back home. I show you folding up a check before I didn't say how much it was for. So I saw you finally have a check. And I was like, you guys still use checks. And then I remember driving from the airport. There's a you know, cash, your checks here. A thing, a few things in business in America that you just think we got to get rid of that or you just sort of grit your teeth and go, we got no choice.

43:08
That's amazing. I'm happy to admit this but i was i was a banker for 11 years and when I moved to the states or product service status I seven six years I didn't know how to write a check on

43:22
pi two and you know, I do I do I put lines on it.

43:28
Done the guys from all avoid or whatever. There's some things like that, that just don't make sense. So you've got the biggest tech companies in the world all based here. And you've got, you know, incredible FinTech investment, but like people, again, paid by check and like we I think we have 650 650 staff, right. Oh, it's I have a 650 200 still getting checks weekly,

43:50
is the choice. So

43:52
yeah, it's the choice. We want to pay everyone a direct debit. We don't want to cut checks and sign them. We are a member of our team. Just check Sony for like three hours on on a Thursday. And and that person does not want to do that there's no option.

44:11
Why would Why would a staff member won't want to check? I've

44:18
always done it that

44:19
way. Rich, richer retain, you know,

44:23
people who still pay the power bill at the post office.

44:27
Before you go, if someone's thinking about starting a business in the US, what's one question that they should ask themselves?

44:37
One question, this is tough.

44:41
Ultimately.

44:43
I think if you want to make it in the US, you've got to go all in. I see a lot of people think about opening in the US. I think the notion of thinking does not make it here. Yeah, it's It's the city it's a country in which people all around the world want to come into my country and and and certainly like a city like New York City. It's the world city. So you're not just competing against New York and so you can pay it against people from other parts of America, you can pay it against people from South America from Europe. So I think that you need to be all in and to be all in you got to take a tremendous amount of personal risk. So that would be my one piece of advice, but be prepared, you're moving, you're gonna be on the hook for life. You're going to take a you're going to have to rent a place. You're not going to consider about flying in from Australia and find the states. They say through that. You're all in and you need to pay the price. You need to put yourself on the line and if you do, honestly, Americans in a

45:49
really,

45:50
really open minded and they very proactive and entrepreneurial and I do think they see that. They look through things with with good intent and optimism. And that resonates really, really well with Australians who've got that attitude of giving it a go and not too fussy and happy to be scrappy and lean in and do whatever it takes and be social and be open minded. If you've got those qualities, and I know you're here and you're going to give it everything you got, people will give you a chance. And that is what's incredibly exciting and inspiring about being here. Yeah, I think you feel it like us just being in the store. There is that and seeing all the the experiences of the US. It's not until you sit down at a blue Stein line, having a coffee that you appreciate the amount of logistics and also just

46:45
just ability to cut through all of the things that you need to do to make it happen. It's very like we find it extremely inspiring.

46:55
To see you there that

46:56
the daily talk show where we keep talk we said this is the funny thing, when you're Melvin it's all yeah we feel like if we were in LA and then yeah I'm here it's like we're just some big babies we've got a few years we realize the

47:07
scale that it's being played out and and I think there's such the bubbles in Australia consist of quite a few people that may have quite a lot of the majority we come over here and you realize how small our bubble is or how there's just little bubbles here that there's so much more to it

47:26
seems like there's a bit of a bullshit filter to show like if if we were to do it if you don't have those things lined up, as you said, if you're sort of half putting a toe in Yeah, you destined so I think,

47:39
I think they say throw it they used to it. They had a friend like this from frost. He lost it one winter. Yeah, gone. You know, the exciting part about the US is, and this is the technology certainly facilitated this but you don't need to now land in LA or New York. You can honestly land in Austin, Texas. You could land in in Nashville, Tennessee, you could land in Miami, Florida. And these tier two cities are absolutely exploding because people now have more flexibility with where they want to work and where they can work. So that's super exciting because the cost structure in those cities is a lot lower, you know, the barrier of entry is lower. And so that's, I think, Australian scene got Am I getting big apple? Well, maybe now it's maybe Big Apple spit. The second step is landing. Let's land in San Diego. Let's land in Seattle, and then see if we can make it there. Those cities are still being got a million people and there's lots of opportunities to broadcast you proposition. Yeah. And you message and then let's attack Neil next time. That's a little bit of selling advice. And that's definitely a new thing. The emergence of these Tito's and without a dad, it's been underpinned by technology. Yes, people now can, for example, live in Austin, Texas. Pay no city tax, no state tax, and pay less than It gives you a lot more more runway to get something off the ground versus California where you're paying state and city tax and 1413 14% of the dream is a overinflation. Like they're all these things like, is it overinflated? Is it like, I guess, just over saturated in the sense of New York like, actors, for instance, you want to act? You go to Los Angeles and we say the amount of Uber drivers that have actually gorgeous look, you

49:30
can speak in seven different accents.

49:32
Yeah, I mean, and so I guess that that's part of the whole thing, too, is going to those other cities. It's like it's probably not as crazy if I did.

49:41
Yeah, me that it obviously depends on the industry trying to crack it. Yeah. If you try to make it in and acting, yes, you can apply Hollywood and you can apply maybe New York in the theater circuit. Yeah. But a lot of other industries. linked to a particular city. There's there's pockets are Engineering in 30 cities, there's pockets of technology in 10 big cities here. Hospitality is probably 50 cities that you could do something pretty special.

50:12
Coming to Los Angeles, I realized the ease that I have it back home in terms of ease of life having a kid, the roads that I drive on, they're not as busy as I thought they were, it feels like traffic. But when you come here, it is pretty crazy. What is one thing you actually love about living in California?

50:29
So I've only lived in LA for just under two years, and we live in Santa Monica. And so I think Santa Monica and everyone talks about the four or five like defining dividing the city and it is actually very true. Like the fact that I might add here. Well, there's a second top of a

50:48
real journey. Yeah, you

50:52
can hear what I've

50:53
learned is it's usually about 25 minutes one way and then you double it to get back.

50:57
Yeah, so I took me and what happened? What is crazy is new Can you find the Uber says all right 22 minutes I get in there about 22 minutes I'm on top meet Uber ride it goes from 20 to 27 to 32 to 37. I'm going closer and they let the tongs going up and literally that's because so depend on roads you have one accident was a light like days 20 minutes on your journey and I'm even when I moved here I was like Donna apologizing and calling and PayPal and I'm often not the most like prompt I must admit, I'm always put too many things on my calendar. But people like that happens all the time. Like, I only get to half on a half the meetings I type in the car trying to get to the meeting because he's an accident or something goes wrong. We're in New York like the subway. so damn efficient, pretty grimy and dirty but incredibly efficient. Ben Yeah, Santa Monica is close to the beach and the weather is absolutely extraordinary, like consistency of weather. I might, you know, it's probably improving because of global warming, which is not a good thing. But you know, it's just like Well it's pretty happy but you know I think it's more like in Australia saw last close to the beach you can we can walk to the shops we don't have to drive the climate is very moderate particularly in winter and being close to the beach you don't get the crazy hate that you get in the valley you can say cool things down so it's worked out well but we're actually moving back to the east coast so this is gonna be two Eastern here and we go back to the east coast because I've been traveling so much and even doing one weekend Li one week in New York and it's just it's just a just just to

52:36
just too hot when you go to Melbourne What if it

52:40
was a lot you know I think like that top the top cafes are obviously

52:52
you know, I think I love the kettle black top pattern, that I love things like pillar of salt a lot Journey man you know I love save rallies cafes are amazing playing styling and our that's mine all right

53:14
there you go. Okay so

53:22
you know I think it's there's so many you know every every time I go a bit you know I used to go to Patricia in the city absolutely love that and and when I go home we often style my parents in law applies and they around the corner from a cafe code, little locks and closed supply and silent got the consistency of cafes so high moment I think it's more the social ritual. I love the lack of just going going to catch up with going my wife and writing the papers back to front having two coffees. avocado toast with with with Hello me and mushrooms rice Assad I like it's just magical it's such a great way to disconnect and just relax a little bit and then during the wake you know, Monday through Friday I die twice a day. Morning catch up as a time and then yeah, yeah. Oh good and then you know the afternoon was was before we you know we were working so light yeah used to get another coffee at three o'clock because we might get out of the office at 678 10:12pm you know you never know I really and sometimes in that type of banking. Yeah, well I think you've brought the drain to the US. It's super exciting. Thanks so much for your time that because I know this is it's outrageous that you're able to sit with us for this long we've made you miss about two meetings and

54:47
daily talk show. If you've enjoyed the show, feel free to Instagram us.

54:50
Share, share your stories. Hi the daily talk show.com

54:53
is the email address

54:54
and if you're in LA come to blue stone. Please don't lie. Absolutely

55:00
Toronto

55:01
is your favorite one very quickly

55:03
there's a there's a cafe we have on the Upper East Side the same church help us at Central Park. That's pretty magical. Yeah, block that one a lot.

55:10
What number was that out of the

55:11
number six. The first cafe was in West Village and that was where where we lived and that's that want to hold close to our heart. I think that's the one I was

55:22
awesome. Thanks. It gets into the talk show said Mr. Guys. Hey, guys.