Scaling the Right Way: The Founders of Chopt, Dos Toros and Dig Inn Share Their Secrets
This story appears in the October 2017 issue of Entrepreneur. Subscribe »
What’d you have for lunch today? If you live on the East Coast, you may have grabbed a fresh marketbowl from Dig Inn or a salad from Chopt. Or maybe a folded quesadilla from Dos Toros. These brands are steady climbers in the fast-casual industry, which is now worth $50 billion. That may be a small slice of the $800 billion restaurant industry, but it’s growing fast and changing the mindset of eaters across the country by offering high-quality food, often sourced locally and always served quickly. And while it may take a place like Dos Toros less than a minute to build your burrito, the operation behind the scenes is an intricate web of challenges and good intentions. We brought Dig Inn founder Adam Eskin, Dos Toros co-founder Leo Kremer and Chopt CEO Nick Marsh (also a Dos Toros investor) together to chat about their industry, the hurdles ahead and unexpected camaraderie.
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Pretty much everyone thinks they’re a food expert these days. Does that make your jobs harder?
Marsh: Customer knowledge is mostly an opportunity. For example, at Chopt we offer destination specials: dishes featuring flavors we’ve found around the world. We’re able to do things we couldn’t do five or 10 years ago because there’s an appetite for them, and an understanding of what we’re offering.
Eskin: When I first started working on Dig Inn, it was because I saw the customer moving toward eating whole foods. We thought that what happened to grocery would happen to food service. And now we’re all here and in business. It’s still early, but the industry is still ripe for revolution.
You’ve all known each other for quite some time. How competitive are you?
Eskin: It’s not zero-sum thinking -- If you get a guest, I don’t get a guest. We can all prevail.
Kremer: Downtown at that food court at Brookfield Place [in Manhattan], our three brands are eyeball to eyeball, sitting in a triangle and they’re all crushing it.
Eskin: Healthy lines for all!
Marsh: When we were negotiating those leases, we compared a lot of notes -- What does the [foot] traffic look like? There’s more in the game than just us being competitive.
You’re all committed to local ingredients, which has forced you to build a lot of your supply chains from scratch.
Marsh: In the world in which our brands help each other, it’s really the supply chain. It is a totally new frontier when we go to new markets. Where do I get my produce? Who are the local farmers? What distributor can bring it to me? It’s superexpensive because we’re all doing it for the first time.
Eskin: We have five people that focus just on supply chain, and half the time they’re on the phone talking with farmers and distributors, waiting for the industry to catch up.
Kremer: Dos Toros just expanded to Chicago, and our first trip out there was to find a local tortilla supplier. Without that, a new market is a nonstarter. But I do think we’ve seen movement already -- there are more suppliers doing a better job than there used to be.
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But for now, sourcing is still expensive, which I’m sure keeps your retail prices high for a lot of folks.
Marsh: We’re not in tech, so none of us have investors who have given us boatloads of cash that we can burn through for years. We have to make this work now. But if you look at where we can go in the next five or 10 years, there is a vision in which elements of cost structure begin to move in our favor. As our supply chains grow and become more stable, this becomes a less-expensive operation.
Kremer: All our models rely on volume. If we aren’t moving more and more people through our lines, the math doesn’t shake out.
Marsh: You want to see a line move fast? Dos Toros’ double line. [Marsh is referencing Dos Toros’ new configuration, in which the counter is built at a right angle instead of a straight line, creating two separate assembly stations rather than just one.]
Eskin: Innovation of the century!
Kremer: [laughs] Our epiphany was two perpendicular service lines at each restaurant, effectively doubling the customers we can serve. Speed is important.
Eskin: At Dig Inn we actually found that speed isn’t always our friend. A marketbowl isn’t as familiar as a burrito. We’ve opened a few restaurants and really hit the speed out the gate. But a year later we were like, Where’d our customers go? For a period of time, the language internally was “Speed kills.” Customers wanted us to take the time to walk them through the menu. We had to strike a balance between speed and service and focus on delivering this experience first, and then pick up the speed.
You’re all known for scratch cooking and hospitality. How do you recruit and train employees?
Marsh: The fastest way to crush a company’s entrepreneurial spirit is to hire people with too much experience, at the restaurant level or at HQ. Focus on that hourly shift manager who understands what you want the operation to look like. You’ve got to bring that person up and promote them.
Kremer: It is about offering a viable career path for people. And as far as compensation goes, we are all for a $15 minimum wage. Giving people stability will make a positive difference. And turnover is such a challenge; a living wage is only going to create a better work environment.
Eskin: You look at a P&L and think, How can I afford all these employees? But then you look at it in terms of Jen, who’s carrying a second job, working 70 hours a week, and supporting three kids -- she’s worked for you for four years, but she can’t live on what you’re paying her? It’s messed up. Then we need to pay her more.
Marsh: The thing is, the math works. Our restaurants with higher average wages are more profitable.
Eskin: You can plot it on a map. Highest wages means the longest-tenure crew members, kitchen leaders, chefs, whatever.
As you scale these businesses, what’s too fast? What’s too slow?
Marsh: Chopt is probably the most conservative in the group.
Eskin: And the furthest along, so connect those dots.
Marsh: Our rule of thumb has to be 20 to 25 percent annual growth. Do that for a couple of years, and then rest. This isn’t an industry that rewards risk, or growth in a straight line.
Kremer: It’s also not an industry where scale magically solves problems. Dos Toros has been in business for eight years, and we’ve just now entered our second market with Chicago. Missteps are so costly from real estate and guest perspectives.
Eskin: We’d like to open our third Boston location. We’re building it now, but we don’t yet have people lined up and trained to open, so when construction is finished, it will sit unopened. Which is…humbling.
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Kremer: But it’s the right decision.
Eskin: It is! What choice do we have? Dig Inn will open six units this year on top of 13, and it feels a little shaky. We want to step on the gas, but we don’t have that foundation yet, so 2018 will be about solidifying it.
Marsh: We’ll end the year with 51 Chopt stores -- and the challenges are exactly the same with each one. To Leo’s point, scale doesn’t solve problems. As you grow, you don’t get further away from the edge of the cliff. The cliff just gets higher.