Replacing Joe Bastianich for this episode, Elizabeth Blau joins Tim Love to judge two teams pitching their different visions for fast-casual restaurants that are offshoots of pre-existing establishment and that they believe can become franchise empires.
Full Circle Sliders
Lara Whittington and Jennifer Bonner are a married couple who own a tavern in Dallas, Texas, called Full Circle Tavern, and are pitching to the investors their vision for a spinoff called Full Circle Sliders.
Part of Full Circle Tavern’s success comes from their marketing campaign that encourages diners to take selfies with Full Circle merchandise. Wanting to create an experience similar to Full Circle Tavern for fast-casual diners, Jennifer and Lara want to center Full Circle Sliders on just sliders – entrees featuring smaller serving sizes. As an enterprise separate from the tavern, Lara and Jennifer are asking for $200,000 for 15% equity in the first Full Circle Sliders.
Tim and Elizabeth enjoy the food, and are impressed by the estimated 23% food costs. If Tim were to invest, he makes it clear it would have to be for both the Slider and Tavern franchises. Additionally, Tim is concerned that the popularity of sliders maybe played out. In contrast, Elizabeth likes their approach to sliders and they both feel that Full Circle Sliders could be easily replicated.
Peli Peli Kitchen
Chef Paul Friedman, Michael Tran, and Thomas Nguyen are the founders and owners of Peli Peli – a fine dining restaurant that fuses South African cuisine with comfort food, and that has two locations in Houston, Texas. Wanting to introduce their food to a wider audience, the three want to create a fast-casual spinoff called Peli Peli Kitchen. To create this new franchise, they are asking the investors for $350k for 25% equity in the first Peli Peli Kitchen.
Given the vast number of different cultures present in South Africa, Tim and Elizabeth enjoy that the food has such a depth of flavor and that its food costs is 18%. Learning that their restaurants are doing incredibly well – earning close to a million a year – Elizabeth and Tim want to understand why the three founders need an investment. They explain that they don’t just need the money, but they need the help introducing this type of food to places that have never heard of South African cuisine.
Elizabeth and Tim are concerned that while wealthy customers would interested in Peli Peli’s unique dining experience, people who would go to a fast-causal place on average might not be interested in giving an unfamiliar menu a chance.
Though both businesses want to create casual offshoots of their current high end restaurants, Tim and Elizabeth see that each pitch has different strengths and weaknesses. Tim repeats that he thinks sliders aren’t as popular as they used to be. Elizabeth loved Peli Peli’s food, but is uncertain about educating the public about South Africa’s unique cuisine
Believing that Peli Peli Kitchen has the greatest potential for success, Elizabeth and Tim pick them. After selecting Peli Peli, Tim explains that he wants them make South African food easy to understand for Americans and Elizabeth wants them to develop a branding for the restaurant that can be easily replicated across the country.
Excited to get to work and to make the best presentation possible, Michael, Tran, and Paul call their staff to overnight ship nine coolers of food that they have prepared already. They even fly some of their staff out to help run the launch.
Meeting the show’s culinary consultant, Antonia Lofaso, the three men learn that their main goal is to prove that they can easily communicate to fast-casual customers what African cuisine is like. To get potential consumer feedback, the founders prepare sample food and start walking the streets to talk to strangers about Peli Peli Kitchen’s food and South African cuisine in general. Once people take a bite of food they enjoy it, but it is clear that they need do a lot of explaining to people.
Talking to Roy Rede about the look they want the space to have, they communicate that they want to capture the feel of South Africa. Paul explains that while the country is modern, there are still a lot of homes made of crates and have plates of metal for roofs. In short, they want it be modern but rustic. Discussing the menus, Paul suggests having them printed to look like South African passports.
Antonia comes back to inspect their menu. She enjoys the food but lets them know that the menu has to be easier to understand. Instead of saying what’s in the dish, they should compare it to a dish people are most familiar with. As Antonia makes clear, in a fast-casual space everything on the menu needs to be easy to understand so it should be easy enough for a child to understand.
Thomas understands Antonia’s feedback but worries that a menu might be boring. To test Thomas’ new menu, Michael sent it to his ten-year-old son. From this test, Michael realizes that this version of the menu doesn’t explain the food and doesn’t explain the restaurant. With the menus already sent to Roy for printing, they are stuck with what they have.
Returning the next day for launch, Paul, Michael, and Tran are blown away by the work Roy has done. Talking to Antonia again, Paul explains that he will not be in the kitchen and instead will be upfront explaining the food to customers. They also tell Antonia that they are projecting a check average of $18 per person, they are aiming to serve 80 people, and they want to keep their ticket times between 5 and 8 minutes.
Arriving before the launch to check out the space, Elizabeth finds their exterior sign to be confusing. Stating “South African Flavors” and “Southern Comfort Food,” Elizabeth thinks the sign should be more descriptive. Tim and Elizabeth both love the interior look of Peli Peli Kitchen. Elizabeth specifically felt transported and could see this design being rolled out across the country. Though Elizabeth and Tim like the idea of the menu designed as a passport, they find the menu lacking in clarity. Tim even finds a typo in the menu.
With Chef Paul out of the kitchen, and in the front meeting the guests and explaining the menu to them the kitchen staff are quickly backlogged with orders. Tim and Elizabeth observe the customers are struggling to understand the menu even with the Chef explaining it to them.
Tim heads to the kitchen to see a lot of meat not being is not being kept at the right temperature. The staff immediately begins reheating the food to prevent Tim from throwing the product away. Realizing that they need Paul in the kitchen, the get him back in and he gets everything under control. Under pressure, Paul begins to get visibly upset with some of the staff but brings the time down for ticket orders.
Tim and Elizabeth sit down to try the food and enjoy every dish. They realize that the idea of Peli Peli Kitchen could carve out a one-of-a-kind space in the fast-casual section.
The Deal Table
Sitting down with Tim and Elizabeth, Paul admits that he should have never left the kitchen. Going over the survey results, 100% enjoyed the food; 80% left understanding the food; and 95% of the customers will return. Knowing that 95% would return is information Elizabeth sees as gold. Tim also shares that their check averages were higher than predicted ($19) and that they served over 120 people. The key problem is that the menu was not clear, but the men all understand that and are willing to improve it.
Going over the original investment offer of $350k for 25% equity in the first Peli Peli Kitchen, Tim and Elizabeth bring up the fact that there can never a clear division between the original Peli Peli restaurants and Peli Peli Kitchen. Not seeing a significant divide between Peli Peli Kitchen and the original Peli Peli high end restaurants, Tim and Elizabeth want to know how much it would cost to buy into the entire operation
Michael says it would be $2 million for 25% of the entire business – placing the value of the entire business at $8 million. Tim disagrees with the evaluation and places it closer to $5 million. Elizabeth offers $1 million for 25% of the entire business. Tim that Elizabeth’s offer is a bit low and offers $1.2 million for 25% instead. In return, Elizabeth offers $1.25 million for 25%. It is an offer that the team can’t turn down and the Peli Peli team agrees to work with Elizabeth – making this the biggest deal to ever be done on Restaurant Startup.
As of the airing of this episode, Michael, Thomas, and Paul have their expansion plans on hold as they finalize the deal with Elizabeth and learn to improve operations at their current locations under her guidance.