Shane Murphy (00:02.31)

Welcome back everybody. Today we are here with Andrew Smith, the managing director and co -founder of Savory Fund, which partners with a wide variety of restaurant concepts with just a few locations and then they provide capital and operational frameworks to help them scale to over 60 units and absolutely explode in sales. Andrew and his wife have been doing this for north of 16 years and have an incredible amount of knowledge and wisdom to share with our industry.

Andrew, I'm so excited to have you with us today. Thanks for joining and sharing your story with us.

Andrew Smith (00:35.982)

Of course, always good to see you. Appreciate you, brother.

Shane Murphy (00:39.43)

Yeah, I think, you know, we were just reminiscing, you know, I first met you about seven years ago when I launched an online ordering business with some marketing tools built in. And you were so kind to give this young budding entrepreneur time and feedback. And I remember we, we dove a lot into the industry and what's on the horizon and the different trends and boy, how things have shifted since then. Right.

Andrew Smith (01:04.718)

Boy, totally different. We about put on our back, didn't we? From when we were talking before. Things seemed so simple, didn't they, in 2015, 16, 17, 18? I mean, it was just blissful. Everything was up and to the right. Everybody was making money. You could build things for half the cost. I mean, it was amazing.

Shane Murphy (01:09.126)

Wait, what?

Shane Murphy (01:23.334)

Yeah, and here we are still cranking away. And I mean, you've made some big shifts through the years for from like the four foods group experience and operating and managing that into, you know, the savory fund before we go in into details too far. Maybe can you share a little bit more about your background and the story behind savory fund and how you got to this point?

Andrew Smith (01:46.67)

Yeah, it's kind of a unique one just because a lot of times people find themselves in careers that they didn't really foresee themselves in earlier in their lives. And this is for sure for me too. I never started my business career thinking I'm going to own restaurants and be a private equity guy in restaurants. I just never thought that I wouldn't have laid that out in a million years, but I actually started my career in tech in 1998, 1999. I started my first tech company.

Believe it or not, Shane, it was a streaming media business. And so streaming media didn't exist in 1996, 1997. So I jumped on the bandwagon and started creating a Kodak and that was my first business. But I sold that to a public company years later, made it through the dot -com bubble, started a tech company that was in financial software and sold it to one of my clients a couple of years later. And then my last one was a construction software for home builders and tower builders. And crazy enough, Don Trump was my client all the way down to local home builders.

It was a fun time. I was private equity backed by a very large private equity firm out of San Francisco. Took on tens of millions of dollars in private equity funding and I just thought that I was on the top of the mountain, right? I could not go any further up.

And I remember my wife, Sean, at the time was my, was the wife of my two toddler boys. And, she came to me and she said, you know, I'd like to do something more than just be a stay at home corporate wife, which she was an incredible partner to me as a, as an entrepreneur is you probably Shane have experienced yourself. You have people around you that you're like, man, I am not alone. I lean on everybody around me. And that was Shawna for me. And she came to me and she said, you know, I'd like to do something more. And I said, well, what would you like to do? I'd love to support you. And she said, well, I'd like to open a restaurant. And in my mind,

Shane, I was like, that is the dumbest idea I've ever heard. Like why would you ever do that? They all fail. Nobody makes money. But what came out of my mouth, Shane, was I think that's a great idea and I would love to support you. And that's the reason why we're still probably married for 25 years is because you do support your spouse and no matter what they want to do. But we, we started building our first restaurant and I was still the CEO of my tech company and

Andrew Smith (03:48.718)

Here life could not be better and in 2008 we opened up our first restaurant in October of 2008. And that was right in the middle of the next crash. It was the financial boom or bust and it was melting down and my life was on fire. I was like, we're gonna open up this restaurant and it's gonna be a complete failure. And long story short, it was a huge success in the middle of a horrible recession.

which really got me thinking like why in the hell is that market so stable yet my tech industry is again going through another .com bubble for per se where the pressure was on us and I watched Shauna have so much success in the business that she was running and it actually made cash which I'd never seen before as a tech company.

And in 2009, we ended up selling that business and I called my wife up and I said, hey, they can keep me on or I can come join you and do something different.

She, she gave me a shot and she hired me as a dishwasher. And so I went and I started cleaning dishes for the very, very first job I had. And then I made pastries and I worked the register and I did everything in the restaurant business because I wanted to learn everything I could. fast forward now, Shannon, we can talk about it more in depth, but you know, we started with one restaurant and we call our, our career kind of a series of moonshots. we said, let's do five of these. We did five of them. And then like, let's do 10 of them. And then we did 10 and

One thing that we realized is we really had to build a team of people that knew better than us what we were doing around us. And so we started hiring and building a team and that was called the Four Foods Group. And we pivoted in 2018 when we decided to not use the bank of Andrew and Shawna and friends to fund our growth. And we decided to stand up a private equity fund.

Andrew Smith (05:34.798)

which we did in 2018. I raised $100 million and bought five brands and then another $100 million fund was raised in 2021 and bought six brands. And then we just kicked off fund three, the beginning of this year for $200 million and are about 70 % raised. And we have already bought our first brand in that. So.

I don't know, 16 years over 450 restaurants and about $2 .5 billion in sales. I think that we've done something pretty special and sometimes we fail to pause and like see what we've done, but that's what we've done so far.

Shane Murphy (06:07.942)

Yeah, that is such a beautiful story from, you know, the tech world to your wife really spearheading all of this. And, you know, you getting dirty with the dishes all the way to through billions of dollars in sales. Like I think that description of a series of moonshots is absolutely the case. And through those experiences, you know, you have experienced patterns of how

to put together frameworks that help these brands to grow and explode and do it efficiently. And to your point, something that can actually spin off cash, which is often mind blowing for us tech guys who live in a world where we just burn through the years.

Andrew Smith (06:54.542)

Which one of these days someone's got to figure out a better way in tech, but you're right. Like for us, it was always like, how long is my runway before it comes to that cliff? You know, and you always got to raise until you can continue to build and listen, you're doing it the right way, Shane, but yeah, the tech, the tech era and I'm still an investor in tech and I still love it. And that's how I kind of scratch my itch of techs, Shane, as I invest into tech, but I still look at it and go, what the hell are we doing? We got to start making money sooner or later.

Shane Murphy (07:20.966)

Yep, for sure. And that's so awesome that you've done that repeatedly over and over and over again in the, in this restaurant industry. Now you've obviously specialized in taking these small local concepts with just a few locations and helping them to absolutely blow up and to scale and grow and do that efficiently. I'm curious, what have been some of your favorite like marketing techniques and strategies that

you've employed across your portfolio through the years that you've found to be really foundational to that success.

Andrew Smith (07:56.942)

Yeah, you know, marketing, I actually have a degree in marketing and a lot of times marketing, you're looking at kind of your omni -channel of things that you do for a brand to, to hit the different eyeballs and then to have, you know, repeat visits from your, your customers through, you know, that connection. And, and in my mind, I always think that marketing is something that you do kind of on the periphery of a business. That's the way that you're perceived and what you market out.

And what I would say is that in this industry, especially more so now, Shane, marketing for us is really inside out. It's not the outside of what you push out to the world for what people should perceive. Because if you do that and you're not focused on what the actual business is doing when the customers walk in, you've really blown your dollars for the wrong reason. So what we've really focused on over the years with all of our brands is are we executing for the person that's standing right in front of the cash register?

And if we're not, there's really no sense in marketing the business because you're not prepared for it. So when savory gets involved in any brand, we really look at a business and say, well, does it have the underbelly? And we call it the underbelly because that's really what savory is, is we look at the foundational principles or the underbelly of a business. We didn't create the business on any of these. We're not the founding partners. We're not the ones that curated the menu and the vibe and the experience of the restaurant.

but we do understand what an underbelly is and what is required to really then stand up a regional or multi -regional brand and soon to be, you know, a national brand. And so if you look at it, you say, well, do you have the right leadership? Do you have the right systems? And do you have the right people? Right? So people process and system.

is really what we look at in each business and that's the underbelly of every business. And if you have the right leadership, the right people per se, they're going to have the right people in each of the restaurants so that the experience is concrete and it's consistent across the brand. The other thing is systems. Do you have the right systems in place so that when people come in, you can give them, you know, the loyalty program that they expect so that they can have, you know, concurrent visits and they actually feel part of the fam.

Andrew Smith (10:00.91)

And then really the last thing is just the process that you're using too. And so that's what we really focus on. And honestly, those three things are actually part of your marketing program though, Shane, because again, we're in the hospitality business. And if you walk in and your experience sucks, it does not matter what your billboards say or what your tick tocks doing or what it's showing or how great it is.

Shane Murphy (10:19.014)

Mm -hmm.

Andrew Smith (10:20.782)

If it doesn't match when you walk in those restaurants, you know, and I know as patrons, Shane, you're like, that doesn't match what I saw on Tik Tok or what I was told because the experience was awful. So we really focused inside out.

Shane Murphy (10:33.542)

Yeah, and that's so crucial. We talk about this all the time because my company does like SMS marketing. So we're part of that pushing out experience to drive the repeat visits. But when we're talking to new customers, we always explain if you don't have the fundamentals of your business, no amount of marketing is gonna save you. If anything, it's going to drive you into the ground faster because it's

Andrew Smith (10:54.19)

Nope.

Andrew Smith (10:58.542)

You can faster. Yep.

Shane Murphy (11:00.742)

is you just aren't set up for success. Now, if you have that underbelly, like you put it, then you can use marketing as an accelerant and get people back in having that repeatable great experience over and over again. But without that underbelly, no amount of marketing is gonna help. And so, you mentioned once that underbelly is there and it's the...

Andrew Smith (11:21.102)

Done.

Shane Murphy (11:30.31)

the people, the processes and the systems are really functioning well.

How then have you best amplified that experience to get people coming back in more and more frequently and bringing in additional guests?

Andrew Smith (11:46.318)

Yeah, I was going to say loyalty is one of the biggest. I mean, the loyalty systems in the past, I thought, were pretty clunky. They weren't consistent. They weren't persistent. They weren't stable. And the other problem is that everybody had 50 different ones. And so you had to have 50 different loyalty program cards or punch cards or whatever. So I mean, we really evolved. And you know that. And I knew that technology would always kind of evolve that whole segment of the industry. I think it's gotten a lot better. To make it simplified for your guests is probably the most important, right?

when you market to your guests, make it super simple what the call to action is and then how they can follow through and actually redeem whatever you're showing them. We're not huge on couponing. Within our business, we think that if you do that, you train your guests to be a coupon brand and so they wait for the next coupon. But, you know, offers and promotions absolutely work. To get people in to try something that's new and is an LTO, using a loyalty program to talk to your loyalty guests.

through that platform has been very effective for us to get transactions back in. The other thing that's probably been the most important, probably the last 18, 24 months, I mean, traffic is difficult in this industry right now. Everybody's fighting for traffic. People have less money in their wallets. And for that reason, you have to give them value. So marketing value.

And when I say that not cheap food, people don't necessarily want cheap. They want value. It's a very different word, isn't it Shane? Like value and cheap are two different things. I don't want to get less food. I don't want to get crappier food. I want to get more food for my dollars. And that's really what it is. Or a better quality food for my dollars is what people are looking for. So believe it or not, marketing is communicating with your guests in a very simplistic way. But when then they actually buy it,

Part of marketing is executing on the value and the perception of value of what you get when you spend those dollars. So that's what I would focus on.

Shane Murphy (13:41.286)

Yeah, I love that. When you've tested different strategies throughout the brand, how have you actually confirmed what's working? Because often that's one of the big questions. Any restaurant owner out there has tried a lot of different things from a marketing perspective and hasn't really known if this works or not. So they just cycle through them, which...

It can be devastating on your margins if you do that the wrong way. How have you gone about testing new things throughout the brand and then identifying what is that simple message? What are people responding to and how does that actually work?

Andrew Smith (14:27.246)

I think one thing about marketing, especially in this industry, is that it's always changing. So I would say that the best predictor of the future is the past. We always know that. We all have heard that statement in life. And if in the past you've used something like mailers or if you use the billboard or if you used an email marketing campaign and you're not seeing results from it or you're not seeing...

the sales tick up from those efforts and those costs, the future is probably going to be the same of what you've experienced in the past with those efforts, right? So I think it's ludicrous here insanity to continue those programs. My thought is always be pivoting until you see what your guests actually respond to and lean in more and heavily into that. I believe that the whole world has kind of shifted toward this whole, you got to be on TikTok, you got to be on Instagram and you got to sit there and show your food.

Shane Murphy (14:58.246)

Yeah.

Andrew Smith (15:17.582)

And I don't know for our brands, we, we do do that because people want to see what you have and they'll walk in and you know, they'll grab their phone and they'll say, I want this and they'll show their phone and then they'll point to it. So it is effective, but it cannot be all your eggs in one basket because there's so many tick tock and reels and Instagram posts out there and Facebook and everything else that we're really all being just kind of lost in the noise. And so again, I think that the thing that you have to do is not only communicate with them,

you know, through those methods. But once you actually have those methods in their mind, they come in, they try your food. You got to get them hooked onto a loyalty program so you can communicate with them as one of your most valued VIP guests and family members of that, of that brand. Now, you know, you think about the, the, where your sales come from, you know, 20, 30, 40 % of your sales come from your top 10, 20 % of your customers.

You want to get those diehard customers that come into you once or twice a week, you know, for a brand like Swig, we want you Shane coming in three or four times a week because it's a beverage. I mean, you got to drink something every day. We want to get at least three or four of those drinks a week. So

at the end of the day, we're going to focus on the people that are the most devout customers, because that's where your marketing dollars are going to turn best for repeat sales and increased margins is if you get your diehard customers coming back more frequently. It is so expensive to go out and get brand new people to come in and try you and you do it off of a coupon because you don't know if they're ever going to come back if they came in just for that coupon.

Shane Murphy (16:51.078)

And that's where, you know, we see this a lot where there are coupon brands and they try to incentivize their repeat guests with these big massive deals which just cannibalizes your cell. Yeah, these are people who like you and love you. They actually don't need a super steep discount to come back. They just need to have you

Andrew Smith (17:06.926)

Your profit. Yeah.

Andrew Smith (17:13.301)

They don't do that.

Shane Murphy (17:19.59)

be in the top five people that they think about when they're like, I'm hungry or man, I have that craving for a soda. You just need to be in the top, top few and be in front of them. You don't have to give them a BOGO or this massive, massive offer.

Andrew Smith (17:34.702)

Yeah, your your attempt is as a brand. And when you market is to get we call it the pinwheel of options. And the pinwheel of options Shane is when you and your spouse or your friends, your co workers go and get in a car. What do we all do? We all go, so what should we get? And we all go through the pinwheel. Well, we've been here last week, we were here on Monday. We haven't been here for a while, but you go through the pinwheel of places you like.

Shane Murphy (17:53.67)

Yep.

Andrew Smith (18:02.798)

And all of us are trying to get on that pinwheel and that pinwheel for every guest is usually eight to 12 brands that they're going to have on the pinwheel. Now, will they venture out and try something occasionally? Of course, they're always going to go back to that pinwheel. So your job is to try to get on that pinwheel. Well, how do you get on that pinwheel? Well, you have to be known. So make sure that you're out there in your scene, but when they come in your door,

You don't know how many times they've seen your brand or how many dollars you've spent to get them to see you repeatedly before you, they actually walk in the door to try you now. You have to do everything you can to market the hell out of them while they're in your store, not just keep on marketing for new people to come in your store. That's my opinion.

Shane Murphy (18:45.126)

Yeah, I absolutely love that. As you look at the coming years, what are the restaurant industry trends that you've had your eye on and how are you thinking about navigating the changes and challenges that are coming our way?

Andrew Smith (19:00.993)

Boy, the challenges every time I think I got a peg chain that the challenges are different. Like I think about back about 2020 and you know, people talk about that time as being one of the hardest. It was so hard for us to Shane, but it was actually one of our best years ever. If you can believe that we actually

profited probably more than we ever had in the previous years. We galvanized as a team. We also galvanized with our customers and our guests. We added more units. We bought two brands. We raised another fund. I mean, it was a crazy time for us. And then when I think I got it all figured out, 2023 hits and inflation kills everybody and construction costs are high and contractor gouging happens and supplies are limited. So at the end of the day, you just never know what's going to be thrown your way. My, my point on what the future is going to throw is

be ready to pivot for any and all of it and do it quickly. The people that ask us, well, how did you guys prevail so much in 2020 and 2021? Every single day we sat down and we said, well, what's the data that we have that's in front of us and how do we pivot around the data that we have instead of just going, well, it'll improve. Well, maybe it won't. Maybe the future is never going to be like the past. And so we got to adapt to what information we have. I think right now,

The future is going to be better than the past. When I say the past, the past few years, we already starting to see it stabilized more. You know, one of the things that we all see and it's, it's really sad because it's also rhetoric that the press is doing that I think a disservice to our industry is all they're talking about is the units that are closing and the bankruptcies that are happening. Listen, every industry goes through a shakeup. What the hell do you, does everybody think that the is going on with the tech industry right now? It's going through its own cycle and shakeup, right?

But with tech companies that go out of business, they just shut off their lights and go home. Within our industry, it's like, my gosh, there's these units that shut down and then like the signs come off these big buildings and this and that. So they're like, that industry is so volatile. It's like every industry is volatile at certain points in time. But the Darwinian ShakeOut that happens and occurs in any industry, including our industry right now, is actually a natural progression of that industry. And what I say, what I mean by that is,

Andrew Smith (21:13.614)

all of these stores and units that are going out of business, they were hanging on by dear life and kind of on the like by their fingernail tips. It's probably good to get those to shut down.

to have the new wave of merging brands or good operators or good fundamental businesses to then take those spaces and then open up and redefine what the future is. So I actually feel like the future is more interesting to me. I'm more bullish about it. We're going to invest a quarter billion dollars of a new fund into it and create some billion dollar brands out of it because I believe the future is better than the past.

Shane Murphy (21:48.422)

It's absolutely bright, 100%. Andrew, this has been such a fun interview and conversation today. Thanks for joining us. How can people follow you and learn more about savory?

Andrew Smith (22:01.454)

Yeah, super easy. Savoryfund .com. We made it as easy as possible, Shane. And then just, I'm a LinkedIn guy, so you can always just go onto LinkedIn, Andrew K. Smith with Savory Fund, and I'm easy to find.

Shane Murphy (22:13.83)

Awesome. Well, Andrew, thanks again for joining us and sharing your industry knowledge and experiences.

Andrew Smith (22:17.518)

Awesome. Thanks a lot Shane, appreciate you.