The Exchanges

Q experience like for you? I mean, cause you, you, I, I should say, I mean, you didn't, I don't think you ended up spending that much time there. Was it, was that the idea that you would just kind of stay there for a couple of years as part of the commitment of being bought out or, or did you think, okay, I'm gonna have a career at Starbucks now?

A Yeah, it's a, it's a, it's a great question. At the time the transaction happened, I made a commitment, Ali and I made a commitment that we would work as hard as possible to make sure that the transaction was as successful for them and their shareholders as it had been for our shareholders, and that was an informal handshake, and I stuck around for, um, almost two years to help manage the, uh, transition from Seattle Coffee Company to Starbucks, and, uh, And it was a fascinating experience, um, very eye-opening, in that we assume that, you know, this big, successful business would come over and everything would be buttoned down and polished, and, and, uh, what we found was all of the challenges and the, the imperfections and the dysfunction that we had in our small little company were just amplified on a bigger scale at Starbucks, and it was funny because Howard Schultz took us to dinner Ah, right after the transaction closed in London. And he had had a little bit of a, uh, a campaign going on internally at the time around how do you get big and stay small. And there was a book that he was handing out to all of his senior executives called Orbiting the Giant Hairball. And he gave us a copy of it. And it's a lot of pictures and graphics and, and it, the whole premise is when you start a company like Starbucks, you have to put processes in place and systems and controls and, Each…

AI assessment note: “I stuck around for, um, almost two years to help manage the, uh, transition”

Q But you also, uh, began like a, a franchising program in 2014. So, can you explain why you decide to do that? I mean, obviously franchising the model is great because you can expand quickly and with less upfront cost, but you also risk losing control, right, over, over the brand and the quality and, and things like that.

A Yeah, it's a great question. So you're, you're exactly right. On our fifth birthday, we had 12 stores in western Washington, and it was at that time that we sat down, as Allie said, and, and had a long conversation about what we wanted to do with Maud. Did we want to keep it regional, and live, frankly, a more comfortable life, and just drive to all the new stores, and know everybody, and, or did we want to take a swing, and see if we could turn this into a true national, maybe even international brand, And really expand this platform that we'd been talking about into something much more profound. Now, most of that growth that we then embarked on was company-owned growth. Um, but you're right, we did also bring in a franchising model because in that first five years, having started or kind of pioneered this category of fast casual pizza, halfway through that first five years, a lot of other brands started to enter the category. And Back to the conversation about Seattle Coffee Company, there is an advantage for the first mover. That person or that brand that gets out and secures the right real estate builds that relationship with customers. If you allow a brand in a category to get too far ahead in a particular market, it's hard to supplant them. So as these other brands were entering the market and they were all franchised, we would only be able to push ourselves so far with c…

AI assessment note: “bring in partners who could help us expand into those markets that we wouldn't”

Q In the meantime, Scott, you, I mean, because of Drexel Burnham, I think, They declared bankruptcy, so you presumably had to find another job. You went to go work for a private equity group, and I guess while you were there, you ended up becoming the Deputy CEO of a healthcare company. Is that, was that a company that the private equity group had bought out?

A So you're right. I, I left Drexel with a group of professionals that moved to, uh, another firm, Apex Partners, and I spent three years there advising and investing in, um, a range of companies, and one of the areas that we specialized in, or we, or that I In particular, focused on was healthcare with a focus on long-term healthcare, and I had been advising a company on restructuring their business and raising some financing and did a large financing, and then the, the CEO and board came to me and said, hey, listen, you've, you've put in place a lot of the framework that we're now going to go and try to execute against. Why don't you come and join us and help us do it? And, um, I knew that I didn't want to spend my whole career on the advisory side. I really wanted to become a principal. I wanted to go build things. And, um, I was, uh, this was my first opportunity to step across that divide and get into an operating role. So I became deputy chief executive of a, a small public long-term healthcare company.

AI assessment note: “I had been advising a company on restructuring their business and raising some financing”

Q announced that Mod Pizza was acquired by the elite restaurant group. It's a An investment group, um, I guess to help avoid potential bankruptcy. And I'm curious, you know, because Mod is such a great business and, and was operating as such a great business. What, what happened? Was it inflation? Was it the cost of goods? Was it too rapid of an expansion that created some of the challenges?

A Yeah, Guy, it's a great, uh, it's a great question. And I think to summarize, we, we had, um, it was a. 16 year journey for us. And the first, um, 12 or 13 of those was incredibly exciting, growth-filled expansion across the U.S. We were built as an experience to have on-premise, and we, we entered the pizza industry, did pizza a different way, and then when the pandemic hit, it really forced us to change how the business operated, and it also dramatically impacted our growth strategy. We had been Expanding across the country very rapidly to be a first mover. And then we pivoted very intentionally in about 2018 from first mover into market infill. And so we started to fill in all the markets that we were in, um, raised a bunch of capital in 2019 to execute that phase of our strategy. And then in 2020 that basically came to a halt while we Move to surviving the pandemic. Yeah. And as we came out of the pandemic, we, we made several attempts to get back into growth mode, to fill those markets in and to finish the strategic plan that we had had. Um, and there was just a number of challenges that came out of it, whether or not it was staffing crisis or, uh, supply chain issues or inflation.

AI assessment note: “challenges that came out of it, whether or not it was staffing crisis or... inflation.”

Q So, so you guys are, um, involved in philanthropy and, and so tell me how you, the conversations you started to have around starting another business of your own, because you'd been through it, right? You did your own startup 10 years earlier. And now you're, you know, it's like, 2006, seven, you start to talk about maybe the two of you starting something again. How did that start?

A Well, what ended up happening is, um, we had been approached many times by people who were interested in getting us involved with a coffee business or a restaurant retail business, and we had always politely declined. But one of the elements of our time in Europe was we had a, an intense Love affair with Italy and all things Italian. When we had a chance to travel Most of the time we ended up going to Italy because there was just something about the country and the people and the culture and the food and everything about it, the architecture that just drew us in, and we loved our experiences. You overlay that with somebody approached us during that time that we were back in Seattle and thinking about how we were going to be investing our professional time, and they came to us with the idea of doing something different in pizza. And I'll be honest, I kind of poo-pooed it, and then Ali kept coming back to it, saying, you know, I really think we need to look more closely at this.

AI assessment note: “they came to us with the idea of doing something different in pizza.”

Q Um, the restaurant is, I think, mainly, I'm assuming most people sit down and eat there, or am I wrong? Are there, is it most people take, take pizza out?

A Well, it's a, it's a really great question. Um, prior to the pandemic, 95% plus of our customers would come into Maud, a restaurant, and either walk down the line and build their own product, or pick up their product and take it out. Um, since the pandemic, a much higher percentage of our business Is, or our customers approach us differently, either through delivery or through our digital channels, and so that's actually part of our story today, which is how we need to continue to evolve. In 2019, there was a study conducted, um, we had an investor who joined us at the time, and they commissioned a big study by a big consulting firm, and they did a, a deep dive into the business and the industry and our brand, and We had a very thoughtful plan to, you know, develop greater off-premise capabilities and digital capabilities, and it was like a five-year plan, and all of a sudden the pandemic hit, and we needed to do all of that in five weeks. And, um, and so, it's been a, the last three years has been a real adventure. The business has changed from what it was just a few years ago.

AI assessment note: “prior to the pandemic, 95% plus of our customers would come into”

Q And, and was there somebody, I mean, was there a partner or somebody who was like, pizza, let's do pizza? Yeah.

A Yeah, there were a couple of people who approached us, um, one in particular who, the general idea was, pizza is slow, it's expensive, you know, it takes time, it, and it's a sit-down occasion. Or, you go into these places where you have pizza by the slice, but the pizza was made hours ago, and it's reheating it, and is there a way to combine all of these, the attributes of fast casual, um, With pizza, which is the second largest food category in restaurants behind hamburgers. It's a loved product. There's so much innovation you can do because you have this great platform of dough that you can put any combination of wonderful toppings on, and so maybe we can try to make the experience more personalized.

AI assessment note: “Yeah, there were a couple of people who approached us, um, one in particular”

Q And how did you start to, to determine, like, what the concept would be? Did you, like, rent space? Did you get a kitchen, like, a commercial kitchen? Did you bring a bunch of people together in an office? What, what did you do?

A It was a combination of all of that. We had an office for the Siena Group, and we used that as kind of our main hub. There was a lot of work that was done on whiteboards and so forth. We then collaborated with some equipment suppliers to get into kitchens to test this idea of how we could formulate the dough and how we would press it and the different techniques for cooking it and, you know, how quickly could we do it. And so there was, like, multiple, um, Streams of work that were going in to, um, convince us that if we actually did lease a space and build it out and start to construct this concept that the key components would all come to life in a way that we could at least run one restaurant and, and have it operate. We had lots of questions, though, about would people, would we be able to deliver a product that people liked enough to actually come back? We were able to answer enough of them to convince ourselves that, hey, You know, taking a lease and trying this once might not be a bad idea. And by the way, at the time in particular, Guy, we weren't thinking that if we did this and it started to build momentum into a business that Allie and I would be the ones in the driver's seat. Um, that was not the, the perspective at the time.

AI assessment note: “It was a combination of all of that. We had an office for the Siena Group”

Q sort of the, the rise of ghost kitchens, particularly in urban areas where, you know, You can make a bunch of stuff and send it on to DoorDash and somebody gets it. I don't know. Does it, does it, is it in your, is it in your interest to actually have more restaurants or to have more of these ghost type kitchens or, or, or a combination? I don't know.

A We really focus more on the more successful we are, and the more stores we have, the more people we'll be able to employ, and therefore the impact that we wish to make will be bigger, and so that's a real driver and motivator for us. Just specifically on this question of ghost kitchens, I, I'll be honest with you, it's not really an area that's super appealing to us, and there are a number of reasons why. One is, we believe one of the roles that Maud plays is A venue or a location within which the community can come together and connect in person and, and be a place of celebration and human connection. This whole idea of ghost kitchens is a little, it's not a model that makes perfect sense or hasn't been perfected yet because a ghost kitchen is a location from which you can ideally build a restaurant meal more, um, efficiently because you don't have the more expensive real estate. But you still have the same challenge of having to get that meal into someone's hands, so the radius that you have to work from is still more or less constrained by the same constraints you have for any restaurant. You can only deliver a meal with a certain quality within plus or minus five, six, seven miles, depending upon the topography. Um, and so it becomes really challenging. It's, some people say, well, as opposed to having these five restaurants just build one ghost kitchen, well, just the, the…

AI assessment note: “it's not really an area that's super appealing to us”

Q to the US, back to Seattle in 2000. You've got, um, you're financially secure. I mean, you, you can just kind of spend, focus all your energy on your family if you wanted to for the rest of your lives. Um, but you, I think, uh, I think, Scott, you joined Uh, or maybe you started a private equity group when you got back? You, you, you created one, right?

A Yeah, so, um, one little thing that happened in between is, as we were leaving Starbucks, um, we got involved with helping to back an incredible couple and concept called Carluccio's, which is an Italian deli cafe concept that two incredible people, Antonio and Priscilla Carluccio's, were in the process of bringing to life in the UK, and We helped them build a really fun, successful business called Carluccio's, and that was something that we did while we were still in the UK, and then we were very involved with when we got back to Seattle, but that was another chapter for us of helping a, a really great team bring to life a concept based on what we had learned from our experiences with Seattle Coffee Company, and that's a company that eventually went public in the UK, and then we eventually sold it, but that was all happening while we moved back to Seattle. And then you're right. We, we decided to set up a company called the Sienna Group, which was intended to be a platform from which we could bring the experiences we'd had with Seattle Coffee Company and Carluccio's and support and, and back other, uh, private companies that were growing. But to do so more as a investor and coach, less as an A full-time executive.

AI assessment note: “And then you're right. We, we decided to set up a company called the Sienna Group”

Q Um, use the word discreet. Did you Target, sort of, communities, places, regions that were a little off the beaten path?

A Well, we, uh, it's funny, I remember sitting in our little office that we had, uh, in the early days of our growth, and we had a whiteboard, and we were talking about our growth strategy, and we literally took out a map of the United States, and somewhat arbitrarily started to carve up the country in the markets that we would enter ourselves as company markets, and the markets that we would then Go and seek out, uh, franchise partners in. I look back on it now and think, wow, if we were answering the same question today, we would be, you know, pretty thoughtful with research and analytics, and at the time we literally got up, we, we took this map and took a marker and started circling regions of the country. So yeah, we constructed a growth strategy that had logic behind it, but it was, it was a seat of the pants logic in some ways.

AI assessment note: “somewhat arbitrarily started to carve up the country in the markets that we would enter”

Q you know, ahead of the curve and looking around corners and whatever other cliche I can come up with, but you looked at pizza and you were like, this is a category that can work. And so I guess I wonder, where do you see the opportunities now? Or like if you were, you guys, when you were 30, looking at, you know, something to start, where would you go?

A Um, for me, the big opportunity is to continue to lean in to this macro trend that is both, I think, powerful, but also incredibly needed, um, to tap into the potential of capitalism and of Business to be a force of change, a force of good in our society. We have so many issues in our country, in our communities, and they're not all going to be solved by the politicians, or they're not all going to be solved by the nonprofit sector. I think companies need to be more accountable for the health of the communities that they rely on for their survival, and I don't think that that is a zero-sum game. I actually think that if If you do that and you do it well, you can build a business that is better and stronger and more defensible because you're going to attract and retain and engage a group of people who want to be a part of that as an employee. And then over time, you'll attract customers, hopefully, who understand that you are about more than just a product or just about profit, that you are also about giving back and they're going to want to be a part of that.

AI assessment note: “for me, the big opportunity is to continue to lean in to this macro trend”