Chad Franzen 10:14
So you kind of knew that you didn’t you didn’t know. And you knew that you had to take steps to learning them however that looked.
Michael Karsch 10:21
And even though I thought I knew what I knew early on, and then started to realize I didn’t know what I didn’t and then I got to a point where I was like, Okay, I think now I’ve done my 10,000 hours. I actually believe now into that and, and I think I’ve got now, I think I’m on the right side of history in terms of, like, how to look at this thing.
Chad Franzen 10:44
Was it your comfort level that led to the expansion? Or was it just, you know, you were those four stores were doing well, and it’s time to expand?
Michael Karsch 10:51
Yeah, yeah. I thought, yeah. But because we had a, because we have a central distribution production facility. We needed to amortize those costs. So I felt like the unit economics would get better, you know, as we grew, which was mostly true. But there’s some positives and negatives in that. You know, there’s definitely some value to just having, I might even say one store, but like two, three stores and just watching and learning I had it over again, like there’s like first mover advantage versus that. I think in hindsight, I would probably say that I would be better off drilling down longer on a smaller number of stores and seeing all the different scenarios that get developed. Because not just me, by any means, I see now, I just see, like, other retailers doing things and, you know, like there’s an allure early on. You know, everything’s work, like, when you’re the new person, the new brand, the new concept, everybody’s flocking to it. It’s like, it’s like a relationship, you know, as far as I remember from, you know, my many years ago, before I was married. But there’s like, my point is, like, there’s that first initial, the consumer has this first initial like mysterious and exciting and and that’s only accelerated in the from the consumers I see, because with the growth of social media and a desire to socialize in Different ways, it’s like people just love this, like pop up and Instagramming and waiting online and telling people you waited online and giving people advice about what you should get stuff. And the problem with that, for a lot of entrepreneurs that I’ve seen in the food space is like, you kind of somehow believe that that is going to be the forever. And it’s not that you can’t still have a great business, but building the business on that forever will lead to a number of mistakes. It could be the way you just I’ll give examples afterward, but could be the way you designed the store, or the speed in which you rolled out, and then it’s very hard to undo those mistakes. So I should say, the only company that I can really recall that that like just created that aura and just kept going was Chick fil A, you know, it’s like, they’re like the guys in terms of, like, Oh my God. Like, this thing just keeps going. But if you think about, like, Krispy Kreme, like people used to wait online when there was a red light, when it was hot, and now, you know, Lavonne bakery still has a good business. But like, you know, used to be like lines that kind of the the cupcake guys, you know, and all the magnolias and all these things. If you buy into that being the norm, you’re going to pay the wrong amount for your rents. You’re going to set up your store in a way which doesn’t lead to evolution. And I think you can overstaff, get used to a lazy staffing, and that’s where problems come in. You know, one of our competitors, press juicery, they’re out of LA they sold to a like a family office about five years ago, and the whole thing is based, pretty much the large majority of the business is based upon having a big production facility and focusing on selling press juice, right? Fresh, fresh. Bottled, not fresh. It’s actually not fresh. It’s but it’s bottled, still relatively short shelf life, juice and they built as a result, they built their stores very small and very much only focused on refer. Raiders. And then they tried to do is they tried to kind of pivot, because what I saw in our business, and they must have seen it too, was like people started to really want smoothies made to order, and they weren’t set up for that. And there was no place to, like, rebuild your smoothie, like rebuilding a smoothie, like going from no smoothie bar to a smoothie bar in a box that’s like 800 square feet, is very time consuming, costly, and frankly, when you already have 80 stores, would be like really, really a lot of capital and pain and and so as a result, they were caught off guard, and they can’t really pivot in that way. They try to create a different model by creating some allure of like made to order, by putting in ice cream machines, like dairy free ice cream machines. The problem with that and that that worked for a year or so, from what I can tell, but you can see why they did it, because it was like, let’s create some buzz and excitement. That’s kind of like acai bowl with toppings, etc, and it’s better for you. So I get it. The problem was, is like ice cream is even more, let’s just say competitor. Yeah, it’s more susceptible to change and growth and innovation than other areas and then also those machines are not so like operation. That’s what I saw about before, like the difference between concept and operations. Operationally, you know, there’s a reason why people want to kill McDonald’s over McFlurry machines, you know, so it, you know, like they created another set of issues. So that’s kind of stuff I’m talking about, where you see, like, like, Would you like, what pace would I go again? Or Or, like, how you set yourself up? You know, all these things are things you just learn when you’re in it for a long period of time.
Chad Franzen 17:21
Yeah. Did you learn? Did you know some, some of these potential pitfalls or missteps that you talked about, did you learn those from experience or from observation of other other businesses, or both?
Michael Karsch 17:33
Yeah, I had to learn some of the mistakes myself, and some of it I learned from the macro environment. You know, minimum wage going from going from $9 to $16 was a dramatic lesson in learning how to reshape your business. You know, reshape your business model, and also COVID was a tremendous challenge, like forced me to learn how to have an online supermarket and learn the unit economics that very quickly. And so all those things, I think the biggest thing I learned, there’s a lot of things, but like, one of the biggest things I learned is that, like, as an entrepreneur, you’re like, you’re all of your new ideas, like you think are going to be the thing, you know, like the silver bullet and and the truth is, is you’re lucky if, like, a couple of them are, that’s All you need, luckily. But you know, sometimes, just like, too often, you’re just like, shocked that it wasn’t really that big of a deal. Like, oh, this is going to be everybody’s going to want this. You’re like, Oh my God. Like, hey, sometimes you have to think, like, okay, maybe I marketed it wrong. I’ll redo it. And sometimes you’re just like, wow. Like, I don’t know why they don’t, I can’t get them to care. Um. And so I think that’s somewhat of a I wouldn’t bet, I wouldn’t bet big anymore, in terms of, like, assuming you know that you’ve got the thing. I think that there’s stages of it where you realize you have the thing and you have time to keep placing your bets as those. And luckily, like, like, our online supermarket was like that because of the whether it was because we were good in the environment, I’m sure was definitely partially the environment, but I also have a great team. But like, you know when Fresh Direct and ppot, these guys couldn’t fulfill demand, we were there, and we have that was the value of having several 100,000 existing customers with our email list, and we were able to generate thousands of orders really fast for basically no money. And that definitely taught me about the value of having knowing your customer, having a reputation that you know is reliable, but also I’ve seen other instances I said where it’s just like I try to understand why it is. I think the biggest thing I’ve learned in terms of psyche is that people get to know you as something, and it’s very hard. To undo what people think of you that can be really good, like in the example I gave people think about us premium better for you. You know, so of those things critically important. But like convincing them that they should be getting their coffee every morning from us, right? Is like, very different, and you either have to have the advertising budget to power through that in order to get people to buy in, or you may never get there because because that, it takes a it’s really interesting to see how much people need that focus in order to be guided to what they what to to what they will do is taking action.
Chad Franzen 21:06
Yeah, I was going to ask you how much guiding, or, I guess, educating you, you might have to do. Are you, is there enough of a — you know — has our culture evolved enough that there’s a pretty big market looking for, you know, healthy, healthy options. You’re not trying to convert, still, the fast food generation to come over to your side, right?
Michael Karsch 21:24
So I’d say I’m very proud of a lot of the stuff. And there’s definitely work still to be done. I think that what has helped us is, is that clearly, like, I can remember, like, team members here, you know, used to never really want our product. There were very small number of people who worked here who wanted our product. That makes me really happy. I see a lot of team members who wanted an acai bowl and want a smoothie, and that’s an evolution I’ve seen, which is really nice, price wise. On a relative basis, we’re cheaper than we used to be because we were probably only way above market, and now we really it’s been a long time, and we’ve raised prices a combined three to 5% or something. But, and most, you know, like a lot of fast food places, have increased prices, you know, 30% or whatever, over time. So that gap is narrowed. And there’s a there’s a good efficient there’s a good market, basic microeconomic reason why that’s happened, I think that’s good for us, because we do have the premium quality, but you, but you really, what I do realize is like, you have to, like, we have had to evolve our product lineup. Somebody gave me good advice medium way through this. All they said there’s a guy who who ran Pepsi’s better for you business, and he said people are loyal. Are not loyal to how they get healthy. They’re loyal to platforms that they think they can trust and make healthy. And I thought that was really, really good sound advice. And I’m and I do see that. I see that in reality, it’s like people. It’s not just how to get healthy. It’s also like because of all that’s gone on in this country, and plus social media like and just like people judging one another or not, people have gotten very clear about what they’re willing to be accountable for or or what they, what they what they feel a company is doing to help them or not. And my point of bringing that up is like people don’t want to be judged when it comes to food anymore. You know, they, it’s like preaching to somebody by telling them that everything is like perfectly, 100% healthy by accident has a where everything has to be plant based. It kind of has a negative connotation to a lot of people. It’s not by accident, it’s being judgmental. People want to feel like they’re enjoying their life, that they’re doing a good job overall. They do want, as I said earlier, they do increasingly want something better for you, in terms of but better for you could mean like making you feel happy. You know, not just so that plays to my advantage, because I can without people like the core, core group of ultra judgment, like ultra committed group of people to the plant based movement, who are super important, but they’re not, but they can, by accident, be holding you back from from helping provide plant based everywhere. What do I mean by that? What I mean by that is like, if you have a bunch of customers who are like, you’re using honey and honey. I — you know, I think they aren’t being treated properly, and honey is not technically vegan, and we start getting into fights about whether it’s vegan or vegan or what are they? What is it that’s you know, you start getting into that realm. It makes your product line up very narrow, and especially when you get outside of a few cities, that’s the kiss of death. To retail, you need to have a broad enough product selection that is coherent, but broad enough to amortize your fixed costs. And I think a lot of people miss that. I had to take a while to really understand that. But you asked if the consumers are accepting, and I would say the consumer is so programmed to look at each store as a silo that it is very hard for a consumer. Like, I have these fantasies of, like, amortizing my box sometimes. Like, how cool would it be if, like, after four o’clock I could turn it into an ice cream place and, like, let Van Loon operate it all night and I’ll come back. It sounds actually really great. It would be even better if you could be serving, you know, have a big coffee business and have, then you have less labor, and you have, you advertise it. But the reality is, consumers have a hard time wrapping their head around it and, and they see, they, they put things into boxes and, and as we
to get there, and I have some ideas on how to get there, but what I mean by get there is, how do you actually Create economies of scale and amortize your fixed costs, because retail, especially the food industry, has generally been a very low especially since the Labor’s gone up very low margin, and people are trying all kinds of creative ways to raise that margin. I mean, obviously, you know, one example are the delivery platforms. They are. What they’re trying to say is you have these fixed costs. Hey, why don’t you use the downtime or extra capacity? Sure you’re going to pay a big fee, but even if you pay us like 25% and but your gross margins 75% you’re still coming out ahead because it’s incremental capacity. They try to convince you it’s incremental, and they made a huge business. I mean, in a way, they’ve created more fortune than most food brands by having that thought process. So there’s, you know, obviously ghost kitchens try to do that. I think ghost kitchens have failed because the only synergies were the real estate costs. There were and maybe build out costs, but there weren’t really any synergies of management, and that is critical, because I always look at like a food court, looks great, but a food court, if everybody has their own manager at the food court, and everybody’s buying from different places or not buying as one, then that synergy is not there and so. But you see a lot of people trying to figure out how to crack that code as a result.
Chad Franzen 28:56
What has been your you know, you’ve expanded from four to 80 stores. What has been your approach to franchising, and has that changed or will that change?
Michael Karsch 29:04
In so far, we haven’t really franchised, but I think that we will consider, like, selling off some of our company owned stores to get our track record going. It’s been great to have a company owned stores so we can continue to test and get better and more knowledgeable, so we can be a better partner, but ultimately, eventually we will be a franchisor.
Chad Franzen 29:30
What has gone into the decision to not franchise yet?
Michael Karsch 29:36
You know, it’s like, really, you know, the franchise industry is great because there’s a lot of money there, and there’s a lot of a lot of cities, a lot of the great brands have been taken already. So there’s demand for new ones. Our concept, I think, is actually really perfect for the kind of person who wants to buy themselves a job, who, like, a couple, or, you know, or somebody just wants to, like, you know, like, live this lifestyle and espouse this lifestyle. But the franchising business. Things that I’ve seen at the same times, like, there’s a lot of people out there who own, like, companies that own 30-40 stores, and they’re looking for a new concept, or they already operate two concepts. They want a third concept. And I’ve been trying to figure out which direction I really want to go in. And there’s a lot of subtle implications about how I would, what products I would offer, and how I would offer it, and, and, and so I’m still kind of figuring out what that other leg looks like, but I’m surely always thinking about it.
Chad Franzen 30:51
What do you do once you kind of, you know, open yourself up to franchising? What do you think would be, what would make juice press a good opportunity?
Michael Karsch 31:15
Well, I think that you know great thing about Juice Press is that, first of all, we have a brand that tens of millions of people know, and probably maybe even 10 million people have tried, you know, so it’s awareness. You ask, why they put us at LaGuardia Airport and Delft terminal and stuff like that. We are attracted because there’s not a lot of equipment in order to be in business. It’s really, it’s all about the electric air conditioning and then, you know, some refrigerators and blenders. It’s not, it’s not a big build out in that way. So that’s very positive, and it’s very trainable, like we’ve made over 20 million smoothies, and very clear on how to standardize that process, and it has a very good gross margin. So those are the things that are very attractive about it, and those are substantial, but at the same time, I think about other cities and like, how do like, what’s I feel like, I’m still exploring the next, the like, the last piece of of what, the cohesiveness that store like, we really increase. For example, our snacks in the past several years, and it’s been very successful. We started a hot food program based on product we make, which I do think is differentiated. It’s done fine. So I constantly like tinkering. We are working right now with a couple coffee companies that like to use their brand and and, and we are, you know, the great thing is, like equipment, technology gets easier and it’s getting better and better. So like coffee, you don’t need a barista per se. So you can have like you can you can really replicate an entire coffee stop store within your in your same process flow. But overall, it was super exciting. Also, it’s just like 75% of Starbucks business now is ice drinks. And that’s us. You know, we do ice, we do a lot of ice drinks, and we’re really good at it, we think, and our food’s a lot better. So in that context, I feel like if I could, can, if I could spend the money and convince the customer, they would see why we could be a superior, you know, alternative, to a company like Starbucks.
Chad Franzen 33:34
Yeah, you talked about a lot of the things that you tried, that you’ve tried, and a lot of them have worked. What would you say is the most significant innovation that has occurred with juice press since you’ve been involved?
Michael Karsch 33:47
Thanks for asking. I feel really proud that it’s been a lot. So I’ll just rattle off a few great ones off the top of my head is we made our own lot of times we just look at what other people are doing, and then we’re like, oh, that’s not very hard to do these. That’s one of the great things about having our own significant production facility, is that we realize, like we’re really good at using production equipment and recipe design, and we buy and scale so we’re not really phased by what we see, what some other food entrepreneurs are doing. We’re like, Yeah, it’s getting a lot of buzz, but we know, like, we’ll go and prove to ourselves, not so hard. So as a result, like I saw, I think, you know, they did it was, you know, the, you know, smoothies to the home business, daily harvest. Like it was, it was, it’s great. I’m not trying to knock them, but like I, I saw what they were doing, and I was like, How can I not know how to do that? You know, as well as them or better. And we were able to create, you know, our own, do yourself kits during covid very fast, and now we’re using them in food service. Restaurants use them, and the airports are using them. And basically, the smoothies come out even better than in the store, and they’re cheaper because, meaning compared to. If you were going to buy one, because we weigh the actual measurements in the commissary, and that is the biggest obstacle to a good smoothie is whether it was made with the right proportions, versus in a store where you’re dependent on the team member, you know, getting all the measurements correctly. So it’s just awesome to see, like at LaGuardia Airport, you know, like, essentially, somebody could work Shake Shack in the morning, and then they can come, you know, down the terminal, work for us, step in, and it’s just like, go. And the throughput time is good, the quality is good. And so we’ve been growing that business a lot, very excited about that. Also, I feel like just the overall production facility as a cumulative, as an actual entity is, overall, the thing I’m most proud of that entity, as I said, is a 30,000 square foot facility. It’s done a million deliveries, supermarket deliveries, their own deliveries. It’s made over 200 different types of products. High continuity of team there. And what I’ve seen is, like other restaurant groups, have not invested in the strategies to not, not build their own back end, so to speak, it’s been to use the food distributors. And I understand why. I fully understand why, but I couldn’t do that because I was trying to build something unique in terms of the product. Now what’s happened is that, because minimum wage has gone up so much, and labor is harder to stay stable in terms of who’s working for you and and how committed they are to that job, what I’m seeing is like a lot of great restaurant tours and chefs, but they’re like, oh, now I’m paying a sous chef, basically, or just somebody just to make like they want to have unique french fries, and then there’s like, one person making French fries all day, in, in the In in for their whole shift. But you have five restaurants in New York and there’s no equipment, there’s no there’s no machine, right? There’s no economies of scale at all. And then I can help those people because, and I am helping those people because we have that back end, and it’s humming and incredibly well. And so I think you’re going to see from us that you’ve actually called that business a separate business. We call it catering logistics LLC. And I think you’re going to see that business, I’m confident you’re going to see our business grow dramatically in the next years, year, years. And we came up with something I think is really innovative, based on listening to customer feedback and to It’s interesting you say B2B to start this, because it’s really a B2B business, right? That I’m doing in my kid logistics business, what I realized was, like, catering is a very important business for a lot, like, for a lot of people, there’s a lot of opportunity in the office and people’s homes. But, like, there’s a lot of catering going on. And the reality is, is that catering is a bit of an allure that’s a little is more difficult than you think, because everybody, like, my average ticket is $14 our average catering ticket’s like $500 everybody wants to have 40 customers at once, you know, especially they’re going to pay the delivery fee and stuff like that. But what happens in the stores is going back to I was saying about the silos, where it’s like, you want to have this day and age, you want to be able to provide a menu to a customer name, an investment bank, law firm, marketing firm and biotech firm, and you want to say, like, Okay, you’re going to have 50 people here, and 10 are gluten free and fiber kosher, and five are halal compliant, and 15 are on a diet. And some people it’s like that birthday, and other people are just like, I want to see how expensive what I’m being given is because that makes me feel like I have a great job and you have to basically like the person setting all this up. Really doesn’t want every day or every meeting to have to call three different places. So it really lends itself to somebody who can do it on others behalf, right? And. And what I found is, is that, and I think I’m going to be able to announce in the next couple months, like I’ve been able to think about my the business as a licensing business for catering, and say, just give we’re going to create a menu for you such and such brand, and you have an amazing brand, and you’re known for fried chicken, like you’re known for fried chicken, you’re unbelievable fried chicken. If somebody wants to order from you that you know they want to have a really fun afternoon for 50 people, but that person doesn’t have they don’t have sliders, they have no vegan option, they’ve got no fruit salad, they’ve got no salads, they’ve got no dessert and so if I, if I say the person, look, I’ll buy from you host. I’ll make everything. Give me the recipes. I’ll sign a non-disclosure. I’ll do, you know, all these things, I’ll make, a bunch of the stuff, whatever I’ll make all I know how to make, all the stuff that you don’t know how to make, or I have other partners who are going to I’m going to have it, and then I’m going to assemble it, and then on that order, it’s go, and that person, you’re going to make a royalty, and you’re going to make a wholesale. And the idea is, like, really just taking off. And, you know, I think that that business is going to quadruple over the next year. And what’s exciting is, like, when I talk to the people who actually operate the restaurants, they really get it because, like, you have a great you have a great restaurant. You’re doing a lunch for X, great law firm. It’s lunchtime. People are like, the person who’s the in charge of getting that order is freaking out because they can’t it’s not they can’t find it. The managers can’t be found because a person’s done with lunch rush, and all of a sudden it’s like a nightmare, and that person is afraid of getting fired by his boss, versus us, where, if we’re whole to controlling everything, we’ve done a million deliveries. Everything is being assembled by us. Our customer service person has been with us for eight years. That person’s in touch with the production facility. Our production facility knows exactly if it was sent out and has a tracking device and knows exactly whether it’s in our trucks or and then is talking to the end user proactively. So, that’s why it’s such a win, because it improves your increase. It increases your average ticket because there’s more product choices, which probably leads to more repeat orders. It leads to simplicity of operation, and it leads to a higher on time. And so that business I’m super excited about, and then in that process, making a lot of product for these other restaurants I was telling you about is growing very, very rapidly. And in particular, I also want to say my on my private production, we bought a gluten free bakery, and I’m super excited about it, because, unfortunately, there’s just a very big demand for people who have gluten issues, and we’re very proud to bring this on our platform, fold it into our existing facility. Obviously, this is sectioned off because it’s certified, but we can make we feel strongly. We can make already our — this, company, its reputation, we make unbelievable gluten free baked goods, unbelievable gluten free pastas, bagels, et cetera. And it’s a very underserved need in the marketplace. So I think I’m getting tremendous inquiries from all kinds of different avenues to provide them with product for that.
Chad Franzen 44:21
Wow, awesome. Very nice. So I have one more question for you, but just first, tell me how everybody, how anybody can find out about everything you’ve got going on, whether it’s franchising or just Juice Press in general, or anything.
Michael Karsch 44:34
I still think that, just for some because I wasn’t expecting that question here, I would say the best thing to do is still text me. I mean, sorry, email me. MK at juice press com, I’ll connect you to the appropriate person. Because still the franchising I’m ready to give, to take, to take it like give person one opportunity and see how it works. Because I’d like to, as I said, like to create that track record. The nice thing is, is that person would be able to basically, potentially step right into it and and day one, you know, being able to get going, I do, but I said, like, that track record is important, so I have to be like, it’s important that I really connect. With that person, and really clear they want to keep the standards, and you’re going to follow our game plan, the catering I’ll direct, like it’s on our website, our catering menu, you’re going to start and I think you’ll start to see, I know you’ll start to see brands. You’re going to start to wonder, I wonder if that was like, all sudden I’m seeing this very famous brand, like out advertising for catering and and then, you know, you might see, but I think we will take the next step, once we have about 12 partners in that on board, we’ll probably do like a kind of like what easy cater is doing. But see easy cater right now, great, great valuation, solid company, but what, what easy cater is really doing is they have no back end really like meaning they, they are, they are helping you coordinate a pickup. But the customer service is not exactly the same, and there’s zero shared production, so therefore you have the same issue. It’s like, do I want to have for my team a salad? Or do I want my team to have cupcakes? Or do I want to start ordering from all these places individually for it’s our solution? So my point is, is that I’m going to hire corporate catering sales people, and they’ll see, like, the whole menu and and because of the B2B, I laugh, because, like, if I stop picking days, we used to talk about Cisco stock all the time. And it was like, Why did chief technology officers always buy, you know, Cisco routers? Because it was like, because what value is there you being the person to buy some startup router, and then it doesn’t work, and then you’re fired. You know, at least if the Cisco router, which is the best, goes down like 70% of the Chief Technology Officers also use the router. We think like, why take with the brands we’re going to be bringing on and the diversity inclusiveness of our product? Our feeling is, why would you take a chance on some random individual restaurant when you already would have dealt with us 10 times, 12 times, and you know that you’re the highest probability you have of being successful about having it on time and looking good in front of your clients, bosses, etc.
Chad Franzen 47:55
Sure. Sure. Hey, last question for you. You’ve been very generous with your time. Thanks so much. So when you know you’re in New York, or maybe in LaGuardia or something, and you stop by Juice Press as a customer, what is your go-to combination of items?
Michael Karsch 48:10
Thanks. I mean, you can imagine, because I sit, actually, I sit in the back of the store like right now, so I’m around my product all the time. My wife, who’s my partner, she also has her favorites, very invested in it. I’m dreaming right now. Game on. It’s great, I think it’s a classic example of why we think like a premium and functionality. It’s great for post workout, excellent electrolytes, and you can just taste how real the ingredients are and that makes me feel really happy. Yeah, you’re going to pay a bit more for it, but it’s still a great trade off for most people. So I think this is amazing. Our number one smoothie is always the Blue Magic. It’s remarkable to see its consistency. But our this time of year, when it’s this hot out, the watermelon mango is my favorite and we have a watermelon juice, which is, like, the freshest by far, and so those would be some examples of things I’m passionate about. But I have, like, in my lineup, I have, like, a dozen, if I’m looking for a Gatorade I focus on, like, recover 180 I really like, and there’s a brand called accelerator, which is kind of the Celsius category they’re in that better for you category, the third party products.
Chad Franzen 49:49
Okay, awesome. Sounds great. Hey, Michael, it’s been great to talk to you. Thank you so much for sharing.
Michael Karsch 49:56
I really appreciate it. Bye. Have a great one.
Chad Franzen 49:59
You too, So long everybody.
Outro 50:01
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