Challenges of Growing an Entrepreneurial Business

ED HESS: Good afternoon, everybody

Welcome to Darden Business School

And welcome to the best MBA class in the United States,

holding court with entrepreneurs who have

faced the challenges of growth And we’re very pleased to have three entrepreneurs with us Another entrepreneur is running late He happens to serve on our board of trustees and he’s in a trustee meeting, and he will come down And as he is arriving late, he will also leave early, because this is also alumni weekend and tonight is a big night, if you will, the retirement party of our dean But welcome The purpose of all of this is, OK, people out there have started a business They’ve commercialized their business They have survived start up They’re now interested in how do we scale our business and take it to the next level And that’s what the ladies and gentleman in the class today have been studying this quarter with us here at Darden And so they have become experts in six weeks And so they will have pithy, insightful, wise questions for the panelists The panelists have been out there in the real world, doing it In fact, I’m proud to say two of them, years ago, sat in the audience and were Darden MBA students in this course And so let me let each of them introduce themselves, tell them a little bit about themself and their business, and we’ll do that and then we’ll start with questions Jeff JEFF MACKLIN: How’s everybody doing? I’m Jefferson Macklin I am class of ’95 from Darden, so it is my reunion weekend as well, but I’ll stick it out for the full two hours I am president and COO, soon to be CEO as we transition this spring, of the Barbara Lynch Gruppo And we’re a 260 person company up in Boston, Massachusetts We are a restaurant company And we have revenues of about a little over $20 million, stemming from 10 businesses– seven restaurants,

a catering company, specialty food products company, and one other I can’t fully disclose at this point But we have been in business for 16 years The company was started by a chef named Barbara Lynch, and I joined Barbara about eight years ago to grow the company And we’ve in the last eight years doubled the company And in my role, the unofficial job description would be to balance the creative tension between creativity and business You can imagine a chef– and we’re full of chefs in our company– they kind of push the creative side And then somebody has to kind of step in and balance that out with the business side without diluting the business and not taking the soul out of the company So we have based our business on three pillars And that is, obviously, food, but hospitality and service Because it’s our belief that a bad meal can be made up for with good hospitality Bad hospitality cannot be made up with a good meal So we really have pushed that forward We’ve been very honored in our business to have succeeded Barbara won the Best Chef of the Northeast through the James Beard Awards The James Beard are kind of the restaurant industries’ Oscars In 2012, we won best Outstanding Wine Program for No 9 Park, our oldest restaurant And then just this past year, 2014, Barbara won Outstanding Restauranteir of the Nation So that was an award that we felt went to the whole group that we have NATALIE FOLEY: All right, Jefferson, nice to meet you And we’ll talk a little about managing the creative side of things on our end, as well My name’s Natalie Foley and I serve as vice president and chief operating officer at Peer Insight It’s an innovation consulting firm, so those are two great buzz words that are thrown around a lot, so I’ll explain What we wake up and do every day is help established companies act like entrepreneurs and create new businesses, new services, new revenue streams for themselves and for the folks that they serve We’re a professional services firm, so you’ll hear me talk a lot about human capital, which is really what we rest on, and our IP, which happens to be very much correlated with Darden We do a lot of design thinking in our work and have co-wrote some books with Jeanne Liedtka, for those of you who might know her or have taken her MOOC as well, for folks out all over the world listening in We’ve been around since 2004 So we’re going on our 11th year We’ve had two major pivots and I came in at the second one I have a lot of empathy for you I was sitting in this seat but I didn’t accept my job offer until the day before graduation, so this was just a fun class that I thought was really interesting And then it became my life And Ed has gracefully been there as I’ve turned to him constantly as I continue this class basically for the next four years And he’s been very generous with that Can hear me OK? So a little bit more about Peer Insight Like I said, we’ve been around since 2004, and some other things that are interesting about us, I guess, is we’re based in D.C. We prefer to have a studio culture As I was talking to Jefferson, we do hire a lot of mixture of folks, intentionally, for the work that we do And we do hire lot of folks who are trained in design but also know business And so that blend is going to be– we talk a little bit more about that as well We’re in our early stages, so we’re 10 folks in our core team And then our extended family is a group of specialists that we pull in as needed And our revenues are less than $5 million So you’ll hear us kind of talk a little bit differently about the stages of growth that we’re in MIKE FELLER: Hi, I’m Mike Feller I’m a 2009 grad I currently am the president of 3 Fellers It’s a wholesale gluten-free baking company My mother started the business, I think back in ’07 She originally was diagnosed with Celiac disease, which is one of the most extreme cases of a gluten sensitivity or intolerance And she started cooking a lot and baking, out of necessity, and that sort of evolved into a business at the time I got involved in 2011 After Darden, I ended up going to run a business for a larger company and, as I was explaining to Natalie earlier, my mother had been in my ear about coming on board for several years and, for a number of reasons, the timing was right around 2011 so I got involved At that time, we had a lot of stuff going on There was an online component of the business There was a wholesale component, retail, as well as special orders, special events We eventually made the transition to an exclusively wholesale operation And in doing so, we went from, in a couple years, from servicing about seven stores in our local area

to almost about 1,000 And so for us, we’re a smaller business than either of these folks, but we certainly are growing and have had some a pretty exciting opportunities recently Our business– we focus primarily in producing really high-end baked goods and desserts, so your breads, your rolls, as well as some brownie and pie and another dessert items We service the retail and food service spaces, which gives us a nice little split and diversifies our customer base And on the retail side, we’ve worked with companies like Whole Foods, Kroger, and a lot of natural, organic markets And we recently worked on a deal on the food service side with Marriott and Amazon Fresh as well in the online space So there’s a lot of stuff going on, but it’s certainly been a great experience so far ED HESS: OK We’re going to finish up our introductions in just a second, because our fourth guest is just arrived, Lyons Brown What we’re doing now, Lyons, is two, three minutes, who you are and a little bit about the business And then we’ll go to the questions Thank you very much I’ve explained to everybody why you’re late and why you’re going to be leaving early LYONS BROWN: I’m from Kentucky, I can’t even say hello in five minutes. [LAUGHTER] ED HESS: You got to try LYONS BROWN: Hey everybody, I’m Lyons Brown and I apologize for being late It’s great to be here I’m a Double Hoo I graduated from the college in 1982 I graduated from Darden in 1987 I came to Darden because my family had a two degree rule And if you wanted to come in to the company and start at the bottom of the totem pole, you had to have two degrees So I came to Darden, got a business degree, and went to work for one of the largest distillers in the world, which is Brown-Forman Corporation We’re the makers of Jack Daniels Tennessee whiskey and all kinds of other lovelies And I did that for 15 years And I finally got to the place that I thought was going to be heavenly And it wasn’t heavenly It was hellish And I had gotten as far away from the green slime of the bog of creativity as I could have And I ended up in a very politically-charged environment that spent a lot of time figuring out who deserved to be where rather than how we were going to get to our customers and grow our business And my wife helped me understand that perhaps that wasn’t the healthiest place for me to be So I retired and I started my own company 10 years ago, which is called Altamar Brands And what Altamar Brands endeavors to do is to take all of the learning that I took on board from a $3 billion public company selling distilled spirits and put it into something that would be like a 220-volt cord going into my shorts every morning Where it was just beautiful brands, right? I call it hooch bling, right? So today, I’m a distiller and an importer of esoteric, artisanal brands from around the world And we have the most Byzantine, weird distribution system in the United States in drinks, which was granted to us as a condition of prohibition being released So we didn’t think about it very long We just said OK And so we’re very good at being able to get distribution, because we have long, old-time relationships going all the way back to the end of prohibition, but with no American companies So what we do is we bring spirits in or we distill spirits outside of the United States for companies that don’t know how to deal with the United States And it’s been a hell of a ride One of my finest accounts in the United States is sitting one, two, three doors down from me JEFF MACKLIN: We’re big fans LYONS BROWN: And this is not the first time that Jeff and I have been on a panel together with Ed, so I’m sure that was longer than three minutes but it’s great to be here Ed, thanks for having me and– Nice to meet you guys ED HESS: It’s great having everybody All right, first question I’ll ask OK? First question I’ll ask Biggest challenge, whether that was process, control, people, focus, prioritization– whatever Biggest challenge when you came in Barbara Lynch Gruppo, in effect to run the business for the creative side– What

was the biggest challenge you faced? And then when Natalie went in and took over and became the COO, same thing Mike, same thing Lyons faced in his company And then we’ll open it up to some questions Fair enough? Fair enough? OK JEFF MACKLIN: So, as I mentioned earlier, I joined the company eight and a half years ago And at the time, we were about 107 people, $6 and 1/2 million in revenue And it was very much a startup We were at three restaurants at the time, three businesses The catering company had just started, so technically four But there were no processes in place There was no structure There was just kind of winging it And that was a full-blown creative environment, but it was really hard to even know where we were taking things And in particular, we were getting ready to do a mass expansion with three additional restaurants coming online So there was a real race to try to put some more structure in there And that was everything– and hey, I don’t have an accounting background I had, obviously, accounting here But the first thing I did was go hire an accountant and put one in place on the staff that we had, so a full-blown controller, to really try to provide some structure Because in my feeling, the structure allowed us then to take on the additional growth You can’t build a house without a really solid foundation So putting in that foundation was critical What I quickly learned is how damn difficult the restaurant business is The NRA, the National Restaurant Association, will say that if you make 4% net income, after all is said and done that that’s what the average is nationally That explains why you see so many restaurants fail in the first year or soon in five years So we’ve had the good fortune to, like I said, have one that’s over 16 years old now and many more So it’s a really, really hard business And I came to start to describe the business as trying to change the tires on a car you’re driving You are open seven days a week, you are going until 2 AM just about in all of the locations So to try to affect change, to try to push the company forward, is extremely, extremely challenging And you only do that through a lot of hard work and effort and amazing people And so as I think about the biggest challenge we’ve also had, in addition to just trying to manage what is a very difficult business, it comes down to retaining people And we’ve had a lot of discussions, and I look forward to the questions coming up We’ve had a lot of discussions over not how to grow, but why grow And so when I joined, as I said, 8 and 1/2 years ago, that’s evolved into now that we have the foundation now, what are we going to do with it And so we’re having those interesting conversations now and really encountering a lot of challenges in regards to foundered transitions Where Barbara, having been behind the stove now for 25 years of her life, is ready to move on to more interesting endeavors and we now have an opportunity as a company to really grow smartly and grow for the right reasons So I’m really looking forward to that But you know, as far some of the challenges that we’ve also faced recently, luckily we’re in a very temperate climate up in Boston So when you have a 4% net income, it doesn’t matter if it snows and if you have to close your restaurants 2 and a 1/2 days out of the month Not your choice It doesn’t matter if the subways close and all your employees get to work on the subways So those are the kind of curve balls that you get thrown But the more structure that you have in place, the more you have really well-trained and motivated people in the right positions, the better you can deal with those curve balls And I’d like to say that’s the absolute key and critical success factor for us has been our people ED HESS: Thank you NATALIE FOLEY: This is why I love being on panels, because Jefferson and I need to talk a little bit more, because he sort of stole some of our ideas, which is great And very similarly, when I came in to Peer Insight, we had– as I mentioned earlier, there was two pivots in our firm And that came in right after the two founders decided to go different ways And the other firm still exists and uses a lot of the same IP And so I was coming in at a really volatile time for the firm, but also a good one The book had just come out with Jeanne and we were lucky that was doing well So for me, some of the same, like who are we and why do we exist, was critical first to answer It sounds like softballs, but we immediately set nine guiding principles They’re on our website They are embedded in every decision-making process that we have They’re in it They are the base of it, because otherwise we can’t make effective decisions and stay focused and streamline on our strategy And as a consulting firm, you get people who don’t have a clue what you do but are willing to pay you money for the things around the edges And especially in innovation, it is a completely undefined field That’s cool and definitely hot It’s very hard to sell Because you’re trying to sell some–

you’re fighting against ignorance and apathy, not your next client, the [INAUDIBLE] client project that they’ve bought from a consultant type of thing So it’s very different So the first thing we did that was challenging was make our guiding principles, who are we And revisit those as we grow as a firm is important And then it was just process And I think the biggest thing I learned from that was it’s great for your leadership team to have completely different skill sets Same values– the guiding principles actually weren’t that hard to create– but it was wonderful that our founder and CEO is more of the visionary He’s the thought leader, and he’s amazing at that He hates processes and is the first to say that he’ll do it once and then completely change it, because it’s just more fun to do it again, even though he’s an engineer And so I think that was a really good learning moment for me Like I never again will work with somebody who looks and thinks like I do, because it’s really important to have somebody in a different role So I came in and was the worry wart, to be honest, and sort of the realist I’d say, and set up processes out the wazoo And then as things were not a priority, making the process around it wasn’t a priority And things that became priorities needed more processes and attention So hopefully that helps tee up some questions and conversations later too MIKE FELLER: Hopefully I’m not being redundant here, but I ran into a very similar thing coming on board My mother is– she’s a– really nice She likes playing around with things and trying new recipes and coming up and she loves the R&D portion of the business But the business side of it was not her strength And that’s not a knock on her, that’s just– that’s who she is And so when I got there, we had about 125, 130 recipes going on in four different channels that I mentioned with the retail, online, wholesale, special order, and so on And that was very, very difficult to support And I think when I got there, we really had to look at really hard what was working, what was not working And then, like Natalie said, where do we want to go with this What were some of our– from her standpoint– what were some of her personal goals with the business? Where did she want to go with that? The reason why I say that is having a goal of becoming a regional or national brand is very different than having a very successful local baking business So those are some questions, to sort of reiterate here, that we had to get a good feel for in terms of what she wanted out of it Because before we answered that and before we had a sense of what those goals were, we couldn’t make decisions in how we want to go forward And they really framed a lot of our decision making in how to proceed And so we eventually decided– and this was a tough one– we decided to go exclusively wholesale Now again, with my mother being more of the creative type, we had some pretty tough conversations And I basically in– well, maybe in a little more words– I just basically told her that, look, we can have a fun business that’s more of like a hobby or we can put some more business fundamentals in place and then hopefully position it to get where she wanted to go Now I promise you, I wasn’t popular all the time But I think that after a while, I think everybody really bought into it and I think we really understood that But it seems simple, but it’s much harder to do than you think And it really keys– the rest of what you do really keys on that The other side of it too, for us being a very small business– and we were– these guys are probably several stages ahead of us– for us, revenue was a real critical challenge And really, when you’re at sort of the level we were, we’re really servicing seven local stores at the time, figuring out where your dollar is coming in every day, especially as part of family business, that was tough It can be very rewarding, but as you’re driving home every single day, thinking about what kind of impact you had, that’s a tough one to put on your shoulders every single day Now I enjoyed it and there were a lot of very rewarding things out of it, but driving revenue every single day– that was a critical one for us Because if we didn’t have that, putting the processes in, figuring out how to be efficient, all that didn’t matter So I guess we were probably dealing with some other issues when I first got there, and as we continue to grow, absolutely, I won’t reiterate this again, but the processes and a lot of that and the systems really became a lot more important as well ED HESS: Let me, let me– What’s fascinating so far from the first three is think about the similarities OK? That all three of these people performed a similar function

in a different environment, of putting in processes, controls, structure, prioritization, defining who we’re going to be And I never thought about it, getting the three of you together, but it’s sort of similar OK, now we get to the creative types LYONS BROWN: Wow So– [LAUGHTER] LYONS BROWN: So when I graduated– ED HESS: That’s a softball LYONS BROWN: That’s the only one I’ve ever gotten from you [LAUGHTER] LYONS BROWN: When I graduated from Darden, I went to work for a public company that had $300 million in free cash flow, right? And so I had a job, and then there were tons of other people inside the company to help that job happen And when I got tired of that job because I didn’t want to be political, I wanted to be entrepreneurial, and I left, and I sat around and smoked the hookah pipe and got this notion of the poetic nobility of entrepreneurship, it was like, fine, OK, fine And then all of a sudden, one day we’re in the business And we’re bringing tequila in from Mexico and we’re bringing absinthe in from Switzerland and we’re bringing gin in from Sweden, and we’re dealing with production facilities thousands of miles away We’re dealing with logistics We’re dealing with inventory We’re dealing with currencies We’re dealing with distributors in the United States We’re dealing with pricing models We’re dealing with retailers, bartenders, hotels It was like, “Oh my god,” right? So what I always say to any entrepreneur is be careful what you wish for Because what is going to happen is entrepreneurship is going to intrude on your serenity It is going to intrude on your sleep And it is going to disturb you every single minute of the day Because what is going to happen is you are going to have more to do every day than you can possibly do You are going to have more opportunity than you possibly have the resources to do it in And congratulations, you’re the founder So guess what? Everybody’s looking at you So what are we going to do? And I’ll tell you, what I learned is the understanding of the difference between what’s urgent and what’s important And when I woke up in the morning– and I still wake up in the morning, and you are going to think, man, what a wimpy goal I just set out every day to try to accomplish one strategically important thing for my company So that when I go to bed at night, I can say I moved the ball I moved the ball down the field I made Altamar more valuable I made that brand more compelling I gave a consumer a better reason to choose us I gave a trade partner our rationale for something that might help him grow his profit, right? So understanding the difference between what’s urgent and what’s important in a world where you’re going to have 150 emails waiting for you when you go to bed at night and you don’t have any energy left Understanding how to apply your resources in a way that makes that happen Ed and I have a hell of a story together about resources The worst thing that happened to me was I sold a brand for $10 million two years into the company And it allowed me, right into the recession, to behave like a big company rather than to behave like an entrepreneur And I did And when we came out of the recession, I spent a year waking up every single morning, trying to understand what I needed to do today, so that my company wouldn’t fail And if you want to saddle up on a razor blade, saddle up on that one Ooh! [LAUGHTER] LYONS BROWN: Right? So, there we are ED HESS: All right Good, good All right, questions? Yes, please AUDIENCE: So with the exception of Lyons, it doesn’t sound like anyone else is a founder So what’s the founder’s involvement today and how has that role changed since you’ve been involved? JEFF MACKLIN: Great question It’s not come without a lot of effort and work and I would say it’s still a work in transition Barbara’s an extremely accomplished chef and chef owner and founder, and yet as I said when you’ve spent that much time in that position, she’s looking for new challenges And yet we also have a company that employs 260 people And it is an ongoing business that we’re still very jazzed about And so we also have a company that’s very much a Martha Stewart style company, in the sense that there’s one person behind that brand And so I would say actually we don’t have that answer yet

We are in a process of transitioning, where with my designation as CEO, and then I’m going to start defining what the vision is and what the strategy is to accomplish that vision with the existing team And doing all that to make sure we don’t dilute the brand, and yet still be respectful of the founder So it’s very much a work in progress for us NATALIE FOLEY: Yeah, that’s a great question I mean, in a professional services firm, somebody’s buying you So when you go to sell, they want you when that consulting gig is up, not your 30-year-old side kick who doesn’t have grey hair And so I think when you’re dealing with an entrepreneur who knows– and consulting is high turnover It doesn’t matter how great of a firm you have That’s challenging And so they’re really selling themselves They’ve also had their name on a book And so translating that knowledge so that everybody– and especially also in us, everybody’s sales, selling So everybody needs to learn that brand and buy into what that entrepreneur is about And one of the things I remember well in Ed’s class is that they set the tone Their personal and financial goals are going to set the tone for the firm, at least for some period of time And so you have to buy into that In our case, it’s someone who had already run successful businesses and sold them, and so this was at first kind of more of a lifestyle thing He– “I want to see my children I haven’t seen them in awhile That would be good to do.” And have a business that’s good and doing good in the world but I’m not going to work 100 hours a week And so that person is setting the tone And so you really have to have to kind of have conversations about that inside, and about what that means for growth and financial– you know, how much money do you want to take on in debt and who is responsible for that So it ends up being a lot of nuances I don’t know if we’re answering your question more than just throwing out things that we’ve had conversations about internally But it’s a great one, because it really– I mean, that person is going to be very similar, they’re going to be why that company is successful, to ultimately, to some extent JEFF MACKLIN: And I just want to add– I know in our situation, and I’m not sure, well, we have a senior team And they average tenure of the senior team is probably nine years So of the five of us, we all look at each other and you kind of ask the question, “What would Barbara do?” And that means brand-wise, so you don’t dilute it, how do you keep company moving forward with what she would have intended and what she wanted and be respectful of that, but at same time also begin to push forward and begin to institute your own desires and hopes for the company, because we see the potential that it has that maybe Barbara’s take on it she didn’t have And that’s not a criticism of her, that’s just– there’s a lot of energy in this company and I really want to tap into it, as does the senior team And how to tap the potential– and I mentioned earlier, we’re trying to answer the question of not how to grow but why to grow And the biggest thing about growth is giving opportunities for our employees We have some stellar rock stars in our company that Lyons has had an opportunity to spend a lot of time with as well And we want to give them the opportunity If we don’t give them the opportunity, they’re going to leave and go look for one And so we feel that the growth model and the growth plan for our company and where we’re going to head can be satisfied through that ED HESS: Mike? MIKE FELLER: So ours was a little different being a family business, but my mother– which that in itself was, I’m sure you can imagine, was interesting But so basically when we made the transition and I got involved, she really wanted me to handle pretty much top to bottom every aspect of the business and be in charge of that At the same time, she was very, very good about creating new products and in the R&D portion of the business And so that was a natural one for her to stay involved with Day-to-day stuff, more things that were along the lines that if we were dealing with stuff with financing or just general stuff about the business, she handled But other than the R&D stuff and then some business development things which were important If we had a meeting with Whole Foods, or– I don’t think I touched anything, but– UNKNOWN: Yeah, you mentioned Whole Foods MIKE FELLER: Right, yeah I guess that’s the effect here [LAUGHTER] NATALIE FOLEY: [INAUDIBLE] MIKE FELLER: Sure So, all right, I won’t use them But any important business meetings, if we’re looking for new opportunities, those were naturals for her to– we would go together and meet with some folks But those were the primary areas I think a lot of it came down to where her interests were and what her strengths were And so we just try to find a match as best as possible, but it’s not as clearly differentiated as probably a larger company if you will ED HESS: OK, I’ve got– when you have a question, if you raise your hand, we’ll get you a mic, OK?

Because they couldn’t hear the question Yes, sir? AUDIENCE: So I have a nontraditional background And one of things that scares me about entrepreneurship is I don’t have an industry or even an item that I’m super passionate about at this point I’m hoping maybe my first few years in the real world will alleviate that concern But, Lyons, you don’t have this problem Mike, you kind of stumbled into working for your mother’s bakery How have you dealt with that? You probably didn’t go through business school wanting to run an organic food company How has that been for you? MIKE FELLER: A very interesting question And no, I’m going to agree with you I never went into my Darden experience expecting I was going to be in baking [LAUGHTER] MIKE FELLER: Yeah, first of all, you don’t want me baking But for me, that was interesting, really going through my life and really my two– the two industries that I had a passion for and really interest me were sports and education And when I first left Darden, I actually went into an education company For me, it was different, just because this is your family business And so, it obviously was extremely important to me Even the years where I went and worked for another company after leaving Darden, I was still very much involved with stuff, that if she had a question or something she would call me up at night and ask for my feedback So I was already involved before I got there But you know, what I found was any business, regardless of what it is, if you put the effort in and– there are a lot of things you can find that are very rewarding I don’t go home and bake at night My wife does But I don’t typically find that to be my outlook But I think there were a lot of things about the baking business that also translated across any type of manufacturing business, that there were a lot of parallels And so I think it’s finding really what part of that business really interests you It may not necessarily be a direct match, but I think that you’ll find that no matter what the business is, like I said, there are a lot of parallels, I think, across manufacturing businesses no matter what they are I don’t know if I’m answering your question or not, but that’s the way I think I looked at it JEFF MACKLIN: The Naval Academy, is that right? Oh, I’m sorry I say that only because I’m a West Pointer All right, so I know exactly what you are going through, and I can also convey to everybody here– I mentioned I’m here for my reunion weekend I’m here, really excited to be here for my reunion weekend, because Darden really changed my life Having been to West Point and graduated from there and then gone into the army, it was a family thing You know, I didn’t know what profit meant I mentioned I had no accounting background, all that kind of stuff, that’s all because the military background But what Darden led me to find and discover was that you can actually do what you love And I never dreamt that when I graduated West Point, I’d be in the restaurant business I never dreamt I’d be in the music business, which I was in prior It was all because of Darden though, where I had this transformative thought that you really can do what you love And so I’ve always endeavored to do that And I would see a lot of my friends from Darden graduate go on to try to pursue the big dollars And while I may be at the bottom quartile of earnings when I show up for my reunion, I guarantee you nobody is going to want to be talking about their bond trades and they’re going to be curious about the restaurant business And I’m not saying that to demean bond trading, I’m just saying that there’s a little bit of a passion thing that you’ve got to tap into And so I started at Darden to use two years of the time out to try to discover what it is I love and what I enjoy, and then how can I accomplish that in a professional manner so that I didn’t know whether I was working or playing And I think you can tell from Lyons and how jazzed he is by his business and all of us, I think there’s an energy that you bring to it when you’re tapping into that live wire, that you can really go for something So I encourage you to go for whatever you’re– look at your own kind of personal inventory What is it that you dig? And then pursue the hell out of it And it most likely will come in incremental steps, because you can’t make that leap all at once And I did that where, hey, I had to pay the bills I thankfully kept my in-state tuition here but it still was expensive I went into consulting But on the off-hours of consulting, of which there were a few, I was able to manage bands in Boston And that allowed me to make a transition into the music business by getting my feet wet And so when you really do that personal inventory and get a sense of what you’re in to, just try to figure out how you can dabble in it, get a little bit of experience That might help build a resume But then you can make the leap into that And it might be your own thing I mean, we’re in a time of huge entrepreneurial activity so you can do your own thing now a lot easier and jump into it all in NATALIE FOLEY: I mean, since we’re talking about passions, I’ll jump in I mean, experiment to with it You don’t have to go and start a business

Just try something out on the side, and give yourself six months and $10,000 and see where it takes you You don’t have to all of a sudden start the most world successful firm And that’s– obviously, I’m practicing what we preach for a living and what we help our clients do, but that to me is something– I mean, a small business you’re creating I went from IBM with 400,000 people on a badge and now I use a key and get into the building And it’s just a nice feeling that I’m part of something And obviously you heard me get my job at graduation I mean, I spent the same thing– two years I’m here to explore Like, not just run to the next thing, because it’s hard to get out of it And now, we have an 18-month-old It’s like, if you’re going to be away from that person, girl, guy, it doesn’t matter what gender you are as a parent, you better be really liking what you do Right? And you have to be passionate about it So I just explore a little bit And don’t feel like you have to have it all figured out I’m going to talk anyway [LAUGHTER] LYONS BROWN: So we launched an incubator down the hill three years ago and I hang around down there We’ve had 75 startup companies come through there In the last three years, we’ve read 300 applications, right? And it’s fascinating If the answer’s not obvious to you yet, Jake, just don’t jump, man Just take your time, because it will become obvious to you You have this wonderful opportunity in your life now to be a butterfly in the garden, right? So fly around Fly around the garden and pollinate some flowers, right? Find your way into entrepreneurial enterprises Get some projects Get some internships, right? Use the word fear I like to say– at Darden, we have two kinds of people, poets and engineers I’m not an engineer so I have to be a poet, right? And it’s like if you’ll grant this poet some editorial license, I believe there’s two kinds of people in the world– entrepreneurs and everybody else And what distinguishes them is fear Generally, I don’t find fear in entrepreneurs It just doesn’t seem to be in their dictionary, right? The notion that they could fail just doesn’t seem to hit the radar, right? So you have this very determined single-minded progression and dedication And then we hear this phrase serial entrepreneurs Well what are serial– serial entrepreneurs are serial failures, right? They just refuse to admit it They keep getting back up, dusting themselves off, applying the learning, and getting back in until they hit it again So you’re in this great place right now where you can touch this with faculty, with experience, with internships, with the iLab You can come have coffee with me, we can hang out Right? ED HESS: Other questions AUDIENCE: I was curious to know what’s the process of defining your strategy as your company’s starting to achieve growth So, for instance, like Mike in the bakery company, you guys were involved in a lot different things but then you came in and you tried to bring some processes to it You had to define the strategy a little bit more and get some more focus, and so for your company, and for the rest of yours, how did that processes take place amongst you guys, in terms of leadership? And also, how did it maybe change your companies in terms of its focus? And was that different from the focus it had when it was started? MIKE FELLER: So I think for us, the first thing I had to do coming in was– when I speak– we made that change over to wholesale, that sounds like an instantaneous thing but it really wasn’t When I first got there, the last thing I wanted to do is step in the first day and say OK, here’s what we’re doing I really spent the first probably– shoot, it probably was at least seven or eight weeks, at least– kind of understanding what are we doing here What’s working, what’s not and really, for a lack of better way of explaining it, but really took the business up on its end and flipped it over and empty everything out, took a look at it, and see, OK, what are we doing here What we found was that we didn’t have a good sense of what our cost structure look like Not just from a P&L standpoint, but also at a unit level We have products, as I mentioned earlier, we had about 125, 130 products I would say 75% of those weren’t even profitable So we had to take a look at that and we nixed a lot of those pretty quickly for obvious reasons So I think that for us, the first thing we had to do

is understand really what was our cost structure and really take a look at all of our products and go through a process of elimination to get to what was going to be our core going forward Now that’s at the product level These were multiple conversations I mean, these were– I made sure that every week we had conversations with our team, not just with my mother who was the founder of the business, but had conversations with the team and asked them what their thoughts were in terms of what was going on and what did they like, what did they not like But as we moved forward, we had to make sure that they understood why we’re doing this Because as I’m sure you all know, change is not an easy thing, no matter what it is It took a little bit of time to make sure that we had everybody’s buy-in But I think that the more transparency and the more clearly you can discuss and explain why you’re doing certain things, it sped up that process for us And so that transition over to wholesale, once we laid out sort of here’s what the benefits going to be for our cost structure, this is why we’re going to be able to produce things so much more efficiently than we were before You start having those kind of discussions, then the change really happens a little bit more smoothly So I’m not sure if I’m answering it, but that’s at least how it looked like or what it looked like from the beginning for us LYONS BROWN: Please, have a strategy OK? It’s the writer on the ship, right? So really, really important, as the founder and leader of an organization to find your mission, right? Be a mission-driven organization, be a mission-driven leader, right? What’s your purpose? Try to define it in short, sweet, really motivating words, right? Once you get the mission, once you get your purpose, what’s your vision? And we hear about three-year visions, five-year visions, ten-year visions I think in the early stages, a three-year vision is something that’s with within reach You know you’re going to have huge amounts of change in dynamics coming in As soon as you’ve got the vision, which is where are we going to be three years from now, you build a strategy to that, right? So that’s where are we going? How are we going to get there? And how are we going to get there is strategy Simple, easy objectives, right? What are we aiming to accomplish? Who’s responsible, when’s it due, what’s the budget? And if you all have that, you’ve got a rudder on the ship You’ve got a buoy in rough waters that you can attach onto You’ve got something to talk to your employees about You’ve got something to talk to your customers about And you’ve got something to reference that provides stability and comfort OK? Now strategy in entrepreneurship is like navigating a boat with a rudder through an asteroid belt, right? So things are going to come at you all of the time, very quickly, sometimes dramatically, may be game-changing I teach a case that here at Darden about raising $2 and 1/2 million from outside investors, based on a strategy that seem perfectly reasonable in 2007, right? And six months after we had done it, absinthe was legalized And everybody in the country wanted absinthe And I had a very slow growth, very methodical strategy that I had sold in festers and gotten big bucks for, right? And now it’s like I was just kidding, just kidding, right? Because we get this thing now where we can go national So just be ready for that But we get a brick wall down there in the i.Lab And the ones that go into that brick wall at mach one are usually the ones that aren’t very sure where they’re going or how they’re going to get there Spend time on it, it’s important JEFF MACKLIN: Yeah, we’ve take a little bit of a slower path, because when I first joined, we were really trying to figure out what we had as well We were undergoing growth, it already been plotted, but like I said we didn’t have the foundation necessarily in place And the costs weren’t appropriately allocated, the team wasn’t right, and so forth So we finally got to the point where we about a year and a half ago thought we were ready for growth And what do you know, we weren’t And there was a strategy that I had in place and this was where as you make some of those founder transitions and founders discussions, our discussion centered around that strategy And if it’s not right, if people aren’t really on board with that, then it’s not going to go right And so it’s better to back up, take your time We have the good fortune of having revenue coming in

And as I mentioned earlier, it’s a real, real challenge– the thing I was struck by the most was how difficult it is in the restaurant business to even get anybody in the same room to actually have a meeting to discuss the strategy, because everybody’s so focused on service that night So that was one of the challenges But as I mentioned trying to change the tires on a car you’re driving, that’s really what it was like for us And it continues to be like that, because we’re trying to figure out, all right, this really horrible business model called a restaurant– if we want to make more of those, and if we do, how are we going to do that? And we have a good fortune of having seven restaurants and seven different business models that we can then choose the best ones and start to grow those And so we’re finally coalescing around that How we’re going to go about doing that and for the right reasons is the discussions we’re having now Because, again, we want to grow for the right reasons ED HESS: OK– NATALIE FOLEY: I’d add something real quick–sorry– that I’d totally recommend and– is it okay, Ed? I just cut you off Imagine trying to find a place where innovation and consulting– so it has to be beautiful, there has to be thousands of Post-It Notes, so where I’m trying to do it on the cheap as a COO You know, we have to spend a ton of money on our strategy retreat space For us, a big part– we have usually three parts of our strategy that are set in stone and two that are experiments that we’re running And so one year, it was do we want to offer up teaching services? I mean, that makes sense We have a book Why not? Everybody and their mom is teaching design thinking right now, so why don’t we do it really well, we had this book, why don’t we try it out Maybe it would be a good on-ramp for more consulting So we ran it as an experiment We didn’t rest our next five years on that or bring it to the bank or ask for a big loan to expand it out We just tried it It didn’t work I mean, it actually was successful in some ways and not in others and didn’t meet our human capital net needs either And then the next year, we did it with business development We ran a few experiments in [INAUDIBLE] I would highly encourage that mindset to have a fixed revenue target and then you’re experimenting with what [INAUDIBLE] And so you can shut things down six months into it, if that particular track is not working out Just don’t feel dogmatic about sticking with the business plan that you nail down Have some that are firm and then some that are flexible and just be clear about why you’re running an experiment and how you’re going to do it and test it ED HESS: Good point, good point OK, we have some questions from the audience that’s watching AUDIENCE: Yes There are a couple of questions that are about creating the right team, whether that’s your start-up team or your growth transition team and sort of what are the qualifications you look for in each of those sort of crucial team-building exercises LYONS BROWN: I like to say business would be easy if it wasn’t for people The single most important and difficult decision that we make is hiring And the reason that it’s so difficult is I just have never been able to find enough time to be able to peel the onion back on a person to the extent that I’m completely satisfied that I’m about to make a good decision And so, you know, wow, find the mechanisms to be able to do that, to be able to really get into the way that somebody thinks, what kind of a character they are I mean, I go looking for people that came from really good schools, because really good schools are very competitive I look for athletes I look for members of the military I look for people who are about survival at any cost, because you don’t have to instill that in those kinds of people And then in entrepreneurship, what we do not need is people sitting by the phone with a catcher’s mitt, waiting for their instructions today I like to say we hire people who have “I know what to do” tattooed on the back of their neck and they just go out and do it And sometimes they crash into a brick wall And we say, “Try not to crash into that brick wall again, but really good job, right? Tell me what you did and apologized for it later We need action-oriented, competitive doers that want to win JEFF MACKLIN: I couldn’t agree more on the comment about the people issue 90% of our fires or brush fires that we’re trying to put out or are people related, so hiring is critical And then it takes a lot more energy to try to correct a bad hire than to put the energy upfront and make sure it’s the right hire That being said, I mentioned about how important growth is for us And growth creates opportunities So what we have actually– what we prefer to do– is actually hire from within And we try to create opportunities in the company that somebody who is signed on– and we’ve had people who started as hosts and are now GMs of a $3 to 4 million business We caught our pixie dust, and there’s no definition

of what the pixie dust is I hate to say it, but you just kind of feel it You know somebody is kind of drinking the Kool-Aid and has the pixie dust of our company when they have it And we have found when we try to take somebody outside of the company and put them in and not hire for the pixie dust but hire for the resume, it doesn’t tend to end well And instead, we try to grow from within and give people opportunities So again, the pressure to grow for us is to continue to create opportunities, because we have people internal that are going to want those opportunities ED HESS: What percent of the people do you hire work out? What’s your hit rate, how good are you at hiring? JEFF MACKLIN: Yeah, I mean obviously the restaurant business is notorious for turnover It’s a very young business Boston is in a huge growth mode right now The skyline is literally cranes everywhere for buildings being built. Each one of them are being hinged by a developer on a restaurant So what happens is when you train good people, they get poached by all the other restaurants that are growing And everybody in a restaurant, everybody who wants to go to a restaurant, likes to the new, new restaurants, so we have to fight that much harder to make our restaurants relevant, exciting, and inspiring So as far as– I haven’t answered your question, have I? ED HESS: No [LAUGHTER] JEFF MACKLIN: I don’t actually have an actual percentage I can tell you that the going rate of retention is in the low ’20s, 20% range, but we have not had a good hit rate on hiring for somewhat senior roles and bringing them in from outside MIKE FELLER: So we’re obviously a little bit smaller, so it may be a little different for us, but I would certainly echo a lot of the things that are very important, so make sure that you get a good sense in terms of what type of employees are going to really fit and what are some of the skills, what are some of the experiences, what are some of the qualities that you really want to fit into your organization That being said, I think to some extent you also have to be a little bit flexible The best example I can give for us is that we started out and we had this mapped out perfectly, we thought, that one of the pre-qualifications for somebody to come work for us is they need to have a culinary baking background Well, that worked out well and we had some tremendous employees come on that had that But we just actually, through going through a little bit of an uptick this past year at the end of 2014, we ended up hiring some folks that didn’t have a culinary background And they came through referrals from some of our employees, and I’ll be the first one to tell you they are some of the best hires we’ve made to date And so I think that you have to be a little bit flexible And I think it goes back to a lot of the other things that you’re talking about, whether it’s strategy or whatever You want to stick to your core and understand what that is, but also understand that you have to move a little bit You may need to give on certain things and some of your strategy may evolve over time NATALIE FOLEY: Man, this is a great question This is what I wake up and think about every day And obviously, similarly to very people-centered firms, it’s important– Some things that we’ve learned is first of all hiring consultants, easy I mean, we have folks do a case And you’d be amazed what people can say and then they actually do it and it’s just night and day different So having a real hands-on interview where you’re not just asking behavioral questions but you’re really in some way mocking up what their world would be like, either through– And we do a big role play of like asking the questions like a client would and if they’re nervous on their feet it’s just not going to fly We also do– we don’t hire a lot right out of undergrad We love people who have already been trained by somebody else who have to pay for that training, like a big consulting firm So it’s great in that they screen them for us And when they’re tired of traveling and want to do something actually really fun and interesting inside the world of consultanting, they come to us But also think that you have to lay the groundwork for a place that people want to work Our guiding principles aren’t just up there on the website I mean, we live and breathe transparency Everybody sees every financial every week Why? Because you’re contributing to that You’ve got to know where you fit in that puzzle And so our transparency is a big part of why people come And autonomy I mean, you’re dealing with somebody– if you want somebody entrepreneurial, you’ve got to give them a lot of room to play And so our CEO thinks I can do seven times more than I think I can, and every day I feel that And I’m going to do that with everybody else And so I want somebody who’s going to step up to that and not need to be told every day what’s important, to add to Lyons It’s a great point, because no one has time for that So those are a couple of things that I think have been helpful on our end ED HESS: OK Other questions Yes AUDIENCE: I know I’m like a member of the panel Thank you all for being here Could you please share with us what is the one thing you wish you knew when you were in our shoes, graduating from Darden? ED HESS: What’s the one thing they

know now that they wished that they knew then The one thing AUDIENCE: [LAUGHTER] Maybe a couple ED HESS: Yeah [INAUDIBLE] All right, everyone’s reflecting Notice that one of the great things that they’ve learned is to reflect LYONS BROWN: All right, Alex, I’ll take a shot at this one OK The thing that I wasn’t ready for when I graduated from Darden, because I’d never experienced it before I got here, was failure And it’s devastating, right? And anybody that’s sitting in this room, that’s going to this school, especially today There is no way I could get into the Darden school today, but I came in through Jeff’s kitchen door in 1985 By the time you get to this place, to this school, you have had probably nothing but really extraordinary success in your life And when we go out into the world, we’re going to fail You can just absolutely be sure that it’s going to happen And whether it happens to you in your professional career, whether it happens to you in your personal life, it’s going to happen And how you deal with it is going to measure the medal of who you are And sometimes we see people that just disappear from the radar screen They develop so much fear of failure that I say they become men and women leading lives of quiet desperation, living in the middle of the hierarchy, right? So they’re there, just VP Got the house on the cul-de-sac, got dental, got 401k, and have given up their dreams, right? Because they’re afraid to fail And I tell you, when you give up your dreams, it’s really easy to tell who you are It’s really easy The difference between people that are pursuing their dreams and people that have settled is extraordinary It is And so, you know, it’s OK It’s OK to fail It’s OK Just adapt the learning, get up, put your helmet on, and get back on the field It’s cool, because now that you’ve got that lesson, that learning, in your system, you’re of value You’re of value to your company, you’re of value to your employees, you’re of value to your wife, to your children, whatever it may be So it’s an excellent question Thank you MIKE FELLER: And I may say it a little differently, but– and I don’t know if this is necessarily something that I wish I knew Maybe it’s something that it’s hard to get experience with But there’s a big difference between analyzing it at the 30,000 foot level and then being in the chair And I think that having more experiences of being in the chair and knowing what that’s like and having to make decisions and then having to live with your decisions Especially at an entrepreneurship level, you’re dealing with a lot of imperfect or incomplete information And so I think that having– not just developing a comfort, but you do after a certain time period, you get better at it And to Lyons’ point, some of the things you may do, they may not be the correct decisions But I think in a lot of areas, you’ll find that sitting back and not making a decision is oftentimes worse than making a decision that you may end up having to change later on In other words, in action may not necessarily be the right course of action all the time So that to me was one thing that I think that going back on it, maybe wish that there are some ways to simulate being in the spot Although I’m not really sure that you can But it’s just a whole different animal when you’re in the hot seat and you’re the ultimate one that’s accountable JEFF MACKLIN: If I think back to ’95 when I graduated, the one thing I wish I had known then was just a little more confidence to stick with it Because I was definitely feeling– I was a contrast to a lot of my other classmates, who were– and again, I was going into consulting, but I knew that wasn’t the end goal I was going to keep pushing and trying to find interesting things to do that jazz me up So I think that would be one thing The other thing on a business level that I think has been surprising, or that I didn’t know then– and again, I had a military background Not known for having a profit and loss world in the military side But it’s just amazing to me and remarkably difficult to get people to give you money for something you offer And that is something we never take for granted And I think that is– that humility is something we in the restaurants, I think down to every server and every bartender

and every cook, I think, is something that everybody pushes every day to try to do the best they can Because we don’t take it for granted, because it’s too easy to go and see it slip away NATALIE FOLEY: This is when it’s nice to go last You can kind of synthesize and then put your name on it I think a couple of things Finding someone in your life that will tell you no or that’s a bad idea is critical One of the things I thought at Darden is– it’s a wonderful, nice, supportive community, right? I mean, it’s amazing in that way You feel like you can kind of do anything Should you be doing that anything probably is something that you wish somebody had been like, “That’s actually– have you thought about this?” Or, “That’s not at all what you said that you want to do.” There can be a culture telling people what they want to hear I don’t think that’s just Darden I think that’s just the world It’s a very self-affirming– you can go and find the people who will tell you what you’re doing is great And frankly, it’s not true You can probably find somebody to give you money to tell you your idea’s good, and then it’s not So I think that’s a really important thing Making time– this sound super cheesy– making time to reflect and stop and pause I mean, you heard us all kind of talk about taking steps in our [INAUDIBLE] most salient to stop and say what’s important Because I think what you’ll find– and it’s a total, as my friend at Darden called it, princess problem– is once you get on this train after Darden, it’ll take off And if you do well, you’ll continue to be offered the next level up and the next level up But if that’s not where you want to be, you’re going to spend a ton of time working your tail off at something that’s not fulfilling and making a lot of sacrifices along the way And so just really being clear about what it is that makes you tick, what value you want to make in the world, and where you want that to show up is important And however you find that way, I think, is really key From a technical side, sales– sales and human capital– is something that I think, I mean, I wish I had somebody, a back pocket that’s just constantly telling me how to do those things, two things better, and a constant evolution on that ED HESS: Very, very good Very good answers Catherine, another question from the audience AUDIENCE: Yeah, so there’s a couple of themes that are coming up And one of them is– we were talking about bouncing back from failure There’s a lot of questions around the idea of when to throw in the towel, whether that’s you’re not excited about your business anymore, or you’re an entrepreneur and it’s time to give up on the idea, or to hand the reins over to somebody else who can run with it ED HESS: So it’s what’s the fine line between persistence and stupidity? AUDIENCE: Exactly [LAUGHTER] JEFF MACKLIN: Yeah, I mean, I think there are two ways to talk about throwing in the towel One is if you’ve gone into that brick wall at mach one and yet you still stay at it And maybe you need to kind of look at all the shards on the ground and say maybe I need to go in a different direction I know for me, the last year has been all about a transition and watching a founder go through– and I’ve actually had a good opportunity to speak with a few other restaurateurs in the nation that are going through similar issues, people in my shoes that are working with chefs And chefs at a certain age are starting to say, well, what’s next? I want to spend some time with family I want to spend some time doing something other than being behind a stove And so I think just like we’ve talked about using Darden to find out where your creative juices come from and what that flame is and the pilot light is, I think for the last year, we’ve had that conversation internally as to what’s next for the founder, what gets her really excited and amped up, and yet what gets myself and the team amped up And I think it’s been a long road And I will say that there are people that I’ve leaned on over the last year for sage guidance and wisdom And one overall tenet was slow and steady wins the race Don’t make a rash decision and let this– see this through And the last year has been a really hard one But I think we’re on the way into some clearing to actually have everybody be jazzed about what they’re going to do next and do that in a solid way LYONS BROWN: I was going to say the perfect time to throw in the towel is when somebody offers you 40 times EBITDA That hasn’t happened to me, which is why I’m still sitting here in front of you guys But that’s not the question Man, I’ve been through this I had 19 full-time employees working for me going into the recession, and we came out of the recession with zero I had to let everybody go I had to reinvent the company I bought out the lease in my office I didn’t start in a garage, but I ended up in a garage And I went from the founder who had let go of everything in a decentralized environment to suddenly once again being the only person in the company

And what I like to say is that when I left Brown-Forman and I left the corporate world, I left $1 million of market research to figure out anything that I wanted to, right? And when you’re an entrepreneur, you’re not left with a lot You’re left with one thing which is really, really valuable, and that’s the voice inside if you I like to say that the voice inside of you, your instinct, is the wisdom of all of your ancestors that came before you, inside, giving you instinct And the reality is if you’re voice inside is telling you, “It’s time,” it’s probably time And if the voice inside is telling you it’s not, it’s probably not And I can’t tell you the number of times I wish I had listened to the voice inside Don’t discount how valuable your instincts are We were out of money We had no people on the street We were in a recession And for some reason that I absolutely could not figure out, all of our brands were growing at double digits When we pulled all the ANP off the table, they continued to grow at double digits in a recession And it was like, what the hell is going on here, right? And I couldn’t figure it out And I was damn sure not going to throw in the towel until I understood the reason why And I went and saw some of Jeff’s employees I went around the country and talked to bartenders And it was like, “Your stuff is great.” And people were just figuring it out They just didn’t figure it out fast enough for me to have an overhead with 19 full-time people in it And suddenly, when we were at zero I mean, what I said was, “This company’s going to cash flow on its own revenue, or we’re going to close it.” And we’re still here, we’re still here JEFF MACKLIN: The smartest thing we did was open a bar with your products, in a recession NATALIE FOLEY: I’d say too, I think it’s just a really important– especially somebody made that point earlier, that we’re not the founder So you can constantly have that question with your founder about what’s their exit strategy A lot of times entrepreneurs– and I think this is all over Ed’s book in this class– they like creating things, they like new things So once you start laying down processes, they get the jitters And this may not become fun for them anymore And so you want to really nurture that– in my case, our CEO And make sure that he’s still having fun Because we just had this conversation recently The way that we’re shaping up now is he’s selling a lot more than doing, which makes total business sense But it’s taken a while to get us into that realm Is that what he wants to do? I’m not sure, you know, and so we’re having lots of conversations about what does that look like? And what does he want to wake up every day and do? And is there a next thing that he has in mind? So it’s just constantly opening up that door And if that’s sell it to some other firm, if that’s hand it over to somebody else in the firm, those are just really good to just constantly be having that and to have a very self-aware CEO So if you can drag it out of him or her, that’s good MIKE FELLER: I’ll just say I concur ED HESS: OK, all right, good Yes Good You’ve got a microphone AUDIENCE: So in recognizing that growth is a risk and that it’s absolutely necessary that it’s managed, one of the risks that comes to mind that I typically don’t think about as a naive entrepreneur is competition How do you think about competition? And do you allow that to– to, I suppose, actually define your strategy or change it up? I mean, I just think of just some of the things that are kind of said out there in the entrepreneurial world I think it’s Peter Taylor that says it in and just says just be careful how you think about competition and kind of just go with what you are and what you want to do MIKE FELLER: So for us– and maybe this is a little bit different But for us, being in a little bit of a niche space with the gluten-free industry and getting involved when we did, I’m not sure how many of you would have even heard of what gluten free was probably three to five years ago And so for us, I think seeing a little bit of competition and seeing some of the larger players gave validity, I think, a little bit and some credibility to the market So I thought that was a positive thing I think when you started seeing companies like Subway, like General Mills getting into this space, I think that says a lot Now, that being said, you got to find a way to differentiate yourself from that And so you’ve got to make sure that you come up with a strategy and a competitive advantage that’s going to be sustainable competing with those types And so for us, in our case, we knew we couldn’t compete on price And that was never going to happen, just because we could never achieve the scale that some of these other players could quickly, because of the amount of resources they had behind them So we found that, OK, we wanted to really produce

high-end, premium type products and build a brand sort of around that, that we felt what have been a defensible strategy against some of these larger players So I think competition is good, but I think you also need to understand what is going to make you different and why somebody should buy your product versus the five or 10 others that are sitting next to it, on the grocery shelf in our case NATALIE FOLEY: That’s interesting, because I know Mike and I are in very different industries But similarly, you didn’t have a corporate innovation unit ten years ago But somebody got promoted into it and was like “What the heck is that?” and needs help And so I think for us, it’s been a very fascinating landscape of competitors, where you have one big player, [? IDO ?], and then everybody else is a tiny shop And so it was really interesting We sort of ebb and flow between have focus but really listen to what the market’s saying about what they value about you And then pay attention to what everybody else is selling So for the teaching, that’s why we didn’t rest our hat on it And we tried it for a year We can’t compete against solo practitioners and we’re not going to compete against universities for that particular offering So how do we pivot in? And for us, it actually ended up being a lot of [? ex-IDO ?] consumers not being satisfied with their product So it was like, how great, this is a whole niche market People are like, that’s wonderful you gave us customer insights; we have no idea how to translate that into a line of business Well, we do, because we’ve always focused on more the business side of design So it’s been interesting, but you have to kind of have these processes in place that allow you to set that focus, but be able to follow what the market is saying and what they’re saying that you do differently And then go with that And then, does your human capital want to do that? And so we’ve had a lot of turnovers People are like, oh, we actually don’t want to do more of the business side of design that y’all are doing OK, great, you got to let people go in that situation JEFF MACKLIN: I think an interesting angle and related to your question is, I think often competitive advantage can be disrupted by technology And yet this panel, to my knowledge unless 3D printers have flavored ink, you can’t make food or liquor through [? digitize it. ?] So there’s some advantage to that But I’ve been struck by the fact that the restaurant business actually is– we feel like a rising tide raises all ships And so the Boston restaurant community is actually incredibly supportive of each other I’ve never seen such a thing When I joined, that was a big shocker to me But if the restaurant across street is out of white napkins, we will lend them white napkins And they send a bundle back the next day If we are out of oysters, [INAUDIBLE] oysters, we can go to Neptune and they will let us have a bag of oysters So I’ve never seen such a thing as that And I think it’s because the business so damn hard, that everybody is commiserating with each other and so they cut you a break But ultimately, it does get back to competitive advantage And so in our case, we again, based on our three pillars of service, hospitality, and food And we talk a lot in our company– and I mentioned pixie dust For us, that translates into really getting back to humanity And that could be interaction you have with your server, with your bartender It could be why we don’t have one TV in our entire restaurant group People spend way too much freaking time looking at screens What if you can actually go to a bar and have a conversation with your fellow human being? And so creating an environment where that can kind of take place is, again, a competitive advantage Instead of putting up, covering the entire wall with flat screens, what if you actually go the other way? What if you actually create the right environment to actually have either a really great meal, really great service, really great food, really great cocktails? But that, to us, is competitive advantage LYONS BROWN: Just to distinguish yourself ruthlessly, right? Just distinguish yourself ruthlessly And I mean, I’ll give you two examples There’s 1,200 tequila brands being sold in the United States today I can tell you unequivocally, I sell the one that is the most unique in the marketplace, no question about it in my mind There’s no way that I’d be in a market, trying to sell a tequila with 1,200 competitors, unless I could say that Figure out how to distinguish yourself ruthlessly My friend down here at the other end has a bar that doesn’t have any bottles in it You will walk in the door, and you’ll do what I did the first time– you’ll walk out because you’ll think you’re in the wrong place OK? The bartender’s the show The bartender’s the show at Drink in Boston And you go in there and you’re looking for brands and bottles, and there’s nothing Just a bartender standing there But this is a bartender says, “What are you feeling?” Right? And you say I’m feeling tequila

And then the bottle comes up A bottle that has been chosen from a blind tasting of all the bartenders in Jeff’s bar No knowledge of brand, no knowledge of distributor, no knowledge of people like Lyons standing behind it What is the single finest tequila that we’re going to represent? And then they will make you a cocktail that will blow your mind, right? Ruthless distinctiveness Study your competitors, make yourself stand out I like to say we build brands that change perception My job– we’re not going to put a brand in our portfolio if it doesn’t cause you to cock your head and say, “I didn’t know that I didn’t know you could do that.” Right? If we can’t say that– that’s one of the reasons why we don’t have vodka in our portfolio Vodka is odorless and tasteless The only way I can distinguish myself is through packaging That’s not what we do We don’t do that We make beautiful, beautiful liquid JEFF MACKLIN: It is It’s fantastic LYONS BROWN: Thank you I love you too, man ED HESS: I’ll be right to you An entrepreneur wrote me a month ago, knowing this event was going to happen, and said please ask this question And I made a commitment, so I’m going to ask the question How does an entrepreneur decide what technology to use in his or her business, and how important is technology in your business? Or is it just big companies that focus on so much technology? JEFF MACKLIN: I mean– ED HESS: Nobody, nobody touching that one JEFF MACKLIN: I’ll feel this question, because just before I left to fly down here from Boston, I sent out an email to a group of colleagues of mine And if anybody’s from Philadelphia, you might be aware of the Vetri family Marc Vetri’s a chef there, and they have six– almost now soon to be eight– restaurants in Philly and elsewhere And the me of their group and I got together and we founded a restaurant forum that meets once a year I’m not in competition with the restaurant in Philly I’m not in competition in the restaurant in New Orleans or Seattle or Chicago So we get like-minded, similar-sized restaurant groups together, and we had this discussion Because we’re getting our ass kicked by technology in the restaurant world Everybody who can make an app approaches you about how their app is going to make you more money and it’s going to have an ROI and it’s going to make everything great in the restaurant We spend on IT– we have a part-time IT consultant we pay $5,000 a year That’s it That’s all we can afford We’re a restaurant company We focus on food and drink and hospitality and service, and it’s really hard to dedicate both dollars and mind share to that So what I did is I did an inventory of all of the things we’re being assaulted with at the restaurant level, from the minute the credit card gets processed, how the order gets in it, all the way through– basically did a whole supply chain analysis of all the technology impacting the restaurants It was two pages, single-spaced, of all the technologies we’re having to assemble And we’re freaking restaurateurs We don’t know the first thing about it So it’s really hard, and it’s kicking our ass, and it’s expensive, and we’ve made bad decisions And so what I’ve tried to do is put best case on the table with our restaurant group forum to say, “What should we do?” And then also, collectively, since we’re smaller companies, how do we get together in a buying group to actually leverage ourselves against some of the technology companies to make some better decisions and cheaper decisions? ED HESS: Interesting NATALIE FOLEY: For us, it’s just accessibility So it has to be mobile-based, has to be Google-based So everything is just open platform and not so expensive they’re going to charge for a smaller amount of users I advise hiring somebody under the age of 30 and giving them a really painful system and then they say stuff like, “Wow, we should really use a new [INAUDIBLE].” And you say, “Wow, why don’t you research that? Pick whatever you want and here’s the budget.” That’s definitely kind of how we’ve approached it so far For us, it’s just a lot more simple We need something secure and it’s a really light touch in our IT side, but you’re also talking to two kind of low tech We just have to have access to our IP instantly and ability to work on planes MIKE FELLER: I think we’re probably a little bit different, being a food manufacturer I think ultimately, what it comes down to is you’re dealing in most cases with limited resources And so it’s finding the best use of those resources, and finding what’s really critical to your business For us, it’s not as much on the IT side that we found, at least for the stage that we’re in right now And I guess our version of technology would be updating our equipment And so as you grow, it’s really investing in those areas, because obviously investing in equipment

makes you more efficient And In a manufacturing business, it really hits your bottom line directly So I think that was the main thing for us, is it’s really looking at your resources, which are going to be limited, and finding the best uses for it JEFF MACKLIN: And I’m going to follow up that answer as well as mine by saying I think what this discussion and your question actually highlighted for me is we didn’t have an IT strategy And I never thought in the restaurant world, we’d have to have a IT strategy And that’s not the case We do Because we have limited resources, technology can help our business and we are just being inundated with options So we need to figure out what are the options, where can it help, what’s the priority, how much can we spend, and then make some decisions And so that has been a useful process but a painful one LYONS BROWN: So we’re brand builders, and that means we’re storytellers And technology today is an incredible way for us to get story out there in a way which is compelling for you, whatever it is that you need If you just need Instagram, fine If you want a little vignette, all the bartenders in the country communicate through Facebook We can give them the lesson of the day, the education of the day You want to go deep– You can go to our website We’ve got downloadable point of sale on our website That’s probably the single, biggest money saver that we had In our industry, there were just training materials and PowerPoint presentations and just paper, paper, paper And I’d come in and train a room full of you all I’d do it once a week And just go around the United States, around Europe, around Asia, doing it over and over again Everybody got a beautiful little piece of paper, explanation of the whole thing What happened? At the end of the day, you guys got up and went right out the door It happened today to me I was at the Darden board earlier The Batten Institute, our Center for Entrepreneurship, produced the most beautiful catalogue of impact, right? Of what they had done Half of them are sitting up there in room 290 right now When we made our point of sale downloadable, it was like, go to the website You can download it If you want to print it, you can print it You want to put it on your paper, you can go on your paper Saved huge amounts of money Data, overwhelming, oh my god Use technology to give yourself actionable data If you don’t have actionable data, fix it, right? Because all we’ve got today is way too much information Figure out how your technology is going to give you what you need fast, because you don’t have time to be screwing around NATALIE FOLEY: You know what’s interesting for us, too? I don’t know that this surprised me and it’s just a harder thing to do digitally, and this might just not be relevant to growing a small business But we found in consulting, people are tired of technology, frankly And a lot of times, we come together and we’re helping people make decisions and collaborate, so we’ve gone all paper for that, which as sustainable for the environment, maybe not so great But that has been a game changer in terms of having authentic conversations with people It’s a different conversation than a sales pitch, for sure But even the sales, when you get people off of their laptops and engaged together in something that’s hanging on a wall, it sounds really simple but it’s very different Now the downside of that is trying to capture that digitally and turn it into something that is beautiful, like a video or something But just a quick note I think actually we’re finding conversations are really shifted with removing technology from the conversations ED HESS: Good Question back here? AUDIENCE: Hi I’m actually wondering thing go back to something that Lyons touched on in the beginning, which is the fact that you even have a partnership with Barbara Lynch Gruppo And as you are relatively young or certainly growing businesses, the partners that you choose can really make or break your brand and affect tight margins So can you talk to us about how you develop those partnerships? And, obviously, the type of spirits you have in the special cocktail bar are like the defining feature of your bar And if those weren’t working out or if his supply didn’t come through, it would really negatively impact your business So what kind of vetting do you do? What kind of numbers do you run? How do you do your homework on the people that you’ll be working with in these partnerships, once you know you like the product? JEFF MACKLIN: The funny thing– I didn’t have anything to do with it We delegate and defer down to the actual front line employee of what they want to use It happened to be that Lyons and I have built a great friendships through the process and that has strengthened the relationship, but I’m not going to ask one of our bartenders to put something on the bar that they don’t like or support So the fact that they did choose [INAUDIBLE] and it was a great benefit to both of us, because I think we both enjoy that relationship But Lyons mentioned storytelling So much of what we do is about connecting

to the person who comes into that bar and try to give them a mind-blowing experience And that helps when we can tell a story We do a lot about storytelling in our education about wine, our education about the food and the ingredients that it’s composed of So, yeah, I’d like to say there was a really rigid, strategic analysis of it all It really comes down to, is a good product? And then, obviously, technology We just talked about– I have been burned many a time on placing a bet on a technology that evaporates And so I think those are more traditional But as far as what’s served in our restaurants, that’s where we talk about this balance of creativity and business I think that’s where creativity wins over the business side That being said, we talk about structure and process We give the keys to a business to a chef or a bartender– or, excuse me, a general manager and a chef And they’re allowed to run that business, and we give them the structure and the process of which to run it So they know where their liquor cost needs to be They know where their food costs needs to be, based on the concepts So whatever products they choose to buy, if it blows their cost of goods up, then there’s something to answer to the next month But that being said, if the choice they make for what’s on the bar brings them in at 18 1/2%, 20% for liquor cost of goods, we’re good And the guests are happy and the revenue’s there But if they’re picking the right products and quality products, it’s going to be LYONS BROWN: My father– it wasn’t my father I had a mentor once, who from the front seat of the car turned around and looked at me in the back and he said, “Lyons Brown, if you ever remember one thing, remember partners are a pain in the ass and they should be avoided at all costs.” [LAUGHTER] And there’s two kinds of partners that I want to talk about, all right? There’s partners like the Barbara Lynch Gruppo, where we really want to go and form a partnership with them And the idea simply is we’re going to offer you something which supports your brand identity, and we’re going to offer you something that makes you more profitable, right? But when you’re talking about getting into business with somebody and you’re talking about that kind of a partner, that’s the kind of partner that my mentor was talking about And the way that it did he– you know, I sat in the back going, oh my god And what he said was you should only go find a partner if they can give you something that you can absolutely not replicate on your own Right? So all of my partners are distillers outside of the United States That’s what they do Their job is to deliver the product, mine is to distribute and market it We split the trademark right down the middle We clearly understand what our roles and responsibilities are And there’s another one You know, coming back to the brick wall of entrepreneurship and bloody crashes and feathers everywhere, the really ugly ones are the ones where partners did not define their roles and responsibilities, did not write an operating agreement that defines how the company is going to be governed if they can’t get along– really, really important stuff, really important stuff So, unfortunately, I’ve got to go to a party [LAUGHTER] Our dean is retiring tonight, and where we’re going to celebrate him Best dean in the country in the last 10 years, no question about it And so I always loved the guy who got here late and left early, but I’m afraid that’s me tonight And it’s been an honor to be with you all Ed, thank you so much Jeff, I hope I’ll see you there I hope I’ll see all you guys there Cheers ED HESS: Many thanks to you LYONS BROWN: Yeah [CLAPPING] ED HESS: We got another question from the audience Catherine? AUDIENCE: This question is for each of you Could you possibly elaborate on an innovative idea that you’ve implemented in your company over the last 12 months? Or two? MIKE FELLER: Well, I think one that we did recently– and keep in mind, innovation can take on different meanings here But the obvious one’s for us, being in the food business, is coming up with new products and new channels, maybe, for business But we actually brought on a big customer where we increased in the number of stores we were servicing by over 500 stores at once, which that for us was a lot And we had a big challenge in terms of how to support that And when we first got the opportunity, got a sense for what the volume was going to look like, the timing and everything,

I went to our bakery manager and our baking team asked them point blank, if we’re going to do this over x amount of time, what is that going to look like on a daily basis? What is that going to be in your mind? And she came back to me and thought– she said that it was going to mean 15, 16 hours per day to produce and hit this order on time And I looked at her and said, “No way.” As I said to her, I said we need to look at this and really dive into it And it really caused us to go back and look at our processes, look at the way we were doing things and see what we can come up with and really get really efficient and really lean in terms of what we were doing By the time we ended up sending out the first order, we were doing it in about four and a half hours a day So a lot of it had to do with us sitting down, looking at our process, and figuring out which ways we can change it Which I know that’s maybe not a direct innovation, maybe that’s not the direct meaning that you would think of, but for us it was, because that enabled us to be able to handle it and actually get through it with far less pains than we probably imagined from the beginning [INAUDIBLE] NATALIE FOLEY: Yeah, so I’d love to hear you all define innovation, for starters It’s something that we try and do every day and we define it differently, depending on who you’re talking to For us, I think, we just use our own processes on ourselves up all the time And so we decided last year to completely redesign our performance review process We call it PBR– performances, promotions– I mean, promotions, bonuses, and raises And we had a system, but it wasn’t fitting a lot of our cultural principles, which is for everybody to have a say and for it to be transparent about how it works It wasn’t transparent And so we redid it, using our own methods We interviewed everybody, just like we would with a client, and did very in-depth research and synthesized and then came up with different prototypes, tested them, and then landed on one And I have a professional coach outside of our work, and when I showed her– I was going to talk to her about some of the results, and she saw what we had produced and asked where we bought it and what firm, because she looks at people’s performance reviews all the time And so what was great for us is it just felt like something we– it felt like us We didn’t really care what the outcome looked like exactly or we didn’t have a benchmark, but we created it and so it meant it was going to sustain and last for us And we could constantly revise it, because we thought of it as a prototype But it was nice to get that outside validation that this was a really unique way to do a performance review JEFF MACKLIN: We provide each staff member a PBR, as well, after the shift A different PBR OK, that didn’t go well OK, so– [LAUGHTER] Innovation in the restaurant business is a hard thing It’s been a multi-century process where you cook food, and people buy it, and they eat it, and hopefully enjoy it, and then depart So innovation– if it’s faster, or quicker, or cheaper– they’re really kind of watching paint dry ideas that we’ve instituted that have helped us And that’s everything from instead of buying dishwashers, we lease them because it comes with service And so we don’t have to worry about our dishwashers anymore, because if any restaurateur will tell you, if your dishwasher goes down, your restaurant goes down, because clean dishes are kind of needed So that was impactful It’s kind of boring, but that was a big thing We also looked at our numbers at the end of a one year and came up with the fact we were spending so much on repairs and maintenance that we could afford a full-time person to actually manage our facilities And that was a big step to unload the burden on myself and the senior team of having to manage some of that So it gets back to then taking that provided time to actually think and actually gear up for the future by actually having some quiet time, some think time, to actually start to plot out the future I would call that innovation, but it’s not very sexy ED HESS: Yes, ma’am AUDIENCE: [INAUDIBLE] ED HESS: Is it on? AUDIENCE: Can you hear me? ED HESS: Yes, yes, thank you AUDIENCE: So as an entrepreneur for small to medium-sized businesses, I feel like a lot of your success hinges on your management team And usually your management team is composed of people whom you’ve worked with before, people you have had really solid, meaningful relationships with before And so, how do you how do you manage it? Like, firing them if they’ve made a number of mistakes versus managing that relationship Can you talk a little bit more about the difficulties and how you went about handling it? JEFF MACKLIN: I have 8 1/2 years of– when I first signed on 8 1/2 years ago, it took awhile to actually even find the right

structure And then when I understood the right structure, then it was a matter of who are the right people in those roles, [INAUDIBLE] very senior people? And that’s been extremely challenging The biggest reaction is that it can show a sign of– it can create a little bit of a worry and a fear in the overall company that, wait a minute, if they’re cutting the head off, then where are we going to be? That’s obviously everybody’s first reaction, is what about me? What about me? That’s the initial thought But what I have found instead is, when I’ve had to make those tough decisions, it’s because the person really isn’t working out and is really not cutting it And you run a greater risk as an entrepreneur by accepting mediocrity and letting them continue Even if you’re trying to get them to improve, if it’s just not in the cards they’re going to improve, you do yourself a bigger disservice by putting up with it Because then your team sees that you’re accepting mediocrity and they start to think that’s OK MIKE FELLER: Yeah, I agree And in my previous job, I ended up coming on board as president of a group of about 75 staff, and I had eight direct reports And within two months of me being there, I ended up having to go of five people, two of which directly reported to me Now some of that was a company-wide initiative that we didn’t fully have a say into the quantity of people, but we ultimately had to make the decision It’s very difficult thing to do I can promise you in a family business, it’s even harder Good luck trying to get your mother on a performance improvement plan [LAUGHTER] It just doesn’t work But in all seriousness, I think the best thing you can do, whether it’s somebody on your management team or an employee, is just have consistent and clear feedback for that person And let them know what your expectations are And when they fall short, you have to let them know But I think it’s just as important that when they’re doing the right thing, you let them know that as well But unfortunately, when you let these folks– you give them feedback and let them know how they’re doing– employees can really go one of two ways They can rise to the occasion and meet your expectations or even far exceed them Or they go the other way and they don’t, and then I think that as long as you’re doing it the right way and giving them the appropriate feedback along the way, then I think that’s– to just point that keeping somebody, an under-performer, around, it only causes problems long-term And so I think that there comes a point in time, and it’s not always clear, but I think that you get a sense for when it’s time to really move on NATALIE FOLEY: Just to echo a little bit, I think in a small business it’s easy to let the HR, the performance review process, go Like oh, we all know each other, we know how you’re doing That’s one of the reasons we re-instituted it, is that we needed to have biannual conversations about not just how people were doing but what they wanted out of their job So we could both try and retain them, give them new things to do, help them exit, whatever the case may be We just don’t have time for dead weight or money for it Firing is our best retention strategy to some extent, of you can’t let somebody who’s not performing hang around in a small firm It’s just not going to happen And then find somebody who’s willing to do the dirty work behind it, because there is– I mean, we live in D.C. so there’s tons of lawyers, so we needed to have a performance plan and we document everything And it’s good, it’s good for somebody to have that feedback to move on to the next role But I think that And then, we don’t really try and hire for relationships We really hire for the role And we’ve been really hard about people who are very good friends of the firm not get jobs That should be– it probably was thought was kind of a walk in the park, but if you can’t do the case like someone can, I mean, sorry Even though you might have other things that are really going for you We might know you’re a cultural fit type of thing So it’s a great question ED HESS: One of the most interesting findings of the big research study that we did here Darden, which underlies the content of this course, was the finding that most entrepreneurs higher quickly and fire slowly And all of them said what they learned is is they had to hire slowly and fire quickly That the biggest mistakes they made were in that aspects NATALIE FOLEY: I would totally agree with that I think for us, we’ve had to turn down more revenue, because we’re hiring so slowly But we can’t make a bad hire So we’re willing to take that risk to do it And it’s really hard, because we did the opposite and it didn’t work out for us And I think that’s really sage advice Because you hear stories of entrepreneurs who’ve just– you get a ton of money from an angel investor and you just hire a ton of people because it looks cool When your clients come, it likes like you’re all busy in your fancy office No

I mean, make something look nice Or just don’t invite clients I’ll go meet them for coffee So I totally agree with Ed MIKE FELLER: Yeah, and I think, just really quickly, I think it’s something where the human element’s really important here And I think that you can have your process, but how you manage that process and how you communicate goes a long way One of things that I’m always very clear in any of these types of meetings with employees is that, you know, I tell them that our hope is that through this feedback, we hope you respond Our hope is that you do rise to the occasion and what-not Obviously, our hope is not to get rid of anybody, but unfortunately that happens But I think that if you communicate and manage it well, people on both sides of it will at least respect it and understand it ED HESS: Yes Do you have a mic? You got a mic? Okay AUDIENCE: So my question is for all of you In a small business with tough competition and limited resources, how do you define who are you marketing for? Especially as you grow your business, you certainly want to grow revenues as well, but how do you find what’s important for your customer, what really matters? And is that a process, a gut feeling, or more trial-and-error? How does that happen? MIKE FELLER: I could take a stab So I think for us– and we may be a little different, just because I kind of came at this from the very beginning, I guess– is that we really try to figure out, OK, once we looked at our brand and who we wanted to be, said who do we want to really associate ourselves with, who are some of the big players that we really want to target? And I think that for us, in the food space, I mentioned the WF company earlier [LAUGHTER] Cisco, UNFI, Amazon, some of the big players that fit well within your brand I mean, I think that literally you just look at it across the industry and say, OK, who do you want to associate yourself with? And then once you do that, then it’s really finding, OK, how do you get in front of the key decision makers? Who are the key decision makers? What level are they? And that’s how the process goes I’d say it was really not all that complicated It’s something where you just figure out again what is your brand and who do you want to work with And that’s your starting point and that’s how you go NATALIE FOLEY: And we like to use the fancy term for trial-and-error, which is experiment But that’s it I mean, it’s a constant get out in front of people And who is your message resonating with I mean, since I’ve been in this role for four years now, our target has completely changed Innovation units are now not one person They’re huge teams And what happened to the R&D shop? And firms have an incubator and a venture firm– and it’s like what? They’re still trying to figure who they are, and so we really wrestle with are we selling to the corporate innovation unit, or are we selling to a line manager who has a P&L and has to grow revenue and they don’t care about what the title is, about how they get to that point And so we’ve really done it by going out and trying to pitch it and see where it lands And then recently hired a legion firm to help us do that faster, part time on an experimental basis even with them, to say try out these three markets with reaching out to them proactively and where is it resonating And that’s been a much greater collection of data that we could do on our own And they can really kind of run target experiments to say is the new product development manager going to be the person who will sign the check type of thing Especially since ours– we just have a complete unknown about who is literally going to sign a check to hire an innovation consulting firm and when would they do it JEFF MACKLIN: So we have multiple brands, obviously Each restaurant has its own unique demographic We used– well, and limited resources It’s a great question, because we in the restaurant world, we don’t have enough money We don’t advertise at all We made the conscious decision a while ago to hire in-house a full-time PR person In the restaurant world, world-of-mouth tends to go further than anything, and so we have somebody who’s fully dedicated to us in house That’s more important to us than hiring an agency, because I don’t understand how an agency could represent two restaurants and make a decision between which one they’re going to promote So we know she’s promoting us We use to heavily rely on print advertising Or not advertising, but print– getting written up in the print, whether it’s critical reviews or new menus or new chefs or what-have-you That obviously is less relevant now and so we put most of our effort behind social media now We prioritize Facebook, Instagram, and Twitter The biggest challenge though is because we have multiple brands and we have designated people at each location taking that on, you have to give them some boundaries or else you have somebody representing the brand that maybe doesn’t use the proper grammar or uses inappropriate language or uses appropriate pictures or whatever So you got to give them boundaries and guidelines And we had a really great session two weeks ago, where we reviewed with each of our social media managers

in each of the restaurants It’s a secondary assignment that they have in addition to their normal day-to-day duties It might be the service manager at No 9 Park, it might be the assistant manager at Drink, or what-have-you So we gave them templates on how to talk about wine There are certain ways we go about talking about wine that we think are unique to us and we needed to give them There’s a whole list of hashtags There’s a whole list of yes, dos and don’ts, and how to go about that strategically And so we try to provide that and provide the guidelines and then just let it roll Because obviously social media can be huge asset but it can also blow up on you So that’s about what we do there ED HESS: Yes, do you have a mic? Yep, good, thank you AUDIENCE: [INAUDIBLE] Can you hear me? ED HESS: Yep Look Got it on? AUDIENCE: So this question’s more around personal growth for you guys, at the stage that you’re in your career So what’s been a big challenge that you’ve had to overcome? And then, I guess, what are opportunities that you see in your position to grow, going forward? ED HESS: Let’s say two minutes each, max MIKE FELLER: I’ll do it quickly I think for me, personally, I left and worked for a very large company right out of Darden And a lot of the systems and a lot of procedures and all of that were already in place And so it’s a much more structured environment there Then transitioning over to the family business, a lot of that wasn’t And so dealing with a little bit more uncertainty and a little less structure, for me was an adjustment But it for me was really cool, because at the end of the day, I had the leeway to really shape where we want to go And every decision that I made had a very significant effect on the company And so I think that for me was a tremendous growth opportunity and it was a very different experience So I think that there’s certainly value in different areas But that was something– I’ve definitely taken a lot away from this experience ED HESS: Quick, quick, quick, quick, quick question Yes, no Would you go back to a large company again or, since now you’ve had all the autonomy and can see the impact, and– MIKE FELLER: Sure I would find it harder to do that Yes JEFF MACKLIN: Let’s see Personal growth I think Lyons mentioned something earlier about his grandfather, or whoever the relation was in the backseat, telling him to kind of listen to the inside voice I think personal growth for me has been listening to that more in the last year and as we’ve gone through some tough transitions And then that leads to the next phase of personal growth for me, which is– I’ve been a really good number two person as COO and really having a visionary to work with and basically execute the vision and craft a strategy that supports that vision, and I’m really, really looking forward to the next step, which is working with the team to craft out what that vision is this time around, and what is best for the Gruppo moving forward, and then how to execute that So that for me is going to be an exciting part of that Can I answer that question too about corporate? ED HESS: I know your answer NATALIE FOLEY: Well now, we don’t, so– JEFF MACKLIN: Never in a million years [LAUGHTER] JEFF MACKLIN: Oh, it’s too much fun, when you control your own destiny NATALIE FOLEY: Yeah, I agree I mean, I think what I’ve learned in the last four years And especially Darden has a nice benchmark of sort of you and how your classmates feel they’ve personally grown I mean, you’re held responsible for it and that can be really daunting But there’s no better way to learn then that you just screwed it up, or you didn’t make a decision when you should have So I think that personal growth is just out the roof I think it is helpful to have– if you’re going to work with a CEO or team– to have somebody that you’re going to learn from At the end of the day for us, it’s a small team So to have 10 people you’re learning from– if you’re in a big company, you might have 300,000 that you could technically learn from So as long as you’re at a place where you’re either constantly getting to do stuff in the business and learning from a CEO who enjoys teaching and enjoys new things as well and is kind of along for the ride, is good But it is interesting For me, I think what would be interesting moving next is obviously– I’ve happened to be a consultant my whole professional career, is going in-house That’s something that’s intriguing to me So what I like about what I do now is creating change and making new things happen And I think a bigger challenge is to try and break that mold inside a big organization But that’s also what we do all day We go into big organizations and do what we do and try and bring that to life there So I think that be a fun, challenging, and probably one I’d need maybe some medication to get through But it would be a fun challenge

ED HESS: If I say the word growth, what’s the first thing that pops into your mind? One word or two words Growth MIKE FELLER: Exciting NATALIE FOLEY: Defining, I think Unfortunately or fortunately, it’s how a company’s success is defined JEFF MACKLIN: This year [LAUGHTER] You know, it’s time to get going We’ve been stagnant So we’re looking forward to getting going ED HESS: Everybody who’s been watching, we thank you for joining us To the class, thank you for attending and for your questions to the panel Thank you for coming All of these people came from other cities to join us Thank you for your participation and your wisdom and your experience, and continued best wishes on your journeys and everyone have a nice evening Thank you very much [APPLAUSE]