The Phenomenal Rise of Black Bear Diner: Bruce Dean's Story

VO:

Some of the most epic things ever accomplished began with the phrase, "Hold my beer and watch this." So, chill those ice cubes, pop that cork, or crack open that can because we're about to share an amazing story. Welcome to the Forward Drinking Podcast. Here's your host, John Hutchings.

John Hutchings:

Hello everybody. Welcome back to the Forward Drinking Podcast. I am your host, John Hutchings. Today I'm very pleased to be hosting Bruce Dean. Bruce is the co-founder and co-owner of Black Bear Diner. For those unfamiliar with this diner chain, I can only best describe it as a warm environment offering food and accommodations that are the way Mama did it. If you dine at a Black Bear, I promise you will leave with a full belly in a warm heart. And what's best about this story is that it didn't stop with creating one amazing restaurant. Bruce is going to share with us the trials and tribulations of growing one amazing restaurant concept to currently 154 operating diners across the nation and still growing. I'm so excited I can't contain myself. Bruce, welcome to the show.

Bruce Dean:

Hey, good to be here. Appreciate it.

John Hutchings:

Yeah, glad to have you. So, Bruce is obviously a very busy guy. We're recording in the morning. Normally we record these in the afternoon, but because of that we're going to be a little different today on the drinking. So Bruce, what are we going to drink today?

Bruce Dean:

I think we're going to drink some pour over coffee from your last guest, Theory Coffee, right?

John Hutchings:

Yeah. Yeah. We love Sam. I love his coffee, so I'm not going to pass up any opportunities to enjoy it. I am going to invoke a little diplomatic immunity here, and I will say sometimes it pays to be the boss, but I am going to throw a little shot of Bailey's Irish Cream in mine. But I'll go ahead and get these poured up here.

Bruce Dean:

None in mine, please.

John Hutchings:

Yeah, none in Bruce's. Bruce has got shit to do. It's early.

Bruce Dean:

That looks pretty good.

John Hutchings:

Oh yeah, perfect.

Bruce Dean:

Got it in a great mug too.

John Hutchings:

Yeah. Yes. And so, we memorialized today's show with some awesome Black Bear Diner coffee mugs, which I love because they've got that old ... They're kind of thick, they have that old kind of camp feel to them. But Bruce, thank you for being here. Cheers.

Bruce Dean:

Cheers. Thanks.

John Hutchings:

Alrighty. Well Bruce, let's get started. Tell us about where you grew up.

Bruce Dean:

Well, just kind of a little background on how I got into the business world. I grew up in the San Francisco Bay Area, Pleasant Hill. And when I was 15, I went and I got a job at a Sambo's restaurant in Lafayette, California. I was a dishwasher and loved it, loved the business from the very first day that I got into it. Little bit different reason why. Back then I was like 6'2", 150. Now I'm 6'4", 250. But back then, boy, I could eat. And so, if something got messed up on the cook's line, they'd hand it to the dishwasher and I'd eat. I'd eat all day long. So, I love that, and just loved the business. And pretty soon I was learning how to cook, and was cooking and basically earned all the money to buy my first car. And then I went to UC Davis and worked at the Sambos in Davis while I went to school.

Interesting side note, we purchased that restaurant as a Black Bear Diner probably 12, 13 years ago. So, that's Black Bear Diner in Davis. And my daughter who went to Davis as well, worked in that same building when it was a Bakers Square in 1996. So, a lot of history in that building. I worked four years straight, 2:00 to 10:00 every week while I was in college. My folks didn't have any money. My dad had lost his job and I had to make it happen. So, never went to a football game, never went to a basketball game, never did much except go to school and work, and was able to get out in four years and try to move on. I went up to Cal State Chico in the graduate program. In those days I wanted to be a city manager. I loved the idea of managing people, and processes, and budgets and all of that. Loved it.

But right about that time Prop 13 happened, and basically all or many of the jobs in the public sector went away. So, I pivoted to business, learned a little bit about business, but really learned about business in my first job. And my daughter was born in 1977, and I had to get to work. And so, I got a job with Bank of America, in on the operations side not the loan side, and learned about business, learned about cash controls, and managing people. Really the most important thing, managing people, and to get what we needed to do and get done, and have people want to work for you. And that was challenging, because I was 22 years old and I had a group of older workers that had been there for 30, 40 years.

And they'd seen 100 people like me come through the business. And trying to get them to listen and appreciate what I was trying to say and do was really important in my development in business. And learning how to just manage your time, which is really important in business, being able to structure your day and move forward from there. So, the bank then moved me up to Redding here, and I worked back in the old days where Everyday Fitness is on Athens was a Bank of America, called Bank of America Village Square. I worked there, and worked in Anderson. And then they gave me an opportunity to be the operations officer in Mount Shasta. So, moved up to Mount Shasta, loved it, didn't want to leave there. The bank called me and said, "Look, we've got a job for you back here in Oakland." And I just said, "No, I think I'll make my way up here in Siskiyou County." So, I'd met what soon to be my wife, and she had a family business.

And they needed help running that family business. And so, I transitioned over from Bank of America to running the family business out of Weed, which included a motel and restaurant, and some stores. And so, I spent the next amount of time learning about, again, now I'm learning, pivoting over to private business. It was the restaurant had been there for a long time. The motel, and again, I built a number of convenience stores up there at the time, starting in Mount Shasta. And took an old, it was like an old gas station, but it had been converted to a used car lot. And I switched it back to a convenience store, and started putting in things that I felt was important from a food side. Back in those days, there wasn't homemade food in convenience stores. There is today, but back then I added deli's and people making fresh sandwiches, and salads, and things of that nature, and really ramped up the food piece within the convenience store.

And did that in Mount Shasta, did it in Central Yreka, did it in Weed, did it at actually a second store in Mount Shasta. And just grew that, all the while sitting there running the restaurant and really working on the restaurant piece and what did I want to do, how to make it better, how to make the systems better, how to make the food better. And in 1995, a landlord that had been in Mount Shasta that had done the gas convenience stores in Mount Shasta had a restaurant in Mount Shasta called Jerry's. And it's a chain that'd been around for many, many years, started in Yreka and actually grew to about 60 units across the west. But they had come across hard times and they weren't paying the rent, I think, in Mount Shasta. And the landlord came to me and said, "Hey look, do you want this restaurant?"

I thought for just a minute and said, "I want this restaurant and I can do this. I can do it." But I didn't have an idea. I had the food, I had what I wanted, I knew what the customers loved, I knew the value perception that they wanted and the quality that they wanted, but I didn't have a name. So, I had been friends with a fella in Mount Shasta that we had done a subdivision with actually. And I went to him, and his name is Bob Manley. And he owned the Shasta Wildlife Gallery in Mount Shasta, been around for a number of years. We had had actually built a new gallery building that's still in Mount Shasta, kind of up on the corner. Those of you who know Mount Shasta know where it is. And Bob and his wife, Laurie, ran the Wildlife gallery there. So, I got with Bob and he said, "Look, let me kind of think about it."

So, he thought about it overnight and came to me. He said, "Look, I had a dream about it," he said. "And what about if we name it Black Bear Diner? And we bring down a number of the artwork out of the gallery and gift shop items, and things like that, and decorate it kind of the art gallery, kind of like a Mount Shasta cabin theme." So I said, "Well, that sounds great. Bob, you run the brand side, I'll do the food side." And so, we decided to do it. Problem was we didn't have any money, kind of the standard refrain in the restaurant business. I had $20,000. I'd sold a boat.

John Hutchings:

Not the boat, no.

Bruce Dean:

The boat, please. But the boat went, and Bob had been a teacher. He'd never been in the restaurant business ever. And he'd been a teacher and kind of a wildlife artist and a guide, kind of an interesting guy. So anyway, he says he got $20,000 out of his retirement account. So, we had 40,000. That's what we started Black Bear with. Now $40,000, and I'll tell this, say $40,000, well, that's a lot of money, but not really when you're starting a restaurant. Today, when we build a restaurant it costs us about 1.9 million to build a restaurant. And we did it for $40,000. So, we did it. We went to the landlord and said, "Look, we need some help here." And he had faith in us and faith in me because of what I'd done in the convenience store. So, they put in some money that helped us remodel it, and they're still our landlord today. And that was, again, that's 20, 28 years later. So, we did that.

I went to our grocery provider, food provider, Sysco, and they never do this stuff but he gave me 60 day terms on the products that I was buying. So, I didn't have to pay for that food that I brought in on the first day for 60 days. So, I could do 60 days worth of business before I had to pay my first bill. Again, they never do that stuff, and they wouldn't do it today for me. But today it's five to seven days and you pay-

John Hutchings:

And now, is that standard, Bruce, in the food industry is like net seven?

Bruce Dean:

Yeah, it's net seven.

John Hutchings:

Wow. I did not know that. That is unbelievably difficult.

Bruce Dean:

Right, when you're starting a business it's tough. And that's really one of the main reasons why these restaurants fail. Three quarters of restaurants fail within five to 10 years. And it's really not that they had a bad idea, or the food was bad, or whatever, they just simply ran out of money. It takes a lot to operate a restaurant once you get it open. And so, I always tell people, "Make sure you've got what it takes from a cash perspective." Cash is king. I always say cash is king. Not, "Well, we were profitable the first month." Well, that's great, but what's your cash position? Because that's really the thing that's going to knock you out.

And so we opened up the restaurant, we got it all done. We decorated ourselves and opened it up on September 22nd, 1995. Bob in the front of the restaurant, pouring coffee. And those people might know Bob, he's a guff, big laugh, and he's guffawing with the customers. His claim to fame was that he could pour coffee by crossing his hands and pouring coffee into two cups. That was his deal. All the while I'm back in the kitchen, sweating bullets over trying to get the food out, and just working hard to make sure ... I'm really specific about how I want our food presented, how it looks to me, everything that you and I eat, if it comes to you and it looks nice and looks beautiful, and has color, you're going to like. If somebody just flashes some stuff down in front of you and doesn't really care how it's presented, or if there's any color in it or what, you're going to sit there and say, "That doesn't look too good."

John Hutchings:

Yeah. A good analogy I would think is, I don't know too many people that would eat sushi if it just looked like a rotten old dead fish. It's edible art.

Bruce Dean:

And it's a good point. I mean, when you go in and eat sushi and stuff, I mean, how beautiful it looks. The things that they're doing with that is everything. And that's really wherever you go and eat, you want your food to look nice. And I was very specific to how I wanted it to look, the portions that I wanted, Black Bear's known for large portions of food, and I wanted to make sure. I wanted our customers to determine how much they wanted to eat, and I give them a to-go container to take it home and finish at home later. I always used to say, and I don't know if it's true or not, but we probably have the highest level of to-go containers going in the industry because I wanted people to take that extra food home, or eat it there.

But I wanted people to feel that they got value. Another one of my Bruce-isms is that it's not necessarily the price that you're selling food for, it's the value, your perceived value in eating it. All of you that are listening to this have probably your favorite restaurant out there, and you're probably really happy with the food that they're giving you, and the value that you're perceiving as a guest is important. It's not only just around food, it's around service, and the environment that you're eating it in. You could have the greatest food in the world, and if you're eating in an environment that is not inviting and doesn't feel emotionally good to you, you're not going to want to go back. Eating is emotional. Again, I always go back, where do you go to your favorite restaurant? And they probably one, make you feel important, and you know, go in, you know what to expect.

And there's consistency around the food, and you know what to expect, and you feel comfortable there. And that's what people want.

John Hutchings:

Absolutely. So, I think one of the things that's just so awesome, and I know for me and my story, when we talked about the opening day, how was that for you guys? I mean, obviously $40,000, even I know in a today's world I don't think you can start a business for $40,000. I mean, I have to imagine that getting in over the hump on that opening day had to be really something.

Bruce Dean:

Well, it was such that I had to hurry to get it done. I couldn't just keep going on and going on. At some point I had to start paying rent. I had to start creating some cash flow with those terms that I got from my grocery provider. The more cash flow I could do before I started having to pay the bills was really important. So, we rushed it through, we got it done. We opened up that first morning and nobody showed up. I've been in the restaurant business a little bit, so I kind of knew that not everybody in the world is going to show up the very first morning that we're there. But my partner Bob, again, remember, he had not been in the restaurant business before. And so, he's just sweating bullets. "Oh no, here we go. We're going to lose everything. We're not going to make it, blah-blah-blah-blah." But by noon that first day people recognized ... Mount Shasta's a small town. So, everybody knew we were open, and we were lined out the door in Mount Shasta for coming noon, and really didn't stop for a long time.

And I tell the story that we sat there, again, back to the common denominator of no money, so we couldn't really hire a lot of people. So, we worked 16 hours a day for 38 straight days before we were able to get a little bit of a break. And if you're in the food business, you know this, that if you're working around food you don't feel like eating food. That's just the reality. When you're in there all day, all night, cooking food, and Bob's serving food, and you just ... So, we each lost 40 pounds. That's a true story. We lost 40 pounds while we opened the Mount Shasta Diner. Now, no worries. I found it again.

John Hutchings:

Maybe you should send me out to help you launch a few restaurants, I'll lose some weight.

Bruce Dean:

Yeah. My wife says, "Why don't you go out and go open up a few more restaurants?" So, that's how stressful it was. And to get this important, this was everything. I mean, we put it all on the line. And so, another important lesson to be learned is we really didn't pay ourselves any money for over a year. We had juke boxes in the diner, and back in the old days people would put quarters in the jukebox, and every Monday morning, Bob and I'd get out, we'd go over to the jukebox, I'd get the deal, take the quarters out, we'd go to our office, which was booth number nine in Mount Shasta. And pour the quarters on the table and split the quarters. And that's what we got paid. Luckily, we had places to live and things, a little bit things to keep the wolves away from the door, but that's all we made out of the diner was quarters. And I ate every meal there for almost three years.

Just had to do it, had to be there. So anyway, it's just a lesson learned that if you're in this to make money, you really need to have a higher purpose than that, that you're really in it to make a difference and do great work. And the way I look at it, the money comes along and it did. We were lucky that way.

John Hutchings:

Yeah, for sure. I think people getting into entrepreneurship I think have to know, and I don't know if this is with everybody, but I'm beginning to find everybody does seem to have the same story and that everybody suffers in the beginning. And I think a lot of people don't understand, well, for how long? And so, in your case, Bruce, I mean, how long was it before you guys were reaching a point to where you felt something was coming back?

Bruce Dean:

It really took seven years to get our cash flow where I didn't have to worry about it, because we started so underfunded that every dollar went back in the business. And so, every Friday I'd write the checks knowing that I'd send them, that they would maybe get to where they were going on Monday and wouldn't clear my bank till Tuesday. And that was the way the bills were going to get paid. And I knew there'd hopefully be enough money in the bank on Tuesday for those to clear. And so, it's not an easy feeling.

John Hutchings:

Yeah, no, that's horrible.

Bruce Dean:

Because if you had a bad weekend, you could tip over. And so, I'll tell a story about that in a minute. But before we do that, we decided ... We did really well in Mount Shasta, and there was a lot of people from Redding going to Mount Shasta to eat breakfast, go up on the mountain and ski, and do all the things that they do in Mount Shasta, and would always include Black Bear Diner on a visit. And we still have thousands of people every year traveling through that stop at the Mount Shasta Diner. And we actually have it, I don't know, it's hard to believe, but it's true, we have a whole number of people out there, we call it our passport program. We give them a little passport and we put a stamp in it every time they visit a Black Bear. And so, they'll go on vacation and plan their vacation vacation around, "Well, there's a Black Bear Diner in Visalia, and there's one in Pleasanton, and there's one in Sacramento."

and they go all the way up and they get their passport stamped. And then after every so many visits, we send them one of the coffee mugs, or we send them a jacket. Now, we have 154 restaurants that go all the way back to Little Rock, Arkansas and St. Louis, Missouri. We have a number of people who've visited every restaurant, and some of them twice. And so, I don't know.

John Hutchings:

Goals.

Bruce Dean:

Yeah. So anyway, we came to Redding. In 1997, the landlord of our location at Redding, which is on Cypress and Hilltop, that was a restaurant that was called Harry's. Those of you who can remember, I think it was a Jerry's before that. And I think they just took the J down and put an H up there. And it was a cheap sign conversion. So, they had had enough, the landlord came to us, said, "Look, I'd love to have you down here. Look what you've done to a Jerry's in Mount Shasta. You've tripled the sales. Why don't you come down here to Redding?" So, being the eternal optimist with still no money, because I told you it took seven years to be able to build the cash, and this was two years in, we sat there and came down and opened our restaurant here in Redding, which has really been a great move.

But back then, on June 30th, 1997, we wheeled in three or four bears, hung a couple ugly pictures on the wall, and had [inaudible 00:22:16] Signs, who does all our sign work all the way around the country still, put up a sign, said Black Bear Diner. And we opened the door on July 1, 1997 in Redding. And really an exciting deal for us. And again, started the whole scenario again where we're working many, many hours, and trying to make this thing go, all the while still trying to keep Mount Shasta going. Summer of Mount Shasta is when the business is, and here we're down in Redding opening Redding. And so, people ask you, "Well, how is it to grow a business?" Well, from one to two, it's five times as hard, not twice as hard, because you now have to balance yourself.

So anyway, so we opened Redding, and again, started a little slow, but then got busy. But I like to tell the story about my partner, Bob. He'd come down from Mount Shasta and I'd be down here, and then he would come in the restaurant. And then if you know that across the street from the diner in Redding is Denny's. Well, for us that represented the big national chain. It was a big deal that we were going to be competing with a national chain. And how were we going to do? So, we would come down, I'd see Bob, grab a cup of coffee and go out, there's a divider in the road out in front of us there. And he'd go stand on the divider and count cars that were going into each business.

John Hutchings:

Google Analytics.

Bruce Dean:

Yes, Google Analytics. He'd come in, he said, "10 cars went into Denny's and two lost souls turned left into Black Bear." Okay, well be patient, Bob." He says, "No, we're done for. We can't compete with them. People aren't going to allow it." So anyway, he'd come down a couple weeks later and he'd stand out on there and come in and say, "Bruce, five cars went into Denny's, five cars went into Black Bear. Maybe we have a chance." Couple weeks later, he had a smile on his face. He came in and said, "10 cars went into Denny's, but they walked across the street to Black Bear." So, just a story that we had that we were able to compete with a national chain. Here we are, small business in Mount Shasta, knew that we had something kind of special. People really loved coming in.

Not only the food, but the feel, and the staff, and the cabin theme, and always had the music going. And trying to make it as comfortable as you can. You can't underestimate when people come in, or guests come into your business, whatever businesses that it is, that they feel comfortable in there, that they feel emotionally aligned with you in your business. And so, a lot of people, I'll go into a lot of restaurants and places, and the food's pretty good but there's just no environment. You can hear yourself breathe in there, and you've got to whisper because the other guests might hear you, whatever. You have to create an environment where people feel comfortable. Comfortable to talk without the next table listening in. And so, it's all kind of important that you wouldn't think much about, but it really makes the experience and makes people want to come in.

John Hutchings:

So, at that point in time, Bruce, I mean, you've now opened Mount Shasta, you've now opened Redding. It seems like you've got something. Was it that point in time where you guys thought to yourself, "You know what? I think we need to start scaling these restaurants."

Bruce Dean:

We're really smart guys. We're really smart guys. So, we did a couple of things that proved that we weren't. We decided we were going to go to Chico. The next step for folks that are doing business in Redding would be to go to Chico, kind of the same kind of town, blah-blah. But it's not, It's a different town. It's a university town. It feels much different than Redding. So, we went in and took a restaurant that was probably 2,000 square feet, not far from campus, thought that it was great, and it was great on the weekends. But during the week all the students would park in our lot. And I just didn't have the heart to have them towed. And basically it was difficult for people to get in the business, and we didn't do a great enough job in finding the right people to run it.

I underestimated what it really was going to take to do that. And I couldn't do it from Redding and Mount Shasta. And so, we had to have a manager, and that that manager position in our business is the key position to success all around the country. Great manager, great business. Manager that's struggling, restaurant's struggling. That's just the way it is. So, we had a manager that was struggling, the restaurant struggled. We were in the wrong place, we were too small. People were parking in our lot. And so, the handwriting was on the wall. But in the interim, again, another really smart move, we went down to Red Bluff and opened one in what felt like a gymnasium. It was a huge former Golden Corral on Antelope Boulevard. We opened in there in the fall of '98, and it just was too big. It didn't feel right.

It didn't feel the way that we wanted it to feel. Again, that emotional connection that I'm talking about. So again, my partner, Bob, never been in the restaurant business. So, we were getting ready to open that business and people were ... The parking lot looked like a bees hive. You know what I mean? There were cars going everywhere, and people wanting to jockey to get in. And so, at a certain time of day, Bob opened the restaurant and let like 180 people in the restaurant at once. Well, I'm back there in the kitchen going, "How am I going to get this 180 meals or more out in a reasonable amount of time?" And you couldn't do it. So, instead of phasing people in the door, he just let everybody in. Well, it kind of set tone for our business and Red Bluff, and we just didn't do a great job of it.

We didn't know yet. It takes a while to know about your business, to learn what makes it successful and what are those components are. Well, we learned that it wasn't a 2,000 square foot restaurant in Chico, and we learned that it wasn't an 8,000 foot restaurant in Red Bluff. Our key spot was about 4,000 to 5,000 feet, 140 seats. And we could manage that, and we could manage the flow of guests in, we could manage the food out of the kitchen, and you'd kind of come to learn about your business, whether it's a restaurant business or whatever. And so, we ended up closing those restaurants, and took a pretty big financial hit. In Chico, I was able to get out of that relatively painlessly. We signed a short term lease, but in Red Bluff we couldn't release it. We had three years left on the lease, and we basically paid that rent for three years on an empty building.

And back in the day, I think that number's etched in my brain by fire. It was $5,300 a month back then that I wrote that check every month to pay that thing. And luckily Redding was doing well, that basically the cash flow that was created in Redding and Mount Shasta was able to pay that. Couldn't sublease it. So again, we paid it for three years. So, we came back with basically our tail between our legs. We thought we were really smart guys, but we really weren't. We didn't know who we were yet. And so, we just decided, hey look, we're going to sit tight. We'll have Mount Shasta and Redding, we'll make a good living. We'll be good. That could have been it.

John Hutchings:

And I think what's great about that, Bruce, is that I think of the American dream story, and you think about these things as far as how they start off with the initial phases, the bootstrap, and the grinding, and you see some success. You see that lift up, and then of course you've got that apex, you've got that fall off. It's almost like a theatrical movie. It's perfect. But the greatest part about these things is those that know how to learn and recover. And that's the part that we're going to talk about when we get back here. We're going to take a short break and hear from our sponsor for the show. And then Bruce is going to tell us about how he took these two restaurants and put them into hyper-drive. Stay tuned.

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John Hutchings:

Welcome back to the show. So, where we left off, Bruce, you were just talking about how you were going to blast Black Bear into the stratosphere.

Bruce Dean:

But we didn't ever think that. When we did Black Bear, we never really thought that we were going to be more than one in Mount Shasta. Our friends would come and we'd have breakfast there with our friends, and dinners on Friday nights with our friends in our own restaurant. And it just ended up being a special place that other communities wanted as well. So, how did we get this thing into an ability to grow it? Now, I told you about the Jerry's people. They had their restaurant chain, they were failing, they were underwater and I think going down. But they came to us and said, "Look what you did in Mount Shasta at the Jerry's there. You tripled our sales. Look what you did in Redding. It was formally a Jerry's, you tripled the sales of what was there. What about if you do that for us? We've got these restaurants, and so let's work out a deal."

Again, they didn't have money, we didn't have money. So, we had a fellow that, a friend of ours, a guy by the name of Ray Minton here in Redding, kind of got together between us and he came up with something that was ingenious and has worked. Basically, they gave us their Yreka Diner, which was a Jerry's up on the south end of Yreka. They gave that to us as part of this deal, and that was good for us. We didn't have to buy it, but in return we gave them an ability to license or basically franchise our brand throughout the rest of their diners, and through their restaurants to convert them to Black Bear.

So, didn't have a lot of money for that, but again, we didn't have a lot of money when we did Redding and said, "Let's start, let's do it." So, we went to Sparks, Nevada, a restaurant that they had lost, I think previous year, about $250,000, which in the '90s was a lot of money. It's a lot of money now, but it was a really lot of money then. And we converted it and made it cash flow positive. So, then we went to Susanville, converted their restaurant in Susanville, same thing. Then we went to Willow's, which is still a Black Bear. And then went to Salinas, which is still a Black Bear.

Went to Las Vegas and converted. Now, that was a big one for us, because here we are, a mountain brand, a mountain themed restaurant, cabin themed restaurant from the little town of Mount Shasta, 2,500 people or so. And we're now going to Las Vegas. And will people in Las Vegas in a large city like Black Bear Diner? We didn't know. Well, it started out a little slow. We didn't know what we had, they didn't know what we were. But as people came in, we had a absolutely great manager there. And he made every guest feel like they were the only guest of the day. This guy would sit there, his name's Ray, he would run to the front of the ... And if somebody walk in the front of the front door of the restaurant, he would literally run to the front and welcome them, get them seated, got to know all the customers, did that with everybody. Everybody. And so, that restaurant ended up taking off really on Ray's shoulders. And people ended up loving Black Bear. And they still love it that same location there today.

But it proved to me the power of great manager and a great team. And what was when we started wasn't doing much, ended up doing a lot. So, we converted, and we converted some in Phoenix, and we converted basically all that they had. They didn't have any more restaurants that they felt that they could convert. So, I said to Bob, I said, "Look, let's create a franchise company. Let's bring our partners from Jerry's into that franchise company as equity owners." And we created a franchise company in 2003, because we had all these other communities that wanted a Black Bear and we'd basically run out of the Jerry's to convert. So, we came together, did a franchise company, went to Chicago, there was a company there called Fran Corp that helped us put together all the ... There's a lot of paperwork, there's a lot of things you need to do when you're franchising a business.

And you've got to utilize people that are experienced in that. I mean, you have to trademark your names and all of that stuff, and make sure that you can use the name. So, we did all that and started franchising in 2003, and opened up. We had a few people that were interested, and I was just, "Somebody loves us. They want to put a Black Bear somewhere." And so, holy Toledo-

John Hutchings:

Flattery.

Bruce Dean:

Yeah, flattery. Yeah, let's do it. So, we did in Bend, Oregon, in Madras, Oregon, we did those and we went to Rohnert Park, California. And these independent business people that felt that Black Bear was something that they wanted to throw in with and trusted us to take care of the business. Now, to me, when you're franchising, to me, it was a personal obligation. They're putting their family's lives in our hands, and I've got to make sure to all the power that I can to make them successful. So, I would go and I'd cook in their restaurants at the start, and work with them, and get them off the ground, tell them what the expectation was and how we're going to take care of the guests, and what's the guests' expectation of a Black Bear. And we were able to duplicate that.

Now, I can't do that anymore. We're up to 154 Black Bear Diners. And again, we only thought that we were one. And when I say that, that's 154, and actually a couple more because we closed a couple during the years, not many, but that was separate openings, 154 separate openings. It's not like they went and bought a 20 unit chain somewhere and converted into Black Bear. They are individual openings, and each city is different, each team is different. I have to send a pre-opening to them. I've got to help them get off the ground, that's my obligation as a franchisor. And it's always funny to me, for those that are interested in franchising your business, you have to have a proof of concept. Not just, okay, if you're here in Redding, California you're doing pretty good and you want to start franchising your business, you don't really know how it's going to do in Chico, or the Bay Area, or Sacramento.

You have to prove this proof of concept outside of your home market. Home market here is easy, but the other places aren't so easy. And so, how are you going to do it? So, you can't expect your franchisees to be the people leading the way. For example, we have a bunch of restaurants in Texas and Oklahoma, and we'll franchise there. And we started to, but we opened I think 10 restaurants in Texas before we even considered franchising. I wanted to make sure before I ask anybody else to put their money up, that we've proven that the people of Texas will support Black Bear. And so, that's what we did. Again, we're still to this day selling franchises. We open about two franchise diners for every one that we open ourselves. We're still opening restaurants ourselves, again, leading our way into some of those markets that are far away.

And then hopefully we can follow with franchises in those markets once we've proven that there's consumer acceptability of the brand.

John Hutchings:

Yeah. So right now, Bruce, where would you say what is your furthest from home restaurant?

Bruce Dean:

Little Rock, Arkansas. St. Louis, Missouri is as far east as we're going right now. But in the next five years, we're going to continue to open restaurants, and I suspect and hope that we'll be coast to coast within this next five year period. Obviously Florida is a great market. We'd like to go to Tennessee, and Ohio, and various other spots in the east, but we really believe we have a national brand here with acceptance by guests throughout the country. And here we are, into our 28th year, and I'm just as excited about the business as I was in 1995, and what the potential it has and how fun it is. And just, I love to sit there and see the good things that are happening with our employees that we have, and now make sure that they're happy. That the culture of Black Bear, the culture of what we created in Mount Shasta carries to Little Rock. People talk about growing, but how do you carry the culture of your business? How you want your employees and teams treated? How do you want your managers to manage?

How do you want those that are above the managers, the district level, to manage those folks, to make sure that we are duplicating the feel that we want in these restaurants as you move east? It's easy to duplicate the food. I buy the food from the manufacturers, and we have Sysco distribute it and drop it off at the diners. Whether it's St. Louis, or Seattle, Washington or Phoenix, it's all the same. It's the same food and consistency across your brand is really important. People come in to Redding, California and have something, and then they go into, let's just say, Sparks, Nevada again, and it's different, then you can't grow a business that way. It's got to be the same so that the guests across the country is having the same experience from the food. Now, the people piece and making sure that your teams are happy and feeling well taken care of, because I've always felt you take care of your employees and your teams, and they're going to take care of your guests.

That's the way I look at it. And if they're happy, our guests are going to be happy too. So, creating that culture, people don't think a lot about, oh, I'll just grow this thing, but how are you going to grow the culture? How are you going to grow the feel? How are you going to make sure that that guest is feeling that, and that employee is feeling that far from your home? I can't go there anymore. I used to travel to every restaurant regularly, but I've decided I want to stay home a little bit. And I mean, this week I'm off to traveling again for things. But those are the things that you have to concern yourself with.

John Hutchings:

So Bruce, you're the first person we've had on the show that could actually discuss scalability. So, walk us through the success principles and the structure, I guess, of how to properly scale a business.

Bruce Dean:

Well again, you need to know your business. You need to know what works. Again, I went through the process of how we learned the proper size of our businesses with a couple of failures with the wrong size. So, you know what you can do successfully, and then you know how to decorate it, you know how to train people. The people piece is the key. The other stuff is easy, but training people and making sure that they understand just the things that we talked about, what we're trying to do, and our story, stories are important when you grow a brand, when you want to scale. The stories of the founders, the stories of when we founded, what the challenges were and the things, people enjoy that and they love telling those stories.

And so, what we call a pre-opening, we'll go into a pre-opening. Back in the day, I'd spent about 20 cents on pre-opening. Now we'll spend $250,000 in training 120 employees for up to a couple of weeks, and making sure that they know the stories, they know how to utilize the point of sale systems, and they got to learn the food and all that. And do that, then you can kind of scale the business. Obviously, you need money to scale. Now, back in the day, again, we didn't have any, but one big thing that kind of helped us back in actually in the recession, the big recession of '08, '09, '10, which was a really tough time for us, I had a local bank at the time, and I'm on the board of Cornerstone Bank now.

And I really believe in local banks. Well, Redding Bank of Commerce stuck their neck out back in the day and helped us when nobody else would. I'd go into some of the larger regional banks or whatever, and they'd just laughed me out the door. Restaurants, right. Recession, right. You're out. But they took a chance on us. So, if I sat there and said, "Look, if I can take this amount of money and I can just match it with this amount, we can grow." And we did that. And so, we opened in Modesto, we opened in Davis, bought that restaurant that I mentioned that I had grown up in basically, back in the days I was in college, bought that, man. And it was a different time. I mean, when we opened Modesto there was over 1,000 employees who wanted to work for us. We had to go to a hotel to interview people. That's a difference of back then really hard times, and today, which is different kind of hard times with inflationary pressures and stuff, but very low unemployment.

Anyway, so that's how we scaled it. A little bit of debt that we took. And I was very, very important not to take too much debt, I just don't like it. But we took it, and grew it, and kind of grew out of the recession with 28 quarters of same store sales growth. In our business, you look at your success in guest counts and you look in same store sales. So, hopefully your guest counts aren't declining and your same store sales are growing, and you've got a successful business.

John Hutchings:

Awesome. Two things here I want to go over, and we always have a teaching portion in this show. It's a part that gets me excited because I get as many nuggets, I think, as our listeners do. But two things that I've noticed from this conversation, and you've obviously done an incredible job at this because your business wouldn't have scaled the way it did if you hadn't been able to pull this off. And you've mentioned it a little bit as we've spoken here, but being able to find, retain, and keep good people that you can essentially duplicate yourself so you can grow this. I mean, two restaurants locally where Bruce could be there running in the hamster wheel, to 154 and growing nationwide. And I think we talked about earlier as these things have scaled, you're like, what, 16, 17 restaurants a year?

Bruce Dean:

Yes.

John Hutchings:

I mean, that's amazing. And without having the people to be able to find, and train, and duplicate these people, that wouldn't happen. And I think that's an important thing. So, can you walk us through that?

Bruce Dean:

Well, you're right. It is the people. And so, what we've learned is that I talk about culture, I talk about how I want the restaurants to feel and how I want our employees treated, and how I want them to be able ... I want to provide a career path for them. I mean, these are hard-working folks. And those that are interested, I want to provide a path for them to manage a Black Bear. So, we really believe in training internally, and we've been far more successful in promoting people internally, growing people to an assistant manager role, and then after a number of months or years moving them into a manager's role somewhere. So, that people piece and investing in training, and investing in that employee experience, I can't underestimate it. It's really important. So, that's how you grow it, is by getting the right people in place, the right teams, support them.

You can't just go to Oklahoma City and open one, and say, "Good luck, Joe. And I hope you do well." No, we've got to have people that support them, care about them. When they need a hand, you're going to help them, and making sure that they feel that level of support, and it generally works out.

John Hutchings:

Absolutely. And then number two, and I heard you mention this a couple times but I think it's so fitting based upon the climate that we're going in right now with the economy, that's value. And when I eat at a Black Bear, I can tell you it's the first thing I think of. I'm a bigger boy. I like my food. I have a funny story about that that I'll lead into here in a little bit. But value, walk us through value because you and I have talked about this recently about value separately when we had a conversation. Bruce and I are both in Vistage, it's a great CEO group for training, and value is so important right now. And I think that's what sets you guys apart from everybody else.

Bruce Dean:

Well, people want their money's worth. Now, in the today's inflationary environment, I mean, just last year our cost of our food went up over 20%. And that was pretty consistent across the industry. So, you had to raise price, you had to be able to do it, but you have to protect the value equation. If you just raise, well, I'm going to raise my prices 20%, well, all of a sudden you come in and people want ... Bacon and eggs is $15, and they go, "Well, I really don't want to spend $15 on bacon and eggs. So, instead of coming to Black Bear twice a week, I can only really come once a week." So, you've lost your value. So, it's important that the guest feels whatever they're spending, it's not price, and that's where people get mixed up.

It's does your consumer, your guest, feel that they're getting their money's worth at whatever price point you have chosen? And I'm afraid that across our industry today, people have exceeded price points that don't represent a value anymore to the guest. And those restaurants, well, they say, "Look, my food costs went up," let's just pick a number, "20%. And I really needed to raise my prices 20% to cover that." Well, that's only a winning strategy if people still want to walk in your door. If they don't want to walk in your door anymore, they're not going to do it. And I'm always said, every time you raise a price you'll lose a guest. There are some people that are just really price sensitive. So, we want to make sure that they, no matter what we're charging, that they're feeling that they're getting their money's worth.

We give a lot of food. We're not going to change that. We haven't changed our quality. I think it's a death knell for a brand of all of a sudden the price goes up, well, I'm going to choose a little less quality of food, or bacon, or sausage. Or I'm going to go to this other product that's cheaper, whatever. You know what? That's a mistake. For 28 years, people have been walking in the door expecting what they get. And if I was to now change what they were getting after 28 years, they wouldn't be happy. And rightfully so. So, I would rather, if I have to take a little price, take a little price, but again, all back down to whether the guest will accept that and say, "I'm still getting great value here. I love it here. They treat me great. I kind of like the atmosphere. I like it. I'm willing to pay it."

And so, in this inflationary environment, whatever business you're in, you have to put yourself through that prism. You have to.

John Hutchings:

Yeah. We definitely have gone through a lot of the same things starting with last year, and into this year especially. But last year, for our business, we have to contract barley as well as hops. But barley was one last year that skyrocketed with the whole Ukraine issue. And because we were producing way more than we had anticipated, our contract came due early last year instead of toward the end of last year, beginning of this year. And we saw about a 42% increase in barley costs. And looking at our brand, and looking at what we try to portray in value, we were only able to raise prices 8%. So, most of that came right out of our bottom line.

Bruce Dean:

Just remember this. It's temporary. I remember the days, like in '15 and '16 beef prices went through the roof. There was a drought and they had no beef anywhere. There was one business that I look across the country that has done great work, and that's Texas Roadhouse. And they never, or very little, raised prices during that time that the beef prices were spiking. They were looking at the long term. This will pass. Your barley prices will pass. Today, what are you paying for that same barley this year? What are you paying?

John Hutchings:

This year is 42 cents.

Bruce Dean:

And what was it last year?

John Hutchings:

Last year, before the contract went up, it was 30 cents.

Bruce Dean:

30 cents. Now it's up to 40. Has it come back down again yet?

John Hutchings:

They're claiming it's going to go up again.

Bruce Dean:

It's going to go up again. All right.

John Hutchings:

But after that, depending upon how things are looking, I think the world's economies in terms of supply and demand, I think are going to start to ... Because the economy's slowing down. So, the need for these products is starting to slow down. I know in the hops market, it's already going way down.

Bruce Dean:

So, I guess my point being is that these inflationary periods are temporary.

John Hutchings:

Correct.

Bruce Dean:

But if you react like they are permanent, and all of a sudden we say, "Well, my barley costs went up 42%, and I'm going to raise my beer price 20%," and pretty soon somebody's going to go, "I don't know if that's worth it. I just don't know. I think I'll go somewhere else. This is cheaper over here." So, in even your business, it's a fine line on how you price. Right?

John Hutchings:

Right.

Bruce Dean:

But again, always look at what I was talking about around the value. And you build value, not just around the product, you build it around your brand. And I think you've been very successful in building the Fall River Brewing brand. And that has value, and people will pay to for that. So anyway, it's all not just the price of the product, it's all these other things that the guest or the consumer finds is something they want to be, that they want to partake of.

John Hutchings:

Yeah. Well, I think of the story, and we'll leave you with this one. So, your Sparks restaurant. So, I used to be an engineer in Reno, Nevada for a construction company. And about once a week, us young engineers would get together and we'd always go to Black Bear, because you just got a young, 23, 24, monstrous plate of food. Usually we would kind of play a roshambo for who would pay the bill. But we actually started this contest where whoever didn't want to pay that day had a choice. They could either order The Grizz and eat it, and I don't know if that's still on your menu or not-

Bruce Dean:

It is, it is.

John Hutchings:

Oh my God, was it just a monstrous plate of food. But you had to order The Grizz and eat it, or if you couldn't eat it you were singularly paying the bill. If you could eat it, then everybody else would chip in and cover your bill for that day. And we would take turns doing that. I mean, you'd see our other engineers are sitting there, and just their bellies bloated, leaning back in their chair-

Bruce Dean:

You could eat one though, right?

John Hutchings:

Oh, I'd pound it.

Bruce Dean:

And I can eat one.

John Hutchings:

So good. But Bruce, thank you so much for being here. I really appreciate it. And your story is one that's just absolutely one for the books. But not only that, you're teaching, and that's something that I really appreciate, not only just coming on the show, what you've done through Vistage, the personal interactions that you and I have had, it means a lot. And for all the listeners out there, I really hope that you enjoyed this show. If you haven't already, please make sure to like, follow, and subscribe to the Forward Drinking Podcast. We'll have another one coming up here soon. Thank you very much for being with us. Cheers.

VO:

Thanks for listening to the Forward Drinking Podcast, hosted by John Hutchings. Has this episode motivated you to create your own amazing story? Then please subscribe and leave a rating and review on your favorite podcast app. You can also follow the Forward Drinking Podcast on Facebook, Instagram, or TikTok at Forward Drinking Podcast. Thanks again for listening. Until next time.