How to Spot a Billion-Dollar Idea | Inc.

Hello, and welcome to this installment of Idea Lab. I'm Graham Winfrey, a staff writer at Inc. Magazine. I'm joined today by Tilman Fertitta the founder and CEO of Landry's Inc. one of the largest restaurant corporations in the US and star of the new CNBC primetime series Billion-Dollar Buyer. Welcome Tillman. Glad to be here, glad to be here. In your new reality series, you are helping these entrepreneurs get their houses in order with the idea that at the end maybe you'll do some business with them besides looking for a quality product at a good price point what is it that you're looking for in these entrepreneurs to help you gauge whether or not you should be business partners with them well number one you're looking for something edgy okay but but then you've got to know that they're gonna still be in business if you started doing business with them and these are small companies that we're doing business with because they have something a little special about them so you want to make sure they know their business and then part of the concept of the show is is for me to help mentor them and show them what they're doing right show them what they're doing wrong and make sure they can scale up their business because when you're talking about a company that's doing say 200,000 in sales and then all of a sudden I give them an order for a hundred thousand in sales they've just grown their business 50% and one order can they really do it and that's part of the show you're helping them on a lot of nitty gritty nuts and bolts things like costs and margins but you're also counseling them on bigger picture issues what are some of the the bigger picture things that entrepreneurs that haven't been around too long struggle with they start making a little bit of money and they want to expand too quickly it's just like episode 1 in my opinion they were they were trying to open a commissary which all of a sudden now you had as much cost as it was for a retail store and they didn't have the business to really make it work and they went from making three hundred fifty thousand dollars a year to breaking even the next year and and remember a commissary is non income producing all it has is expenses and and so you see things like that in people's business where you want to help them and and make sure they don't make those mistakes what led to you do you think to become kind of a brand picker identifying brands that you thought can really go the distance and you know in a variety of sectors how did you kind of gravitate to that type of business approach well I grew organically always and then all of a sudden I realized coming out of recessions or bad times restaurant stocks would really fall and you started looking at the cost of building a new restaurant say it three to four million dollars each and all of a sudden you see this 50 unit chain that you can buy for a hundred million dollars at two million and they already had a brand they already had the pre opening they had really good locations or good leases or they owned real estate that always was part of I can take you through every one of them and tell you why I bought it okay chart house okay was one of the first ones of a brand that had been around some of the greatest locations in America they're on the waterfront okay but the the last ownership didn't do was change change change our parents used to go eat at a restaurant if it had four walls and decent food today we won't entertainment when we go out so one of the first things I did was totally change the look change the logo change everything I've changed the logo three times in 17 years at Short house just to keep things changing and be different I've changed the interior of the restaurants three times you go to a Martin steakhouse greatest food in the world but they never changed their look people they never expanded their menu I changed the look expanded the men you've got rid of bringing out a slab of beef and big old thing a broccoli ordered off the menu we know what all that stuff looks like you don't need to bring it to the table and and and redid the restaurants it's just being opportunistic where other people weren't taking care of their business there any other overriding business principle that you've brought to you know your approach to growth because it's not just growth and healthy growth but you really have expanded in all directions kind of with some of these brands well you get to the big box theory and and here's here's one somebody asked me why do you want to be in the gaming business okay and I'd say well let's think about it this way if you have 50 restaurants and B and you're extremely successful and each one of those restaurants make a million dollars you're doing pretty damn good okay but if I can go open me one casino that makes fifty million dollars I don't have to deal with 50 managers okay I don't have to deal with the property taxes on fifty and all the other support that it takes to run those fifty that one box takes care of their own issues and it makes it a lot easier on you my gaming division is five properties and does two hundred million in Nevada my restaurant empire is four hundred fifty properties that that do three hundred and fifty million in Nevada you operate in hospitality dining gaming amusements you know aquariums we own the major aquarium in Houston the major queer him in Denver how is running businesses in different but related sectors taught you to be a better entrepreneur well it all relates it's kind of like taking aquariums and putting a big seafood restaurant in them and I realized that instead of shutting it down at five or six o'clock in the evening like most aquariums I was able to keep that part of the business open longer because people would come for dinner and so you're putting entertainment with the food and so therefore you did more admission sales with no cost to sales a common saying in business today is if you don't disrupt yourself somebody else will disrupt you is that something you believe in and if so have you ever talked about disrupting the companies that you've run is one of the things we preach that my company is change change change and if you don't change and mix things up you're gonna get run over because it's changing very quickly just like in anything today in technology medicine or whatever you better move quick and you better make change before you start going this way so that's something that that you know I just really really really work on in our company is it's change all the time are there any particular innovative business models whether it's uber or blue apron or Airbnb that you pay a lot of attention to because you think that that could have an impact on one of your brands the person who wants to go stay in and and a hotel that I went on Airbnb is is is not my competitor and I know a lot of the hotel chains are panicking about it and don't like it but it just it just doesn't bother me it's just more competition and and every field out there there's a lot of competition okay and it just makes you be a better operator I've made everybody a better operator in every market I've ever been in okay but at the same time I'm always looking to see what other people are doing better than me and if I think they're doing it I will take a little something of what they're doing and put it with me I am not scared to copy and I don't mind being copied so Morton's The Steakhouse and rainforest cafe very different vibes what attracted you to those different restaurant brands or what do they have in common that most but most of us wouldn't know they're so totally different but they're the same I mean you're still getting lettuce you're still getting meat you're still getting proteins you're somebody's still waiting on you it's just the same guy that goes to rainforests with his grandkids or his kids it's the same guy that goes to Martin's or Mastro's one night you know what's so funny is in Beverly Hills and in the LA area the two busiest restaurants are mine I have a Mastro Steakhouse which does 30 million and I have a rain forest in Anaheim that does thirty million okay well you couldn't be on more opposite ends of the spectrum but the systems that we put in our restaurants are the same systems okay it's the service better is the decor different is the food presented differently are you getting a better steak then you would a train for us absolutely okay but it's it's still food and it's still entertainment and it's still fun people go to Mastro's as much for the entertainment and the energy as they do for rain forests for the entertainment and energy in there so the business is the business what's your take on partnerships nowadays there seem to be a lot of established companies I've been around for decades partnering with smaller more nimble tech startups do you think that big companies are right to pursue partnerships like that to kind of stay on the cutting edge of things or is this partnership craze kind of a little bit of a fad I think you have older dinosaur companies that are scared and and and they don't think they're innovative enough and that's why they're doing that but but you got to look at yourself and and and realize are you staying on top of the trends and now do I think it's good that I have four kids that are in their late years of knowledge in their late years of high school that we're gonna look at things differently than me yes and I'll look forward to them being involved in my business because they are Millennials and they are gonna see things differently but they also know what brought them to the dance is by doing certain fundamentals okay a particularly hot topic right now is robotics can you see a day when your restaurants your casinos your hotels have robots zipping around taking orders dealing blackjack tables you know I would not say no to anything okay you know my online gaming company I mean to sit there and be able to play blackjack online you know it's kind of robotic in the sense because you're doing it you know through the internet and you're making a bet and everything so when we sit there and I remember being a little kid and going to Disney and we saw the telephone at home where you would be able to see the person was that that'll never happen well who would have thought we would have done it on our cell phone and cell phones just you know 20 years ago what are some counterintuitive truths about being a good restaurateur well I'm a business guy first okay and you can be the best restaurant tour in the world but if you're not a business guy you're not gonna be successful okay you can hire anybody to cook food and to run the front but you better understand all facets of the business again is the customer always right I preach that okay that there are no spare customers and if you go into one of my restaurants and you can try me you can ask for scrambled eggs at seven o'clock at night and and we'll fix them for you because I hate going into a restaurant and being told we don't do this if we don't substitute this we're not going to do this or you staying at a hotel and they say but we don't serve breakfast now it's 11 o'clock I'm sorry you can go to the Denny's across the street okay you can get anything in any of my properties at any time there are no spare customers how does running casinos test your entrepreneurial acumen differently than restaurants or hotels are not at all I mean you can talk to any casino operator and where they struggle the most is with their hospitality side putting the heads in the beds and managing the housekeeping side of that and the front office side of that and then there F&B side okay remember gaming is the most regulated industry in the world you had this whole division set up and all these machines set up and all these people set up to make sure that you don't steal from the customer and the customer doesn't steal for you so that's the easiest part of the business what everybody struggles with is the areas that are very easy to me so that was an easy easy transition you said that you spend a million dollars a year just on sheets how do you know when you're overpaying for something like that versus skimping on quality when it's at such a large scale we know what we should be paying we know the market the biggest thing is what happens when you're big is your buying power is so good and you would look at say a Marten steakhouse or a McCormick and Schmidt seafood or whatever as decent-sized company because they're doing a couple of hundred million in sales but when you get acquired by a company that's doing over three billion in revenue we have never not taken five points out of their cost so if you just take a company let's say you pay 200 million for and it's doing - let's just say 200 million in sales and you take 5% out of their cost that's 10 million a year and more-- better yeah we've done it every time you said that anybody can ask you anything about any of your businesses and you'll know it all is that I think they edited that I'm pretty damn good so far at me I'm not trying but you can put me at no you I'm all right being a doctor all right my first question is is that something that you think you specifically are just obsessed with details or do you think every entrepreneur should have a similar godlike knowledge well let me say this my company's really big today and I don't know a lot that's going on every day but I put everything in place to begin with and I can tell you this every there's nothing like history ok and and what I have over everybody else is I know the story of every little thing and how it got to be there right or wrong now why was I successful because I do understand develop and I can look at something I know how to build it I know how to create it I know how to design it but also on the person that I feel like understands that what's trendy for our customers and our restaurants it's my job that's my job and being the leader to make sure that we don't get behind the eight-ball so what do you see in the future of the restaurant business the restaurant business is changing Millennials eat differently they want to hear different music they want to sit at a higher table they want to sit more in a group and it's more small bites let's order it's it's more communal you know it's not the same it's it's more fun and and and you just better change with it if you don't you're gonna get passed by you're no stranger to big business deals but you're not the kind of guy who raises a hundred million dollars for a startup that doesn't even have a product in market yet what do you think of the venture capital amounts being raised by some of these startups that really barely even have proof of concept you know it's the old you throw them all in the Hat and if you look at the people that tell you they made a billion dollars on that one they might have lost a billion on the other nine and the puts when you hit it big like that you're just playing the odds and it's still hard to build a successful company because number one you have to have a product that's release is really special that a bigger competitor cannot crush you and then you better know all the aspects of the business that I always talk about operation sales and and financial which of the following three sectors casinos restaurants hotels do you think is more in danger of being kind of disrupted or changed in a way that might take a lot of effort to manage well you know and TVs helped do this restaurants are very competitive today because everybody who thinks they can cook and get investors and the stupid investors helped them open the restaurant they're not there two years later one of the things that has made my company strong is that I'm so location driven look at my locations the Chart House and Weehawken that looks over the has the prettiest view of the skyline of New York that even during the recession wasn't affected in sales then you go to the bubba gump on Times Square okay because of the amount of people I can only put so many people in there was not affected by the recession okay location location location is just so very important the gaming business is tough because it's so competitive too and every state wants to keep building them because politicians love to say I'm creating jobs but politicians just don't do what's best for their constituents but they do what they think the people want to hear but then the other casinos in the market because all the money's being drained out don't have the money to refurbish and keep the rooms nice keep the casinos nice and that's how you have a screwed up market like Atlantic City is because they kept building properties they should have said six to eight properties here and that's it do you believe in the concept of making your own luck you know being prepared and when preparation and opportunity kind of overlap that's that's when people get lucky you know for sure I can tell you this I think a lot of people throw in the towel too hard too fast I mean I think people throw in the towel and and and because they don't know how to fight and I know the different points in my life I could have thrown in the towel and you'd be surprised how much fight you have in you and how much fight you can put up against the other side if you just do it what are one of one or two of the the riskiest bets that you made and you really didn't have any way of you know having certainty of knowing that it was going to work but you felt like you had conviction and you and you made a risky bet well I can tell you this I mean coming out of the recession in Vegas and Laughlin were not back I did't landok City in Atlantic City was probably the only business that I've ever opened up where it was truly losing ten million dollars a year and then while that was happening I went and opened up a new casino in Biloxi and then while I was doing Biloxi before it was back on its feet I went and did almost a billion dollar deal in Lake Charles Louisiana so I kind of rolled the dice on my on my gaming division all at the same time and it really worked out well what gave you the confidence and the foresight to make those bets you know I just it's just a gut feel and you feel like you know your business and you feel like you're putting the right product and and it all turned at the same time the next year Atlantic City made 20 million Biloxi made 30 and Lake Charles made 75 your experience working with these entrepreneurs on billion-dollar buyer do you walk away from that experience feeling encouraged about the state of entrepreneurship and the mindset of today's young aspiring entrepreneurs or were you surprised at the level of inexperience the level of inexperience is interesting and a lot of them are more artists than businesspeople and and their characters and my feel-good is is that even the ones that I didn't purchase from they're much smarter businesspeople today and in just the days that I spent with them and analyze their business every single one of them has told me how much they've learned and I probably have enjoyed that the most is I know I've had an effect on these people's business what's the one mistake you think all small business owners make pretty much you usually don't have enough working capital and they don't know their numbers I ask people what are you doing sales and they don't even know I ask people how much money they make last year they don't know what do you think is a common pitfall for someone who thinks all right I memorized all my numbers I've got working capital I'm set I think that a lot of them can start off and and they they get some of their product out there but then they can't get it to the next level the Millennials there's so many entrepreneurs that are Millennials and it's just too competitive out there it's just hard to get there and to get the shelf space to selling on shows like Shark Tank you know you asked one of the Sharks well you've made 10 investments in the past year how are all those investments going and they'll say yeah we're we're still working through a lot of you know growing pains and there's even a follow-up show about what happens after they make the deal what how would you describe the state of the shares with your existing brands that you're doing well and I know that on Shark Tank a lot of those deals don't happen but I know one restaurant startup a lot of those deals don't happen you can't do a television show and tell the whole story and get into all the due diligence right and so and they're investing real money so I see that side of it what I'm trying to do is the day after the show runs I'm trying to have that product in my store the concept that I four so that's something I'm working really hard for them to see and for the customer to see and for the viewer to see that this was a real deal and it really did happen today are you pleased with with how things are going with the brands that you partnered with no because we haven't put one in the store yet tomorrow will be the first one so much free time to that thank you for shit

Channel: Inc.

Views: 83,704

Keywords: Inc. (Magazine), Inc.com, Small Business, Entrepreneurship, Business, Entrepreneur (Profession), Startup, ideas, money making ideas, Tilman Fertitta, CNBC, Billion Dollar Buyer, Graham Winfrey, business ideas, business tips, business advice 2018, valuable business ideas, most valuable business, make a billion dollars, become a billionaire, billionaire, earn money from home, earn money online, money, extra income ideas, online side jobs, no investment, investing in businesses

Id: SBiNNcYQKw4

Length: 20min 23sec (1223 seconds)

Published: Mon Nov 26 2018