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Kevin Abt of Restaurants to You.com

THE SMALL BUSINESS SCHOOL
Fast Growth Through Franchising:
Creating value, making a difference

OVERVIEW:

Herndon, Virginia and Stoughton, Massachusetts:
In this segment of the show, we go into the trenches to meet Kevin R. Abt, the founder of Take Out Taxi and more recently (2006), he started, runs, and is growing Restaurants to you.com.

Opportunities to start and grow a business exist everywhere. It takes courage, tenacity, thoughtfulness, long hours, and just plain hard work. Those who are looking for shortcuts are destined to fail.

Kevin Abt does not take shortcuts but he does make it easier for people to follow in his footsteps by creating a franchise model of his business.

Although Kevin started Take Out Taxi, he always had partners. So, with this first concept, he cashed out and followed his children as they went off to their universities in the Boston area. He advised others, served on boards, and did the lecture circuit. But he was still young, so he started up again!

During his tenure with Takeout Taxi Franchising System, Inc., the company grew to include more than 225 locations nationwide, delivering more than $250M worth of prepared food from over 3,500 restaurants. History will forever know Kevin as the founder, former chairman and CEO of the country's first multi-restaurant delivery company.

TRANSCRIPT OF THE SHOW:

HATTIE: Are you too busy to cook dinner, but don't want to go out? One entrepreneur believed a lot of people felt that way, and he turned his idea into a thriving business. We'll meet him in a moment. Plus, we'll link you with a number of smart, experienced and hardworking business owners who've created their own success stories. This is the show to watch if you want hard information about starting or growing a business.

We have advice for you on direct marketing, on the law, on building a practice and on marketing your business. Plus, we'll cover another business basic; this time, putting systems in place to make your business successful.

In the Trenches

Start here for clip on Take Out Taxi HATTIE: (Voiceover) In 1987, when this little girl was born, this business was born.

It was her birth that changed everything for Kevin Abt and his wife. They were used to going out for dinner often, after both had put in a long day at their respective jobs. But with a baby, that was no longer practical. Here's a business owner who acted on his instincts and now is the leader in his industry.

KEVIN ABT: When I left my corporate career, I was on the fast track, and my peer network looked at me and said, `Kevin, you know, have you fallen on the ice? What are you doing? You're gonna leave to go schlepp pizzas in Herndon, Virginia?' And I said, `No, no, no, no, no, no.'

America is in the midst of a huge-time famine. And there are way too many nights across America today where people have to run their life around their meal schedule, rather than having a way to fit their meal into their life schedule. And so I thought the concept of Takeout Taxi--we bring the restaurants to you--was national in scope.

HATTIE: (Voiceover) Here's how Takeout Taxi works. In many cities in America--and the number is growing every day--Takeout Taxi franchisees mail and distribute menus to homes and offices. The menus may list from 20 to 50 local restaurants, including some of your favorites like Bennigan's, Fuddruckers and Steak and Ale.

Unidentified Operator: Takeout Taxi.

HATTIE: (Voiceover) When you're hungry, you call Takeout Taxi, not the restaurant.

Operator: And which restaurant tonight?

HATTIE: (Voiceover) The orders are entered into Takeout Taxi's computers and faxed to the restaurant. Takeout Taxi drivers are alerted and quickly pick up and deliver the order to your doorstep. When you add it all up, nationwide, Takeout Taxi is responsible for generating sales of $250 million. Of course, most of those dollars end up in the pockets of the restaurant owners.

RONNIE FOX: Well, we've been using Takeout Taxi now for about seven years, and during that time, we have seen an increase in sales about 5 percent to 6 percent consistently during all periods of time. And it's been a wonderful way for us to keep in contact with our regular customers who are unable to come out and share a dinner with us when they're unable to make it.

HATTIE: (Voiceover) Off-premise dining is one of the biggest segments of the $160 billion-a-year food-service industry. While customer counts have dipped for the on-premise market, off-premise traffic grew 40 percent between 1982 and 1990. John Tortorella is the director of marketing, and he explained to me how Takeout Taxi targets its customers and prospects.

JOHN TORTORELLA: One of the best ways we have is through our association with the restaurants we do business with. So if you go to most of our restaurants, you'll see a menu stand prominently displayed or a menu man, which is a cut out which holds the menus in a box. Once people make that association and they've decided they don't want to order out, we become a great alternative for them.

Another major means that we use to get customers, which was really what built the business up from eight years ago to where it is today, is direct mail and canvasing. When we're training new franchisees and when we're training our people in-house, one of the things that we always try to stress to them is you're not just getting somebody's address to deliver food to, you're creating a mailing label.

HATTIE: You know, we've been talking about food and it's 12:30, and I'm thinking I'm hungry and the crew's hungry. What do you think, Tony? You guys hungry?

OK, John, can I use this phone?

JOHN TORTORELLA: Absolutely.

JEFF: Takeout Taxi. This is Jeff. Can I help you?

HATTIE: I need to place an order for the Tortilla Factory.

JEFF: OK.

HATTIE: On those nights when you're too tired to cook and don't want to go to a restaurant, in the past, you have called in for a pizza. Now you have choices.

Make sure everything's OK with you.

Oh good, the food. Are we starving or what?

KEVIN: You have to have a product or a concept or a service that has broad market appeal. Concepts are cheap. It's really the execution of the details And in new concepts and new ventures, there is a mine field of details between the concept and the bottom line of profits. And we spent four long, hard years in the debugging of the concept before we started franchising.

It takes money to make money.

HATTIE: (Voiceover) One of the reasons Takeout Taxi is enjoying such strong growth is Kevin bought his number-one competitor.

STEVEN BEAGELMAN: They had just received a tremendous amount of venture capital from NationsBank Capital Corporation of over $3 million to expand the company operations. And we could have continued to compete, but it just didn't make sense for me, after meeting with Kevin Abt and the team that he had surrounded him, and with my team, which we had in New York, we figured it just made a lot more sense for us to team up and become one and take the country by storm and not give anybody a chance to compete with us.

HATTIE: Your first point is your idea must have broad market appeal. Is it OK to use yourself as the judge: I'm the customer, I want this, therefore, other people would want it?

KEVIN: I think that's a good, quick acid test. I think it's a good first shot, but I took it a step further, where I then said to myself, `Let me go back into my corporate arena and go into that network and talk to my friends and affiliates about, is this me or is this us? This time famine--is this me or is this us? Is everybody else having home-cooked meals at 5:30, seven days a week or not?' And lo and behold, I heard a resounding mimic of my own life from my entire network. Everybody was saying, you know, `Look, the only thing we can get delivered to our house is a pizza.' And the joke half the time was that when the pizza arrived, they'd throw away the pizza and eat the box.

HATTIE: There you go, tastes the same.

KEVIN: And I listened to that and I said there's something profound in what they're telling me. They're telling me there's massive demand for real food delivered to the home and the str...

HATTIE: OK. But now are you telling me that it's OK not to hire some big, fancy marketing company to do analysis for me before I jump off a...

KEVIN: Well, let's be realists. What entrepreneurs have that degree of capital to be able to go hire the fancy market researcher?

HATTIE: OK.

KEVIN: If they do, they'll probably never get the business off the ground 'cause they'll blow all their initial seed money on the research study.

Ultimately, most important, you've gotta have the right human capital in the team. Now--and that's a very broad statement because the type of human capital that concept needs in its earliest days is very different than the type of human capital it needs in its midsize, or let alone, its large size. In the opening volley of the concept, you need a maniacally driven entrepreneur who is gonna take no prisoners and do everything that's required to get the business going. I mean, that was my role at Takeout Taxi. As we move into a larger-size operation--I mean, I can see it inside my own infrastructure. I'm looking more carefully at bringing in several additional players to the management team that have very specific skills at running the day-to-day operations.

The last ingredient is the concept must be financially sound. Entrepreneurs are, it seems, constantly in the process of raising capital. And I think it just grows to a higher level all the way down. I mean, we started the company, basically, by my Charles Schwab savings account. And then...

HATTIE: Did you spend all of that?

KEVIN: Oh--and then some. So we went through about a two-year window, where I wound up having to personally fund several hundred thousand dollars of additional investment into the company.

HATTIE: What did you do, sell your house?

KEVIN: Yeah. Yeah.

HATTIE: You did?

Your friends and family must support you

KEVIN: Yeah, I did. If you really want to build your own business, do it. However, before you do it, think through very carefully how hard you really want to work. Because if you're gonna be successful as an independent businessperson, I guarantee you, you're gonna work harder than you'll ever work in a job for somebody else. And you better be willing to make that personal commitment and, again, your network of family and friends better be willing to let you make that commitment.

HATTIE: Here's what I learned from Kevin: If you personally have a need for a product or service, other people probably do, too; your friends and family must support you emotionally as you start and grow your business; and it takes money to make money.

Keeping Track

HOST: If you want your business to grow, you need to install financial systems to inspect what you expect. Working with an accounting expert to determine the kinds of systems you need to make good decisions is critical. A cash register mentality is OK if you plan to stay small. But if you want to grow, you can take this advice to the bank.

JIM COANE: If you don't have good financial controls in place, good systems that are tracking your activity, the tools to manage your finances, manage your balance sheet, manage your costs--if they aren't there, you quickly get out of control.

HOST: That's Jim Coane, president of Telebase, a fast-growing information company.

JIM COANE: And once you're out of control, you're in a downward spiral. You have to start focusing on how to keep things patched together instead of focusing on going forward and the future.

HOST: Small-business accountant Craig Hamilton explains what to track.

CRAIG HAMILTON: You need to have categorization for expenses so that you can see whether you're spending what you thought you were gonna spend, on what you thought you were gonna spend. You also need to keep track of the balance sheet, also, though, so that you know what liabilities you have out there in front of you, you know what revenues you have out there in front of you that may not have turned themselves into cash yet, but can be things that either can be obstacles for the business or can be opportunities for the business as you go forward.

HOST: I asked him how often these numbers should be checked.

CRAIG: No less frequently then quarterly. Because you really need to--if--things can get pretty far out of whack in three months and if you aren't looking at it to make sure you know where you are, you can be in the ditch before you knew the--you left the road.

HOST: It used to be we all had to do this by hand. Now there're so many computer software programs that can do that. Do you have any advice--just general advice, when it comes to looking for software programs?

CRAIG: In accounting software programs, I think there's two things that you have to do, and it's a little bit like exercise you know, find something that you're going to use. If you have a program that is so difficult that you're going to dread even opening the file to use it, that's not going to be a good file or a good program for you. The second point is, really, learn from others who have experience with this.

HOST: So I asked accounting software consultant Tom Miller to meet me at a computer store and show me what's available.

TOM MILLER: A real popular program is Quicken which is a checkbook manager, essentially that is non-accounting-oriented. The philosophy of Quicken is, let's enter our checks and it's gonna take care of some internal accounting for us.

HOST: Now if I needed to do billing--you asked me about that--could I do it off this kind of a program?

TOM: Then you would want to step up, say, to this product another Quicken product. QuickBooks for Windows, where you could actually generate invoices, track your customers, receivables, you could write checks, track your suppliers, payables, etc. Down here, another popular one is Peachtree Accounting and the philosophy of this company is more traditional accounting-oriented; in other words, debits and credits. If you're an accountant, you know, you'll feel comfortable with this product.

HOST: So it's really kinda whatever you're used to--your background is and then whatever--what you need. Now let's say I need to do things like, oh, payroll, I have a lot of vendors to keep up with. Will these kinds of programs do this?

TOM: Yes, they will.

HOST: They will?

TOM: Yes, they will you know, allow you to process your payroll, keep up with, you know, what--where your employees are as of, you know, the current period, where they are as the quarter so you can do your quarterly tax reporting, where they are at the end of the year so you can do your W-2s. They have, you know, the traditional tax table so that, you know, you can create all that. You know, QuickBooks will do that, also.

HOST: What if I have a practice, for example, and I bill time, do any of these work that way? Are there any special products that'll work that way?

TOM: They don't have a capability of entering time by the day, by the hour and then billing that at a subsequent time. You would have to rely on a product such as this, Timeslips, which is an integrated time-keeping and time-billing product that, you know, would allow you to do that. It will even keep an aging of your accounts receivable; in other words, who owes you what and when.

HOST: OK.

TOM: But it is not capable of doing the integrated accounting like these products.

HOST: I see. So this is pretty basic program?

TOM: Correct.

HOST: But if you're just starting out, this might be a place to go.

TOM: You know, even selecting one of these products--you know, we recommend to people to consult their CPA, you know? They may have experience with this product or this product or that product and say, `You know, this product, Terry, is real good and I think it would fit your business because I've had experience with it.'

HOST: What if I just decide, you know, I've looked at it. I am just not an accountant. What happens to people like that?

CRAIG: Well, there's really two things that can happen. One is kind of the bad news, and that is that those are the people who revert back to the bank-balance method of accounting, where they just look at the statement. The other thing is, I think, a good situation that a lot of people can get into, which is to outsource the accounting. In that situation, you find a lot of people will look at it and say, `My time is better spent out selling widgets or out managing the manufacturing process or out meeting customers in the store than it is doing the accounting. And I can go out and hire someone to do the accounting.' And again, the key is not how you get the information, but the key is to get the information so that you can make rational business decisions that are going to help your business succeed.

HOST: Don't try and operate without it is what you're saying.

CRAIG: Flying by the seat of your pants, generally, you'll end up crashing.

Streetfighter Marketing: Another segment of this episode of the show

HATTIE: There's nothing like a good endorsement, and Streetfighter Marketing guide, Jeff Slutsky says the best person to write your testimonial may be yourself.

JEFF SLUTSKY: One of the most valuable tools you can use in selling are testimonial letters. It gives you tremendous credibility when you're trying to get a customer to see the value of what you bring to the table. The trick is, how do you get testimonial letters? Well, you talk to old customers and ask them to send you one. Now sometimes they don't have time to do it. So what you have to do is say, `You know, I know you're kinda busy and you said you'd send me a testimonial letter. Tell you what, based on our conversation, how about I write it up, send it to you, you have your secretary retype it on your letterhead and send it back'? And that may work. Or you say, `I'll tell you what. Better yet, send me a piece of your letterhead, I'll type it up on this end, I'll send it to you for a signature, if you agree with everything, and there we go.'

Now here's the problem, you see, they don't have time to do testimonial letters, but if you do it, saves a lot of time. And I'll tell you a little secret, some of the best testimonial letters I got, I wrote. And let me show you a few right here.

Here's my favorite here, this is one Marvel Comics with Spider-Man on there, McDonald's.

You know what's the interesting thing about these is some of my customers think that these are original letters. All I do is I go to my quick printer and say, `Here, make this look like the original.' Or better yet, here's what I do. You talk to a customer you've got a very, very good relationship with and say, `I'll trade you one of my items for a ream of your letterhead,' which is very inexpensive and it makes the testimonial letters have even greater impact.

Now that's real street fighting.

HOST: Jeff will return next week with additional great advice for us small-business people. And a direct marketing expert will walk us through what we need to do to get our message out.

Article source: Small Business School

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