Full transcript of How Dog Haus Redefined the Franchise Model — Michael Montagano — episode 338 of the Restaurant Technology Guys podcast, with Michael Montagano, CEO of Dog Haus. Speaker labels preserved; lightly edited for readability.
What this episode covers. Michael Montagano, CEO of Dog Haus, on running roughly 60 units and growing without compromising the thing the brand is known for. The conversation covers how Dog Haus balances menu creativity against the operational execution scaling demands, how they manage supply chain without sacrificing quality, where cost of goods actually moves, and Michael’s view that the future of franchising lies in partnerships where franchisor and franchisee incentives are genuinely aligned.
- In this transcript:
- Sixty Units and Counting
- Staying True to the Brand While Growing
- Supply Chain Without Sacrificing Quality
- Being Great at What You Are Great At
- Breakfast Burritos and Unit Economics
- Where Cost of Goods Really Moves
- Back to the Basics
- Reaching a Larger Audience
Jeremy Julian (0:00): Welcome back to the restaurant technology guys podcast. I thank everyone out there for joining us as I like to say every single episode. I you guys have got lots of choices. So thank you for hanging out with us this week. Today I am joined by the CEO of a brand that has been a favorite of mine since I got introduced to it four or five years ago, maybe three years ago with playing golf with somebody on Michael’s team. But Michael, why don’t you introduce yourself, give our listeners a little bit about who he, who you are. And then we’ll get a chance to talk about dog house and kind of what you guys have been doing.
Michael Montagano (0:29): No, it’s great. Jeremy, thank you for having me. I’m a huge fan of the pod and really an honor to come join you on it. And hopefully your listeners will find something we talk about here today interesting about Doghouse and will but nevertheless very much appreciative of you having me on. um So I’m the CEO of Doghouse. I’ve been with the company for approximately five years. I first joined as an investor and board and member of the board. um Eventually, uh, became the CEO of the company approximately three years ago. Um, I come from a storied past and restaurants. My grandfather, uh, immigrated here from Italy, uh, ultimately started, uh, an Italian casual dining restaurant in my hometown, um, next door to his brothers, which was a fine dining restaurant. So we’re in the industry from, uh, uh, from the ground ground up for sure. Um, you know, I learned so much about what hospitality actually means. And I think it truly is the fabric of our society. It’s how we break bread. It’s how we communicate. It’s what makes our industry truly so special. uh He encapsulated that as almost a local celebrity in town that brought out, you know, the birthday cakes on birthdays, the sparklers, the jukebox blaring and was where everyone wanted to be. And it felt like a warm environment and they belonged and And so, you know, I have always been attracted to the industry for that reason. I played a few different roles in it. I started as an attorney, mostly in the private equity space, uh doing M &A and corporate finance for large PE firms like El Katterton and others, almost all in the restaurant space. uh Moved into restaurant tech um in uh on the uh on the business side of things. About 10 years across a few companies, sold them all mostly venture and private equity back and have just been thrilled to join a brand like doghouse. I’ll tell you what attracted me to the brand was definitely the people. The founders are fantastic and it is evidenced really through um how the business has grown and developed over the years. You know, I consider a business. My dad always said this, a business is like a tree. should grow down. at the same pace that it grows up. Its roots should be deep and have a steady foundation for the business. So if a storm ever comes, you can uh ride it out. oh This business, think, is unique in that we’re celebrating our 15th year and uh anniversary. And it has grown down at a pace that is far greater than it has grown up. It’s roots, it’s infrastructure, it’s culture. um its systems, its processes, the quality of the franchisees, the quality of the cuisine, um really created an environment that’s primed for growth. And so as a growth guy, I was so attracted to the brand knowing that it’s all there. Now it’s just about finding the right partners to grow the brand. And we’ve had a fantastic last few years and, and, know, happy to share more about that. But again, thanks for having me on.
Jeremy Julian (3:34): Yeah, no, I love that. And I’m probably going to steal that whole story about growing down as deep as it does grow up because I think we both have seen way too many brands that grow up too fast and they don’t have the foundation. And ultimately they topple over, which I know is a lot of what we’ll talk about on the show. But Michael, for those that are not familiar with Doghouse, it’s not really something that, it’s not the place that your wife sends you when you’ve been out drinking too late with your buddies and didn’t come home on time.
Michael Montagano (3:45): for
Jeremy Julian (3:58): Obviously it’s a restaurant brand. I’d love for you to introduce what is dog house. Cause it is a bit of a unique brand. You and I were talking before we hit the record button. I just, I think it’s a sexy, cool brand. think it’s got a great vibe. It’s got great products. And so I’d love for you to kind of, you know, just share with our listeners that haven’t gotten a chance to experience it. What is it?
Sixty Units and Counting
Michael Montagano (3:58): Yeah. Yeah, so we’re approximately 60 units across 12 states. We’re heavily concentrated in California. That’s changing with our new partners that we’re bringing in to help grow the business in other territories around the country. But we have about a third of our units in California, a heavy concentration in Southern California. We’re headquartered here in Pasadena. What makes the brand really unique is that it’s a really interesting blend between casual dining and fast casual. So it’s full service at the bars, come in, it feels like that sports bar we call Beer Garden Feel where you can watch the game, um come in with your boys, sit at the bar, but also it’s ordered from the counter with big dining rooms, huge terraces, um and generally that plays to also bring your family in after um the AYSU game or the Little League game uh and have more of that kind of family culture. experience. And so what we think it’s a very interesting hack on the casual dining model in that our footprint is about 2000 to 2500 square feet. So it’s materially smaller than a Buffalo Wild Wings or a Chili’s. And so the CapEx cost to open a store is materially less. It also the fixed occupancy cost is also much lighter than you would experience in a bigger box casual dining store. Yet we offer that kind of always full bar, more compact feeling, where you get that culture and camaraderie that we were talking about, that hospitality m that we love. The bartender is the heart and soul um of the restaurant bouncing between the bar and the counter and really creates that fun, casual dining feel. But it’s a smaller footprint store and allows uh franchisees to really drive. know, solid margins and much easier to operate. You know, part of that is it’s lighter in labor, even though you’re still emulating that casual dining feel and hospitality first. um The food is really the heart and soul of the brand. And so the food kind of drives the culture. We’ve, you know, it’s a chef driven uh concept, but it’s all approachable cuisine. it’s… hamburgers and hot dogs and chicken sandwiches and chicken wings and even burritos. We have a breakfast day part, which we came about during COVID and has done fantastic across the brand. But that kind of culinary experience where it’s an elevated version of your favorite food items at a very affordable price. And so it’s that blend between having 24 beers on tap and a full service bar alongside craveable um cuisine that that feels very comfortable to bring your family as much as your friends.
Jeremy Julian (7:09): Yeah, and the one thing that I always find when I look at your guys’ brand and or experience your brand is how even in that small box you guys are able to execute at such a high level some of the products that you guys put out. It feels like you guys are constantly coming out with. different ways to make craveable products. again, you guys have a fantastic marketing department. I know I was teasing about knowing one the guys in your marketing team, because I’m just like, every time I’m like, okay, where’s the closest closest one that I can get to? And for me here in Texas is, you know, a good 30 minute drive. But I’m like, all right, if I’m on that side of town, I got to go check it out. So I guess talk me through how do you balance that with kind of execution at the franchise level because
Michael Montagano (7:28): Hmm. Yeah. Yeah, yeah, yeah. Yeah.
Jeremy Julian (7:44): Some brands struggle with that. They want to create these things, but it’s got to be repeatable. It’s got to be repeatable at scale. so I’d love for you to kind of talk through your kind of philosophy on that and how have you guys been able to execute 15 years on uh creating craveability, but making it execution style across 60 units.
Staying True to the Brand While Growing
Michael Montagano (8:01): Yeah, I appreciate the question. Thank you for being a customer and willing to travel 30 minutes to uh experience the brand. So a couple things. One is we never sacrifice on the quality of the proteins. It’s been something that we have been true to since day one of the founding of the brand. Hormone-free, antibiotic-free, responsibly raised. That goes from our beef being Creekstone Farms to our hot dogs being our own custom blend and manufactured nitrate free to the quality of our chicken. All of it we do not sacrifice on. And so we want to make sure that our customers always know that the quality of the food is there. There’s you can have a cheat day without putting poison in your body. And, one of the founding stories that I love is that one of the founders wives was pregnant uh at the time and they wanted to be able to create a menu that she could eat. and crave and satisfy all those random cravings, but at the same time, not put poison in your body that would that would jeopardize the health of the baby. And so we’ve always stayed true to those kind of core principles. At the same time, we know you have to create a scalable brand. so, you know, for example, the protein can swap out, but the bread stays the same. And, you know, a of the condiments and so forth stay the same. So it’s we’re able to, you know, really make unique quality items, but operationally very simple. And the other thing is we never stop innovating on oh that focus on operational um speed and operational quality. For example, and this is part of, uh we’ve brought in a new chief operating officer from the Jersey Mike system and a new chief development officer and president from the Jersey Mike system as well. But the first thing that we’ve collaborated on. um is taking 25 SKUs out of the kitchen. So even though we have a, you know, operationally sound uh brand, we’re always trying to figure out new ways that we can simplify without ever sacrificing quality. And so that has been core to the brand is both quality and the operational prowess of back of house to ensure things are coming out accurate on time and of the standard that the customer expects every single time.
Jeremy Julian (10:25): No, and I think to that point, I frequent the Frisco store, which is the one that’s that in you and I were talking pre show, that’s where my daughter plays softball and I’m up on that side of town from time to time. And so I’ll hit that hit that store. But it’s amazing how I feel like you guys very rarely, if ever fail, which all restaurants struggle from time to time. But it’s like every time I’m always kind of like, I’m going to try that new thing and let’s see what it is. And you guys do just such a great job of executing.
Michael Montagano (10:34): Yeah.
Jeremy Julian (10:52): You talked about the fact that you guys are poised to grow. guess I’d love for you to talk a little bit about why you feel comfortable that you guys are at a place where you guys, not just, you you got some new hires on the team, but what makes it at a place where you guys from 16, it’s I know that you guys have some aspirations to grow quite a bit. And I’d love to talk a little bit about why you think that you guys are going to do it a little bit different than, some of the other brands that are out there. Cause you know, 2000 square feet is awesome. I love that, that form factor, that footprint, the fact that you guys can be in line, you guys can be on an end cap. You guys have a lot of different flexibility there from a location perspective, but I know you and I talked prior to and about the fact that you guys are thinking about franchising differently than some of the others. I’d love, guess, your insights on why you guys feel like you’re really ready to kind of explode now.
Supply Chain Without Sacrificing Quality
Michael Montagano (11:36): Yeah, I appreciate the question. So when I joined as CEO approximately three years ago, we came in with a four point plan. The first was to really focus on unit economics. And so the business has always had strong unit economics, but there’s always room to improve that. And in that search of becoming a national brand, we took a step back to really focus on core. And so part of that was overall AUVs and sales volumes, which in the first two years we’ve taken from 165 or excuse me, 16 to almost one nine. So we have a pathway to 2 million this coming year and we’ll continue to work on that with that being our North Star. The second thing we talked about was continuing to fine tune the cost of goods sold and focused on, you know, how do we make an already good system better with our
Jeremy Julian (12:10): Wow.
Michael Montagano (12:28): supply chain and without ever sacrificing quality. so part of it has been continuing to reconfigure and tweak the supply chain to make sure it’s working for us and working for our franchisees. And part of that is cost of goods sold part of what we just talked about, which is how we continue to innovate on labor and make things simpler in the back of house and to cut down on rising labor costs around the country. so that has all been kind of. Phase one in tandem with development costs. as you know, we’re seeing everyone has seen rising development costs around the country. And so we took a hard look at, you know, numbers that were rising to the one million dollar range. And how do we really tweak that model to work better for us and for our franchisees and continue to target that 600 to 800,000 range? We’ve leaned into second generation spaces. You pointed out that the model is very flexible and can fit into a lot of different trade areas. and just overall real estate quality on site selection, letting that lead and then figuring out um how to make that work economically. And so really targeting, you know, a really industry leading payback at the end of the day, it’s about making money um for our franchisees. so getting down to those core fundamentals of the unit economics and making that work. so that was really phase one. We’ll always continue to work on that, but we feel like we’ve made just some really remarkable progress on it. um That core focus on fundamentals. The second was when you go from 60 units to bigger, you’re expanding to parts of the country that people may not know your brand or who you are. And that’s hard, you know, and on a mid market brand, you don’t always have an unlimited marketing fund to go run national Superbowl ads. And so we had to think a little bit more outside the box on how do we get people to know who we are? We’ve weaned heavily. into an influencer model, both national influencer and our partnership with Jake Paul, as well as um food influencers and our LTOs and then local influencers around the country to leverage uh what we would consider to be, you know, a more efficient, agile, um innovative model for driving awareness around the country. And then taking a lot of those social media uh tidbits that we’re driving attention to. and then use that for online advertising and so forth and just a really thoughtful way. And uh LTOs, for example, moving to an influencer driven LTOs have driven LTO sales by over 45 % increase from prior year. So one is creating awareness and two is driving more volume into the stores. And we’ve really been effective at that as kind of a phase two. And we truly consider ourselves to have national brand awareness as we look to expand to other parts of the country. And then the third, which I’ll pause after this and kind of we can double click on a bit, but it’s attracting national franchisees to the brand. And we took a very innovative approach on this. Now that we had the fundamentals in place and the brand awareness in place, it was to really attract the right partners. And so we’re fortunate to be bringing in two true new partners on the management side from the Jersey Mike system, collectively own over a hundred Jersey Mikes to come in on the ops side and the development side. But in tandem with that, we’re, we’re launching an area director program, which has broken the country up into 15 different territories. We’ve attracted just fantastic partners, all of them have dozens, if not hundreds of units within their territories. They’ll obviously self develop a good portion of the good portion of their hundred unit territories each. Um, but they will be the coaches and the leads, um, in those areas to help other franchisees grow and develop. think there’s no better operators in the country than in the state of California than doghouse. I do believe there are better, um, operators than us trying to go to Oklahoma and operate, but I guarantee the area director that we’ve brought in to oversee that area that’s self, uh, developing and mentoring. There’s no better operator in that part of the country to operate. It’s that partnership that we’re giving up royalty to say, let’s bring in the best and the brightest in each one of these areas that will not only champion development, but will champion leadership and mentorship of our franchisees in that area. And so we’re truly disrupting that franchisee franchise or model and saying, we’re not only asking you to come in and be a DS, you’re able to buy in to the equity of the business. You have corporate governance rights at the board level. We have management seats that are now run by franchisees. And so we think that is the true new future of franchising where that ivory tower of us and them doesn’t exist anymore. It’s all us marching towards the same goal. um And I love the Dave’s Hot Chicken guys. They’re actually my neighbors, um residentially and commercially. uh And when they sold for a billion dollars to Rourke, they minted, I think, a couple dozen millionaires in corporate, which is fantastic, life changing. These will be the next brands that grow and evolve. But what about the 100 franchisees around the country? And so that’s what we think. There’s such an opportunity um to lock arms with our franchisees and move forward in a way that when we win, they win. And when they win, we win. And we’re just one company together in lockstep.
Jeremy Julian (18:05): Yeah, no, and I think it’s really innovative that, you know, I’ve heard and seen people that have uh considered doing this, but I think the fact that you guys have invested so much before you guys kind of got to this point, Michael is going to be a huge difference because it’s not just a super sexy brand. It’s a sexy brand that understands who they are, understands where they’re going and can help get people there versus just having a great product and then just trying to, you know. blow it up. And so I love that you guys have invested so much in fixing the unit economics because again, I’ve seen too many times, hey, we’ve got a really, really hot brand, but the economics fall down and then you don’t understand and you go into Oklahoma and you don’t understand that Doug House is going to fit differently in Oklahoma, you know, in, Oklahoma city than it does in Pasadena. They’re just different cultures. They’re different, you know, they’re looking for something different. You know, the, the soccer teams and the, and the baseball teams are all going to be different kind of the way you go out into that community. And so the fact that you guys are embracing that early, I think is really, really huge. And then the fact that you guys are allowing them the opportunity to have some equity stake in it, create some ownership at the franchise level, not just in their own stores, but the brand level. And I think that’s, that’s really cool.
Michael Montagano (19:12): Yeah, well, thank you for saying that. We’re obviously thrilled about it. And I think you hit the nail on the head is that doing this without having fundamentals that are in place, without having a national reach with your uh with your brand from a marketing standpoint, without having the right partners in each part of these uh parts of the country is really being thoughtful about who is taking these uh these territories. Because part of that is we have no problem. with people taking equity stake in the business, if they’re the right people to really run that part of the country. um And so uh it’s been a thoughtful process. It’s been a long process. know, we’re finally, you know, coming out with the process and talking about what we’ve been working on, but uh everything needed to be, our ducks needed to be in a row to make it work. think rushing into it, you know, would ultimately not yield the result that we were
Jeremy Julian (20:07): Awesome. One more quick question on the kind of growth. um Your PR firm had sent over that you guys are also going international, which creates its own set of fun. I’d love to kind of just hear, you know, sounds like, mean, at least from the, from, the, the rumor on the street, you guys are going to Puerto Rico and Mexico. I’d love to kind of get a little bit of insight on, on how are you guys thinking about even those territories?
Being Great at What You Are Great At
Michael Montagano (20:13): Yeah. Yeah, look, um again, it’s about being thoughtful and making sure you have the right partners in both of those areas. I think we also felt more comfortable that um it’s near shore, you know, as opposed to truly overseas. I think the licensing deals overseas can ultimately work really well. They can ultimately work really poorly. And I think a lot of it comes down to who your partner is. And I think the same is true even if you’re closer. um you know, with the amount of concentration that we have in California from, you know, NorCal all the way down to San Diego. We felt very comfortable um branching into the Mexican market. uh And we have just a fantastic partner there who is a multi-brand operator, has championed brands in their growth. And we felt very comfortable with their stewardship. At the same time, we felt very comfortable demographically in m how the brand has been engaged with and who it attracts um in California and that there is a demand um that we can meet um in Mexico as well. And part of it is the joint diligence process with your partner that’s coming in to ultimately run it. was not overnight. It was a two-year process of really understanding where we’re going to start in Mexico, what their strengths are, what our strengths are, the supply chain, um and really market testing to make sure we were ready. And we feel very ready. um You know, we’re starting um with a few units um over the next year. We already have one under development uh in Mexico. The same as with Puerto Rico. Puerto Rico is a little bit easier. um You know, our partner, and I’ll call him our partner because he truly is an equity partner in the business, but he also helps on the endorsement side. um Jake Paul lives in Puerto Rico. The store will be very close to where he lives in Dorado. um And so again, And we’re pairing him with uh a fantastic group of uh former Jersey Mike’s operators that will be developing and operating the store to make sure that we’re not only bringing in that doghouse culture of excellence, but layering in a whole level of sophistication from a brand that has scaled from a few hundred units to a few thousand units over the last several years and so forth. I would say, oh well, You know, Puerto Rico is not necessarily an international expansion. know, they’re clearly part of um our larger domestic strategy. um It is not in the Continental 48. And so that poses its own kind of challenges. But again, it’s been a two year process of making sure the supply chain is geared in line along with having quality operators. uh there that are ready to assist and a great group of um local Puerto Ricans um that have years of experience understanding how to navigate both development and operations and restaurant management. And so it’s really built just a fantastic team of people to be able to launch there. We hope it’s not the only one. We’ve aspirations for at least four Puerto Rico and we’ve got aspirations for a lot of stores in Mexico. So we’re really excited to get these first few off the edge ground.
Jeremy Julian (23:43): That’s awesome. Yeah, this past summer I was down in Mexico City and we do business with the Cheesecake Factory. And so I went to a Cheesecake Factory in Mexico City and I was like, this feels like I’m back at home with just uh a little bit of a change, but it felt like a very similar and comfortable experience. so both expats and really quite frankly, the Mexican culture I know just loves the American brands and love to be able to experience it. also do business with Boston Pizza, which is a Canadian based brand that’s got a US presence, uh
Michael Montagano (23:49): Yeah. Yeah. Yeah. Oh, fantastic.
Jeremy Julian (24:13): They kill it down in Mexico. So, but I really love that you guys have not just on the domestic side, but even on the international side, it’s, it’s, it’s this theory of we’ve got to partner with the right people that are in these geographic areas, supply them with the tools to make them successful and then continue to help them grow. ah And so I love that you guys have done that investment. I’m going to pivot real quick, Michael, talk a little bit about the in store versus off-prem, you know, kind of mix. You know, and everybody is always talking about four wall economics. got your 2500 square feet, you know, you’ve got certain amount of fixed rent, between DoorDash and Grubhub and Uber Eats and everybody’s like off-prem, but you got this cool atmosphere in the bar. And I guess I’d love to talk a little bit about your mix and kind of how do you guys even think about that? And then even really catering, because catering continues to be something that your product travels well enough that I can see you guys growing catering tremendously in your region as well. So I’d love for you kind of just talk a little bit about how you guys think about four-wall economics and what you’re doing in on-prem versus off-prem and whatnot.
Michael Montagano (25:12): Yeah, excellent topic. So our business has evolved so much since COVID. um
Jeremy Julian (25:18): Yeah, you talked about your breakfast burritos that came out of COVID. like, I didn’t even know you had breakfast burritos. now I’m like, all right, I’m not driving 30 minutes for a breakfast burrito. But damn, that looked good. I was on the website while we’ve been talking.
Breakfast Burritos and Unit Economics
Michael Montagano (25:27): Yeah. Well, if you, uh, if you try one, you may drive 30 minutes for it. Um, and now with all the drone delivery that’s launched in, um, in, Dallas Metro, maybe we can get a breakfast burrito, uh, flown to you, but, um, uh, so what the, the mix on the doghouse platform is, is about 60%, 40 % on-prem versus off-prem. Um, the off-prem we have focused really hard on developing our own first party channel. and driving people through our loyalty platform and our app, both of which were one of the first things that I launched when I joined the company and has been a big success for the brand. There’s always room for us to continue to improve it. You know, as a mid-market brand, you don’t always get, you know, the shiniest bells and whistles on tools, but I can tell you with the evolution of AI and engineering and software, it’s really democratizing the access of, you know, of mid-market brands to get a lot of the same tools and sophistication that the larger brands have historically had a competitive advantage regarding. We consider ourselves to be pretty close to industry leading and driving 10 percent of volume now through our first party app. So of the 40 40 percent, you know, about 25 percent of that or 10, you know, 10 points is is now through our app. And so the unit economics are far better on that app. Yes, we wished that the marketplaces would
Jeremy Julian (26:40): That’s incredible.
Michael Montagano (26:57): would help us more on unit economics on take rates and so forth. have, you know, certainly as our, as we continue to sell more and more food through them, our bargaining power has increased and we’ve brought down our take rates, which at the end of the day, we’re simply passing onto our customers by having less markup, uh which has made costs increasingly high. I I saw something that the Olo CEO posted on uh social media recently that said the average delivery order. fully baked cost 65 % more on average than um in order in in store. I think a lot of that to be spot on between, you know, all the fees tip and so on and so forth. um And so at the end of the day, we just want to continue to provide the best quality product to our customers at the most affordable price. We never got into the value wars. We just didn’t take price. So we don’t offer a lot of the, you know, gimmicky promos, which by the way have worked great for other brands on, you know, meal deals and so forth. Our theory was let’s not take price on our customer and let’s stay true to who we are and offer a quality product and our customers will pay for it. They’re not looking for a gimmick. They’re looking for quality and they’re looking for a reasonable price. And so we try to honor that through third party. Obviously the in-store customer is the most profitable customer for us. And so we want to heavily focus on driving our three PD customers and our first first PD customers into the store. Loyalty is part of that, getting them onto first party and then bringing them in. And we have such a fantastic in-store experience with the full service bar and the TVs and so forth. The atmosphere is where we really want to drive that customer in. But our three PD customers are just as important to us. And so making sure that we’re executing on those orders, that air rates are low and that we’re living up to the brand’s promise.
Jeremy Julian (28:37): Yeah. And the atmosphere, all of it.
Where Cost of Goods Really Moves
Michael Montagano (28:53): Um, it’s super important where we have found three PD to be really valuable. Well, we also have the alcohol occasion, you know, first party, which, you know, helps on margin and so forth. But we really felt like, um, three PD has worked for us in a meaningful way is the breakfast burrito, um, area. it’s not just because, um, it’s a new menu item or, or supplemental brand it’s because of the day part. So we were able to. open up a brand new day part that we’ve never had, but it was all during our prep hours in the store. And anyway, so there was, was all incremental volume coming in. And so that’s where I think 3PD can really work is that if it truly is incremental, you have a great business based on your in-store customer. That has to be the starting point. Plus your first party pickup and delivery. Then if this is truly incremental, you already are paying rent. You’re already paying labor. You’re, you know, you, you, you know,
Jeremy Julian (29:24): Yeah, you were there on property anyway. and you’ve got prep cooks on there doing prep, they might as well throw a burrito together, you know.
Michael Montagano (29:51): Right. Right. Your, cost of goods sold can actually be even a little bit better as a percentage because you’re selling your food for a lot more money than the in-store customer. But that I think is the key is the incrementality of it. When I think brands, um, it’s no longer incremental. It is the core foundation of the business. The unit economics become terribly challenging because they’re just not set up with the take rates, the three PD charges. to actually work for the restaurants. It just doesn’t. The economics don’t work. um And so I think that will have to change with innovation with, we were just talking about drone delivery or maybe new disruptive platforms or whatever it may ultimately be has to be super important, you know, to the long-term viability of it. But the way you work around it for a brand like ours is the incrementality. And that’s why the burritos have been such a game changer for us. We still don’t drive that much in-store traffic at breakfast. Because you don’t think about it. You’re not thinking about, you know, the hot dog hamburger joint that has, you know, beer, 24 beers on tap and televisions is the spot that I’m going to eat at breakfast. But we’re growing. We’re getting cold brew and nitro and, you know, other things that pair well with our burritos. But that’s where 3PD has really unlocked, you know, a whole new um channel for us. And it’s been very successful.
Jeremy Julian (31:12): Awesome. One last thing that I’d love for you to talk about before we let listeners kind of figure out how they get in touch is, you guys do, it feels like because of your strategy between the influencer marketing, how sexy the brand is, that you guys have unlocked that next generation of consumer where other brands are still stretching to go figure out how to get in there. And I guess I’d love for you to talk a little bit about that because again, it just feels like and again, I’d love for maybe I’m misreading it, but every time I’m there, I feel like the oldest guy in the room. And I’m like, what in the world is going on? But people are spending the money they’re enjoying their they’re experiencing the brand. And I guess I’d love for you to share with our listeners, how have you been able to do that? Because as potential franchisees, I look at that as the unlock to be able to get into the wallets of those of those 25 to 35 year olds that so many other brands are trying to figure out how do they get there that might have the 45 to 55 year old, but they can’t seem to unlock that 25 to 35 year old demographic.
Back to the Basics
Michael Montagano (32:14): You know, I think it’s the basics. know, yes, the influencer uh channels have been very helpful for us to reach that audience. But at the end of the day, you can speak to an audience. But if you’re speaking to them in the wrong way, or you’re offering them a product that they ultimately don’t want or an experience they don’t want, it’s going to be very challenging. And I don’t want to conflate this with uh the GOP one topic, but I’ll just mention it as sort of an analog that I believe And I think we’re positioned very well as a brand that consumers will potentially have less occasions. And I think Gen Z’s are even indicating that, but the occasion that they do have, they want to be great and they want it to be an experience. And it goes back to kind of my grandfather’s theory years ago, which was I want that experience to be so hospitable and so warm and so perfect that people want to come back and come back and come back. it’s where they feel comfortable. And it’s back to that kind of fabric of. our society and being able to break bread with someone and talk to them. It doesn’t mean that they have to be drinking a beer. could be a non-alcoholic beer. It could be, you know, a mocktail. It could be a slushie. It could be a lot of different things. The menu items, it may not be something that they’re going to eat every single day. But we want that occasion to be where it’s such a special bite that they’re having on our slider, which I still think is the greatest bite in all food. like, you know, the, the, that, special bite, that special experience, that you know, a beverage menu that speaks to them and then an ambiance with the right music and the right games on TV and the right bartender who’s, you know, really encapsulating what our culture and our brand is trying to get across the customer. It’s that blend that we believe ultimately will be the prevailing model in a GLP-1 plus Gen Z world, which we’re slowly evolving into, um but doesn’t alienate, who our core customers are, which are middle-aged guys like us. think, it’s exactly right. And so I uh think we’ve kind of honored the customers who have gotten us here by making these slow tweaks and innovations to the brand to really attract
Jeremy Julian (34:19): Uh huh. Yeah. Bringing their kids after the soccer or baseball game, right?
Michael Montagano (34:36): a larger audience. But I think at the end of the day, everybody, whether it’s people our age, it’s Gen Zs, it’s people on GOP1, not on GOP1, whatever it is, ultimately want the same thing. They want the human interaction. They want that warm, hospitable experience. And I think that’s how we’ve been successful at attracting that next generation audience. And then part of it is meeting them where they are. You know, we’ve leaned into 3PD and we’ve leaned into 1PD as ways of, you know, having them experience our brand in any way that they feel comfortable or that they want to experience it. And then using marketing and say, isn’t that great food? Now enjoy that food in our experience. It’ll be even better. And so some of the louder um megaphones that we have, like Jake and others have been excellent at conveying that message. But at the end of the day, you can convey whatever message you want. If you don’t, if you’re not executing to that message in the store, that’ll be a one and done customer. And we know in the restaurant industry, that’s actually that. is having a porous funnel. so ours is about bringing our customers back over and over and over again and honoring them the right way, whether it’s loyalty or evolving the brand to kind of meet the new standards of the day.
Jeremy Julian (35:46): I love that story. the other thing I would say is you guys have very Instagramable worthy food, which I think also helps. So that part’s always fun. So how do people get in touch? How do people learn more if they’re like, hey, I love the idea. I love what Michael’s been saying. I went to one, you know, it one time I was at one of those stores. I didn’t realize there were a franchise group. How do they learn more? And how do they, you know, kind of what can they expect with engaging with your team as it comes to, you know, bring in a doghouse to their community?
Reaching a Larger Audience
Michael Montagano (36:12): Yeah, look, I think um we have a fantastic team. have, we have brought in uh some extraordinary talent on the development side, which ultimately operates in parallel with our development team that’s been there for 10 years um in material parts. So we have just a fantastic group, data-driven real estate selection, a whole new uh development process to make it cheaper and faster and better. And so we’ve got a fantastic team, know, it certainly encouraged people to come check us out on our website at doghouse.com spelled the German way H A U S. Um, and we have a litany of information, um, there about the brand and, so forth. Also recommend, you know, this is, uh, true to anybody, whether it’s franchisees or prospective franchisees or vendors or partners or, um, uh, or anyone that’s interested in the restaurant space to reach out to me. directly, my email is michael at doghouse.com and happy to chat with them and also incorporate in the right members of our team to make sure everyone’s educated and aligned. At the end of the day, we just want people that kind of share in our same culture and our same passion for hospitality and the customer. so we’d love to have conversations with those out there that have some interest in
Jeremy Julian (37:37): Awesome, and fair warning, you get to the website, Instagramable Worthy Pictures up there, you’re gonna be craving one of their products. So, Michael, I feel like we could talk forever about what you guys are doing, so thank you for hanging out. Thank you for sharing a little bit about your guys’ story and where you guys are at and where you guys are going. I’m grateful to know you guys, I’m grateful to be a customer, and I’m happy that you were on the show. To our listeners, guys, I know you guys have got lots of choices, like I said. Thank you for hanging out with us. If you haven’t already done so, please subscribe to the show. Go check out doghouse.com and make it a great day.
Michael Montagano (37:42): Eheh Thank you, Jeremy. Appreciate you having me on.
