Growth of technology is unstoppable, but the industry veteran still believes in providing a full-service experience.
Willie Degel is an entrepreneur through and through.
The Queens, New York, native has been in the restaurant industry for more than 30 years and has done everything from bartending, owning and operating, to starring in his own Food Network series. The former host of "Restaurant Stakeout" is also the founder and CEO of New York City’s Uncle Jack’s, which has two locations in the Big Apple. In addition to his NYC joints, Degel operates several restaurants throughout Georgia, including Uncle Jack’s Tavern, opening in November.
Degel operates in the casual-dining space and is a firm believer in providing a full-service experience to customers. Like all operators in this segment, he's tackled issues related to inflation, advancements in technology, and wage rate pressures.
He took some time to chat with FSR about these trends and how he’s approached solutions.
Let’s talk technology. From your perspective, how is the advancement of technology impacting restaurants?
Alright, well technology is changing the world, right? At the speed of light. And technology is behind the scenes everywhere. We, the normal general public, have no idea about artificial intelligence and robotics. All this stuff that's ready to come into the marketplace and replace the human beings doing simple service style positions everywhere. So, it's coming and you see it. When I talk about technology and I talk about robotics and things like that … to me, like a kiosk … a self-ordering system to me is a robot. I look at that as a robot. I look at that as technology that replaced a full-time individual. Now you have robots making hamburgers, robotic waiters, robots that make French fries. Technology is affecting every business and taking it over.
Look at OpenTable. If you look at a restaurant years ago there was a book for reservations. Someone called the restaurant and you made the reservation. Today, you have to be connected to these platforms. They’re your partner. They’re taking money from you to provide software service, and we, the operators, are almost like guinea pigs fine tuning their system and data … now they make money from you.
Can you expand on that? How do independent restaurants deal with those pressures compared to larger chain restaurants?
Well, the bigger chains can break down the cost. If you look at the food industry today, full-service restaurants are under attack. Most people are going for fast food, quick service, to-go, takeout, and drive-thru lanes. You see McDonald’s and other fast-food restaurants across the country being renovated … taking the dining rooms and shrinking them, adding self-service kiosks inside, adding robotics and technology. So, that space is changing at the speed of light. The full-service industry, we basically depend on human beings. If I’m opening a restaurant, I have to employ 50 or 75 people in a 5,000-square-foot -restaurant. And yes, we have technology. Yes, we have software, we have a reservation system, we have WiFi, we've got data-grabbing software, technology for inventories, controls. Yes, we have to be on Google. Yes, we have to be on Yelp. So, yes, yes, yes. All these different systems. When I look at it today, I'm like, oh my God, there's like 12 different tech companies making money off me every month religiously.
COVID helped the larger chains grow tremendously. It helped big technology companies double their value. It helped [chains] evolve faster than an individual, small, full-service, mom-and-pop restaurant. People look at me as big corporate America. That's not who I am. I leverage myself constantly to open a new business. I know it's going to take me 16 or 20 months to start actually making a profit at these locations. Everyone else makes money way before me, right? So that's an endeavor. That's the risk. That's the entrepreneurial spirit.
It sounds like certain aspects of technology are making it tough to turn a profit.
No matter what, everybody opens a business in the end to be a boss, to be a leader, to build a team and to make money on his money. Now, if the business has no profit in it, you'll close your doors, right? You'll go out of business and people won't be employed no more. So your main objective is to build your business and at the end, make profit, right? If you're investing money, you’ve got to make your money back. You’ve got to advertise it over so many years. It's a lifelong battle. Then you have to figure, OK, how many people work? What's my return on my investment?
So, how do you ensure your business is profitable given all the external pressures?
Engineering the menu based on what your menu mix is. Getting more profitable items within the menu mix, right? Portions compared to 10 years ago are much smaller. You used to go to restaurants and get free bread everywhere. Now you’ve got to cut that back. Also, your hours of operation. I study the data on my hours of operation.
You also have to motivate your staff, make sure they make money, make sure you have guest and traffic driving in.
You’ve got to be smarter with your beverage program. Anybody could just put the most popular brands on, but you’re paying through the roof for them and customers call for those brands. What do you do? You bring in new brands, you bring in up-and-coming brands. So you have to really do your education on the wine and the beverage end. What I like to do is these craft cocktails and we under price and over deliver. So we do craft cocktails for $10 to $12 that are normally $15 to $17, using new and upcoming incredible homemade crafted beverages. There's always a movement in America of new people making new products and they're incredible and they're not too costly, then you've got to educate your team, introduce them to your customers so they get a better value and you're making more profit on the items.
Let’s shift to the topic of wage inflation. The cost of labor is rising across all sectors of the industry. What’s your take on the matter and how have you approached it as an owner/operator?
When government intervenes and just blankets thing as a fair wage, you really throw us a curveball. So when I look at my business and I see all the increases in wages that are given to everybody… the minimum wage is less in Georgia compared to New York, but I pay people way more than the minimum wage in Georgia. If the minimum wage is $7.50, we're paying people at least $12 just to walk in the door and start washing dishes.
So the market is really at $12 starting there as a base pay, right? Then it moves up from there. So if the government intervenes and just says it’s $15 everywhere, now the base of the bottom, minimal service position, is at $15. What does the next position go for?
Sounds like wage inflation is another hurdle placing major pressure on operators like yourself.
In a full-service restaurant with the amount of people we employ, this is what's killing us because all of those other increases crush us across the board. Along with food costs through the roof, meat through the roof, produce, and seafood. All these different things in this business. If you want to get a piece of equipment today, you want to build a piece of furniture today? Everything is through the roof. So we're being hit everywhere.
What would you say to critics of that philosophy who think a $15 minimum wage is the necessary starting point?
I get a lot of hate because people just think they know our business, and today with social media and everywhere there's so many negative platforms where people think they know this business and they don't understand the mathematics. They’ve never risked everything they own to create all these jobs. So they're very opinionated, but they just don't do the math, right? So in my business, I've changed so many people's lives, so many people have grown through the whole process and now are executive chefs or my management partners. People make a lot of money working for me when you go through the system and you stick with it and you execute the game plan and you put your heart and soul into it.
What’s your take on restaurants combining the tip pool for the front and back of house?
With the back of the house at all my places, all have gotten raises. But the back of the house and the front of house are always divided and it's been that way a long time. I’ve talked to a lot of people who love full-service restaurants and they would love to give to the back of house knowing it won’t affect the front of house. With the front of house, you keep them motivated and they do their job. The back of house does their job, we all execute together and the customer has an amazing experience. They’ll throw you something. I get my gas pump from a service attendant. Yes, I might pay a little bit more for the gas and I'm going to leave him a dollar because I want to interact with him, right?
Everywhere I go, the supermarket, Home Depot, anywhere I go, I search out the individual working there and that's who I want to interact with. That's what I do because I want to keep them employed.
Speaking of staying employed, I want to circle back to the topic of technology. With tech replacing workers in some situations, what do you think businesses are losing when that happens?
They don't become a full-service restaurant basically. It's like an oxymoron right to me. I have a manager, a host, captains, waiters … I have bus boys and food runners, right? A bartender makes your drinks and he has a personality and interacts [with the guests]. I think it’s very important.
Behind the scenes technology, if it’s worth it and helps you function and run your business, that’s fantastic. Thank God for some of these great technologies. But you need to interact with the guests.
Why is that guest interaction so important?
I love the show business. It’s people, it’s personalization. It's the guy who remembers your name, remembers what you drink. It's your birthday, it's your buybacks. It's your anniversary. It's all these little things that I'm known for. Customer is king. What do I do if we make a mistake? We make it right instantly so you come back forever. I want to build customer loyalty forever. I tell my staff, when we open the store and the people are coming in, we have to win them over forever. We have to change their routine. So they continue to come to our brands and trust and love us.
Do you think coming out of the pandemic people are going to be looking for that type of interaction after relying on drive-thru and delivery for the past several years?
I think so. I think we have to forge forward, we have to stick to our guns, we have to execute the vision and game plan.
Being in the restaurant business is never easy, but the last couple years have been particularly challenging. What makes you stick around?
You know, I love what I do. I love my people. I employ over 300 people. During COVID I opened three restaurants. I put a lot on the line, invested a lot of money to leverage myself, but I love the business. I believe in my people.