Nearly 20 years ago, Scott Maitland started Top of the Hill Restaurant & Brewery in Chapel Hill, North Carolina. He recently sat down to film an interview for the popular Restaurant Owners Uncorked video series, discussing everything from “the business of the business” to the importance of doing inventory to the reason why the house always comes first. Here are some highlights of his interview:

“The business of the business” is critical. “I tell people all of the time, there is the business of what you do, and there is the business of running your business. From the very beginning, I knew that I didn’t know a lot about restaurants, but I did have the background, especially from my Army experience, to put together a team that had a synergetic ability to accomplish great things. I’ve always seen myself as the guy that deals with the business of our business, and what I try to do is hire the very best people to handle the business of what we do, which is providing great service to our customers, great food, great beer, and so on. Early on, though, I had to do a little bit of everything, and that’s the toughest and hardest time. When you are having to split your time between being the front of the house person and running the books, or being the chef and running the books … that’s tough, because if you don’t handle the business of your business well, that can kill you just as fast as if you don’t handle the business of what you do.”

Be willing to do what you’re asking others to do. “You need to make sure to fully appreciate how difficult it’s going to be to own a restaurant. Unless you are extremely well-funded … you are not going to initially have the ability to pay somebody to manage the business for you. And to be frank, I’m not so sure that even if you could that it would be a good idea. It’s really good that I managed the front of the house of the restaurant for seven years, because I understand what goes on. I empathize with my customers; I empathize with hostesses, and my bussers, and my waiters, and the chefs, and the whole deal. If I hadn’t been involved in that role, I think that it would have been difficult for the restaurant to achieve a certain level, because its leader wouldn’t have known what the heck is going on. On the flip side, I always get really nervous when people outsource all of their back-of-the-house functions. You need to understand that staying on top of financial statements, and accounts receivable, and accounts payable — while not very sexy, and not the stuff people like to talk about with getting into the restaurant business — is the kind of stuff that people begin to realize is critical and also a very big drain on you.”

It’s all about the menu. “Before I got started, people told me, it’s all about the menu. But that was from very much a customer-centric perspective. But I’ve really come to realize that the menu is much more than just a marketing piece, or merely a list of what you have for sale. The menu really drives everything. It drives how you lay out your kitchen. It drives the staff you’re going to have. It drives the customer segment that you’re going to try to bring in. If there is one manifestation of the restaurant, one thing you can point to, the menu is it. You can take a look at somebody’s menu and say, ‘I understand this place.’”

Don’t fall for the seduction of the restaurant world. “The seduction of the restaurant world is … people will come in at eight o’clock on a Friday night, and the place is packed, and I’m having a beer with some friends, and I’ll buy a drink and send it over to somebody. Hey, before I got into the restaurant business, I thought, ‘Man, that is so frickin’ cool!’ It is cool. It’s fantastic! But people need to realize that that is about one half of one percent of the job, that if you think that is your job — standing around the bar buying drinks for people, trying to be the big man — you are going to drive your place right into the grave. I appreciate those moments for what they are, which is, they are great, fantastic moments.”

Go for a long-term lease. “Lease negotiation is an extremely important part of the business. So often, people jump in and decide they’re gonna lease a space, and they don’t even have a clear understanding of what their model is. You need to first think really hard about what your business model is, and have a menu that reflects that business model, and only then should you start looking at space. Too often, lawyers will advise restaurateurs to sign the smallest rent period possible in case things go badly, and there is some real truth to that. But on the opposite end, what if things go well, and you’ve only signed a three- or five-year term? Well, the landlord is going to turn around and jack up the rent. So I think the key is, make sure you’ve done your homework, and you’ve got your business model down, and then be willing to sign a somewhat longer initial lease term of seven years or longer. And definitely pre-negotiate extensions past that. So, maybe a seven- or eight-year lease with two five-year rights of renewal.”

Manage your costs the right way. “Managing food and liquor and labor costs effectively is incredibly important. It’s not like $10 bills are just lying around on the ground. Pennies are lying around on the ground. And you’ve got to figure out, ‘How can I pick up those pennies and put them into my pocket without negatively affecting the customer’s experience? And that’s one of the things that I see a lot, is that people will say, ‘My food costs are so high!’ But instead of taking a look at their waste, instead of taking a look at their preparation, they say, 'Well, you know what I’m gonna do? I’m gonna take this eight-ounce filet, and instead I’m going to serve six ounces, but I’m gonna charge the same price.' Well you know what? The customer sniffs that out really, really quick, and it leads to disaster.”

Doing inventory is crucial. “I am amazed at how many people I talk to [who] don’t do inventory. That’s crazy to me! Having entered into this business with no restaurant experience at all, I was adamant from the start that we had to do inventory. I only have positive views about human nature, but I understand that if a bunch of people start figuring out that nobody is actually keeping score, then you’re gonna have some stuff walking out the door. Three months after I opened, I found a box of shrimp, a pound of butter, and a frying pan in a bush outside of my service entrance. You may not experience something as blatant as that, but if you aren’t doing a minimum weekly inventory, stuff will walk out the door.”

The house always comes first. “We talk a lot around here about the question of who comes first: Your customers? Your team? Your investors? And the answer is, we think of the house first … we think of Top of the Hill first. Because if we think of Top of the Hill first, and what is best for the house, then we’re gonna serve all of those other constituencies the best. Specifically, I tell my managers, I tell my team, 'If you can honestly look me in the eye and tell me you made a decision with the long-term best interests of the house in mind, then I will never get angry with you. Maybe I’ll think you are wrong, and we can talk about why you should have done it differently, but I will never be angry.' I don’t think you can rank investors vs. customers vs. the team, because without all three of those, you are in trouble. At the intersection of those three is the establishment itself. So if you can, in an unbiased way, say what is in the best long term interest of the house, then I think you can look any of those constituencies in the eye and say, 'This is why we’re doing this.'”

The customer is not always right. “The conventional wisdom is that the customer is always right. I don’t believe that, and I think anyone who has been in the restaurant business has a story where the customer was wrong. But you definitely have to go in with that bias, that the customer is right. And it’s not just tie goes to the runner — the customer is safe at home still two body lengths from the plate. But at some point, hey, we have to think about the staff, or we have to think about our investors. And I think that anybody who is worth having as a customer will appreciate and respect that as well.”

Choosing a partner is like choosing a spouse. “Partners have been fantastic for me. Partners have been a disaster for me. Some partners [who] were fantastic have turned into disasters and then turned back into fantastic. Joseph Smith, one of my partnerships, talks about partnerships being like a marriage. But it’s actually worse, because you can’t get divorced (laughs). And there’s a certain truth to that. It may seem like a funny way to put it, but you need to really spend as much or more time thinking about who you are going into business with as you would think about who you are going to ask to be your spouse. There are going to be good times; there are going to be bad times. There are going to be issues about money. There’s going to be all of these things that pop up, and you need to make sure that you can trust that person, and that you’ve got the same values. And going back to this idea of putting the house first — you need to make sure that your partner is willing to put him- or herself in a subordinate role to the establishment. That would be the litmus test. If the person is talking about 'Me, me, me' and money, and so forth, I’m not so sure I’d go into business with them. If they are talking about how they really want to create something that’s going to last … that’s what I would look for.”