Lauren Fernandez With Full Course, LLC

Intro: Broadcasting live from the Business RadioX studios in Atlanta, Georgia, it’s time for Atlanta Business Radio. Brought to you by On pay. Atlanta’s new standard in payroll. Now, here’s your host.

Lee Kantor: Lee Kantor. Here, another episode of Atlanta Business Radio. And this is going to be a good one. But before we get started, it’s important to recognize our sponsor, Onpay. Without them, we couldn’t be sharing these important stories. Today on Atlanta Business Radio, we have Lauren Fernandez with Full Course. Welcome.

Lauren Fernandez: Thank you so much for having me.

Lee Kantor: I am so excited to learn what you’re up to. Tell us about Full course. How you serving folks?

Lauren Fernandez: Full course is the restaurant industry first and only incubator, accelerator and investor in early stage, fast casual restaurant brands. We partner, usually with founders, to help their brands grow rapidly with non-dilutive growth capital, operational support, mentorship and development expertise.

Lee Kantor: Now I’ve seen an interview, quite a few people in the startup community, and there’s been incubators and accelerators and a variety of industries. Why do you think that the the food industry has been kind of slow to move in this space and allow you to be kind of an innovator?

Lauren Fernandez: You know, I, I think that’s a wonderful question. I indeed spent most of 2019 trying to answer that question myself. And from my own experience as a multi-unit franchisee and the chicken salad chick system, looking at that founder’s journey and seeing some of it, and also my own journey as a co-founder and, you know, growth accelerator within that brand, we saw a few things that just didn’t add up. You know, there’s a lot of capital that comes into the restaurant industry, but it tends to be kind of stuck at a lower to middle market private equity level, where deal values are north of, let’s say, 40 million. The next available capital to you, if you’re an independent restaurant owner is probably either self sourced, but you’re going to friends and family, you’re crowdfunding or an angel investor. So with glaringly obvious to me is where’s the venture capital? Right? You might be asking yourself the same question. The reason that venture capital is missing from this part of the industry, and although by extension, incubator and accelerator opportunities is simply put, you need operations and development expertise and a very hands on attitude as an investor to be able to invest at this stage. If you can pull that off, the returns are amazing. We see brands jump from about a one and a half to two, turn on EBITDA all the way up to ten. If we can bridge this gap successfully and get them to scale.

Lee Kantor: So when you said, okay, I’m going to be the solution to this problem, I see. I see there’s a lot of opportunity. How did you go about kind of identifying who would be that, you know, kind of these first guinea pig like, uh, investments to make.

Lauren Fernandez: With a lot of very careful thought and deliberation. So first, we defined who this solution needed to be for. 70% of all restaurants in the United States are a single unit location. They are overwhelmingly independent as opposed to chain. Indeed, the industry as a whole is independent to chain ratio is 2 to 1. And so when you’re thinking about those founders that you want to invest in, one of the things to understand is that of those 700,000 restaurants, first of all, not all of those founders want to grow. They’re very comfortable where they’re at. That’s fine. But what also happened in that segment is it’s remarkably an overwhelmingly where all of the diversity of faith is and flavors are in our country. So the restaurant that you go out to eat at that are a single unit, tend to be more culturally representative. They are more likely to be run by a woman, a minority, an immigrant, a veteran, any sort of underrepresented entrepreneur. Right. And so when I formed this company, it was with the purpose of approaching those founders and saying, can we come along with you and partner with you on this journey? And we knew we wanted to be in the fast casual segment as compared to the restaurant industry as a whole.

Lauren Fernandez: That segment is remarkably resilient when it comes to economic contraction. So when we see consumers changing their behavior patterns on what they’re consuming away from home, fast casual is fairly resilient. And as a segment in the restaurant industry, is slated to grow 11% a year over the next five years. Now, when we think about investment in this space, for us in particular, we’re really looking for founders who represent our values and who are able to really be seen as the next generation of leadership in this industry. And as such, the first two investments we made, I think, are really well representative of individuals that we feel will be the next generation in this industry and help take us forward. Um, you know, for me, I look at brands that are not just restaurants already, obviously, but we also invest in food brands that can become a restaurant. So our first two investments in both flippers and in nonstop represent those two styles of investments, I think, very well. And the new investments will be announcing later this year. I think we’ll also equally represent this point of view.

Lee Kantor: Now, is Atlanta kind of a really good place to start because there are so many franchise owners here and there are so many brands and there’s so much talent already inside kind of that ecosystem.

Lauren Fernandez: I love Atlanta for this company and we thought long and hard about it. I, um, have lived here for over 22 years. I’m very familiar with the industry, both on the food manufacturing and development side and also on the restaurant side. And what I will tell you is you are dead on. This is an enormously rich talent pool here in Atlanta. We have a bit of an uncredited and understated food scene, which is now getting a little bit of traction thanks to Michelin stars popping up here and there in our neighborhood. Um, but I think we we do look nationwide for investments. I do like Atlanta for its positioning, not only on the East Coast, where I think we have a lot of work to do and the type of investments that we make, but it’s also a very target rich environment, not just in talent but also in restaurant brands.

Lee Kantor: Now, how does an area in Atlanta like Buford Highway fit into this?

Lauren Fernandez: That’s my favorite place to go for lunch. Well, you know, it’s it’s it’s just such a wonderful example of what we all know to be true, which is the gem. Little restaurants are usually family owned and operated that are culturally representative, tend to shine out like stars. And if you are in the know in any market, whether it’s Atlanta, Birmingham, you know, Charlotte, Chattanooga, you know, that amazing dim sum place, you know, that amazing Filipino joint. And it’s what we’re here to do is to take those one off and really make them something that is approachable for Americans at scale. Because we live in larger cities, we get, I think, better representation of some of those cultural brands, and they should be available to Americans nationwide. Because guess what? That’s actually what Americans do want to eat, though it’s not just the right thing to do philosophically to level the playing field and give those founders investment support and growth opportunities. But it’s also just good business.

Lee Kantor: Now. I mean, I’m with you 100%, and I’m kind of shocked that this hasn’t been done before because I’m a bit of both. I’m a bit of a foodie, and some of the things that I do around town, um, you know, I’ll go to a place and I’ll be like, like, for example, a ban me place and, you know, Ban Me is a sandwich shop, right? Like in, in essence. And, um, but a lot of people aren’t familiar with the ban me and on Buford Highway you can get a ban me for like 4 or $5 and, uh, you know, that’s an affordable meal for pretty much anybody. And it’s lower than a lot of the chain. The hamburger sandwich places out there. And it’s just there’s kind of a lack of awareness as that, as even a choice.

Lauren Fernandez: And I would, I would say lack of awareness and accessibility. So one of the reasons that Americans in particular, as opposed to other countries, gravitate toward chain restaurants and look at it as a solution, is not just affordability, but it’s also accessibility. Right? There’s some serious density in the availability of those restaurants, and we can just point to chick fil A as a great example of that. But there are plenty of others right behind them. Certain types of restaurants which we would commonly call quick service or QSR restaurants, you know, their play is volume, right? And so the cost of the food is lower. But one of the things that happens when you migrate into the fast casual or limited service space is the food quality tends to go up and you can maintain decent price control. So you’re still capturing some of that quick service buyer and that customer, but you’re also just stapled really well into this, you know, clearly delineated space of premium food at a reasonable and affordable price. That value play that exists for fast casual is why one of the reasons why fast casual absolutely wins when consumers are clutching their wallets a little tighter. I would submit to you that a lot of the culturally representative brands in particular, have really great food control and cost, and so they actually are built for scale in ways most people haven’t even thought of, especially when you consider that some of the items on that menu might be able to benefit from manufacturing. Like maybe we could take the dough for the bon me and have it pre-mixed so that when it arrives at a restaurant, it’s much easier to actually make the dough fresh every day. So we look for a lot of efficiencies in these menus, not only in where the food is sourced from and making sure that it stays culturally representative, but also what can we do with our expertise to help streamline operations and make the business more efficient to maintain that value? Price point to the consumer.

Lee Kantor: Now, is our food trucks or these, um, restaurants that are in like storage containers? Is that part of, um, some of the innovation that you’re seeing as going forward, as a way to kind of have an easier, lower cost entry into a market?

Lauren Fernandez: Actually, you know what’s going on. The reason you’re probably seeing more food products and modular builds that may or may not be like, for example, in a shipping container, if there is a serious lack of available restaurant real estate right now, it is just a result of construction, um, shortages during the pandemic. And we’re seeing the effects of it. Right now. We are at one of the lowest recorded vacancy rates for available restaurant space in recorded history. It’s below 4%. So what’s happening is a lot of brands that are looking for an overall total occupancy cost of about 10% of their sales really cannot afford rents that are over 50, 60, $70 a square foot. So be that as it may, we’re having to innovate quite a bit around where we put brands and how we grow them. For us as investors, it’s one of the primary reasons we focus on what is called an omnichannel development strategy. So we, yes, are building company stores that we own and operate as restaurants. We are also franchising and helping our franchisees pick real estate, but we also develop products that can generate revenue for the company. We also do licensing deals into airports, stadiums, arenas, etc. so we have a number of places we can grow brands and their revenues when economically the real estate is a bit of an issue, which it very much is right now. Um, we do look at modular. We like our licensing deals as well that we can move forward on, because those are usually fixed real estate decisions that exist inside of a stadium, a hospital, a college or a university, for example. And, you know, I think you just got to get creative. We’ve looked at some spaces and said, can we split this in half and and lease it separately to two of our brands? You know, we’re we’re doing everything we can to make it happen up to and including actually making investments in real estate ourselves.

Lee Kantor: Now, when it comes to, um, you know, being part of this, if I’m a restaurateur and I have that kind of one off and I’m, I’m successful, how do I, um, kind of plug into your ecosystem and like, how how does that work from that standpoint? Or are you the one just choosing and you’re finding these gems and then approaching them?

Lauren Fernandez: We are very fortunate that most all of the founders that we work with came to us. We are very respectful of founders who are not interested in growth and what we have found over time. Doing this nearly five years now is that we are out in the community. We are aggressively supporting the segment of the independent restaurant owner through our nonprofit, the Full Course Foundation, where we provide a number of educational and mentorship opportunities at low or no cost to anyone in the restaurant industry. From whether you’re in the dish pit, you’re a manager, or you’re a multi-unit owner. And for us, that goodwill does get our name out there. It does make people aware that we are an educator. We are operational and development consulting support. Our team has over 250 years of experience collectively in every area of restaurant growth and operation. But yeah, we’re also a very fair and equitable investor in this space. So we like to be very open door to any founder who needs support. And if that means that investment is not right for you, we can still coach. We can still consult with you on your growth. We can part you pardon you or refer you out to other debt or equity sources. And we really just want to help elevate and be a good partner to founders who are looking to grow. Because I believe that when you are that young of a brand, it only takes one misstep to cause a pretty catastrophic failure to the business. And if we can help you avoid some of those potholes, the industry as a whole will better itself by looking more representative. And to me, that is not just about the brand, but the founders who created them.

Lee Kantor: So now, can you share any advice for that restaurant owner who, you know, maybe it wasn’t top of mind, but maybe they’re getting to an age where it’s like, I’d like an exit. Or maybe there are kind of, um, bigger mountains to climb here. Um, is there any advice you would give to that person that maybe is on the fence and is is kind of weighing the options?

Lauren Fernandez: I would suggest you immediately reach out to somebody who understands and had done multiple exits and having exited a successfully a deal myself in this space as an owner, I will tell you, we were incredibly prepared for the due diligence. We were prepared for the transaction. We were prepared for the transition. It took me about, I’d say, about a year to maybe 18 months to get there before we started shopping our deal. So the first thing I will say is prepare, prepare, prepare. You will shoot yourself in the foot if you go to the table and try to negotiate from a place of of dire need of urgency because something happened to you or to the business. And so there’s a lot to do, um, that will actually probably improve your business in the interim if you can get ready. And a lot of that is typically around finance, accounting and some operations documentation. It’s achievable. You can do it on your own. I actually teach this class pretty regularly through our foundation and it’s free. So one thing I would suggest is just preparation, right? It’s just worth every penny and second of your time to be prepared. The second thing I will say is there are a number of ways to successfully exit a business and understanding what all of those options are and their relative return structures to you as a founder are very important to understand. And I don’t think, and this is just my opinion, that many founders understand what the typical valuation is on a single unit location. The person who’s going to buy that is stepping into your shoes.

Lauren Fernandez: They’re going to become an owner operator just like you were. And there’s not necessarily as much value unlocked as many owners realize. And that’s sad to me, but it’s also one of the reasons you might want to consider some short term growth as a goal before you go to exit. Um, I think which leads me to point number three is, you know, if you’ve done your homework and you kind of know that it’s coming, you got to think about what the end game looks like and sort of build your strategy to get there. A lot of times as restaurant boards, we’re just drinking from a fire hose every single day, right? And just making it happen. And we don’t think about the long run. And we are pretty opposed to building any kind of restaurant growth that does not have the end game in mind. And indeed, that’s one of the first questions we ask founders when we sit down and we design their growth plans, we say, look, where do you want to be in five years? The transaction is done. You’ve got a big pack. What does it look like for you? And when we get those answers, it tells us an awful lot about what their personal goals are. And then we peel back the layers on that, knowing that helps us build better growth plans for them and for the brand. And I think not enough can be said about knowing what you want your end game to look like and what it’s going to take to get there.

Lee Kantor: Now. Is there any resources for that? Maybe executive chef that feels like, you know, I’m a cog in someone else’s machine, and I really want to go out there and do my own thing and, you know, and maybe I hadn’t thought about, um, you know, moving in the direction you’re describing with a building, a national brand, but maybe just they thought of doing their own thing, but, uh, you know, they didn’t even consider even the possibility of doing something as to the scale you’re describing.

Lauren Fernandez: Yeah. You know, it’s not for everyone. There’s a lot of skills that you need as a chef, and that is a defined skill set. And running a business is a completely separate skill set. But if it is something that is in your dreams and you want to achieve that, one of the things that we run through our foundation is a program called launch. It is a series of courses that are designed to take you from an idea a food truck, a pop up, a catering business, something that doesn’t have a physical brick and mortar location, and to help you work through that and develop all of the pieces that you need to get to a place where you can go get the right kind of funding, which may or may not be full course. It often is other sources, but we can assist with that. And the idea is to help you avoid a lot of common mistakes. We see for the people who are opening that first location, some easy examples of those potholes, if you will, would be the wrong the wrong real estate. It’s the it’s a great menu.

Lauren Fernandez: It’s a great idea. You’re not matching the product to the consumer and where they’re at. So that’s just one example to give you, but also helping them understand the business economics of how much money they’re going to need, what how fast they’re going to consume it, how to do things on a budget. And we’ve got this great course on how to run a grand opening on ten grand. And most, most restaurateurs would want like a $50,000 budget. Of course, you can’t do that as an entrepreneur, right, unless you’ve got unlimited funding. So one of the things we are trying very hard to do through our nonprofit is to flatten that learning curve for that first time restaurateur, because, man, that learning curve is steep. I can speak from experience and that’s where the mistakes are made, right? And if you are running on a very limited capital budget, making sure that you are less likely to make those mistakes, it’s very, very helpful for them. And we do offer that at least live once a year. We also have it available for asynchronous learning through our foundation.

Lee Kantor: So if somebody wants to learn more, connect with you or somebody on the team, you know, plug into some of these free resources or, you know, take their brand to a new level. What is the website? What is the best coordinates?

Lauren Fernandez: Yeah. Full course. Com there’s a link at the top to book a call. We’ll ask you a few questions about where you’re at in your journey, whether you are a vendor supplier. Excuse me, a an investor, a potential restaurateur of the future or a current restaurant owner operator, we’re able to ask a few questions and understand what your needs are, and it links you over to our calendar to book a call with our team directly. And what most people don’t understand is it’s our team that are talking to you live, so no one’s guaranteed you’re going to get an industry expert when you go and book that call, whether you like it or not. And we want to talk to you. This is what we do. So do reach out. We’re at full course. Com and on most forms of social media as a full course official.

Lee Kantor: Well Lauren, thank you so much for sharing your story today. You’re doing such important work and we appreciate you.

Lauren Fernandez: Thank you so much for having me. I do appreciate the opportunity.

Lee Kantor: All right. This is Lee Kantor. We’ll see you all next time on Atlanta Business Radio.