Dave’s Hot Chicken in Lakewood, CA

Guest: Dannon Shiff
Topics: Dave’s Hot Chicken, restaurant industry

Transcript:

Chris Ressa 0:01
This is retail retold the story of how that story ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management.

Welcome to retail retold everyone. I am excited today as I am joined by Dannon Shiff. He is the senior vice president of real estate for Dave’s hot chicken, an exciting restaurant brand that is growing across the nation. Really looking forward to him sharing his insights on what’s going on out there. Welcome to the show, Dan.

Dannon Shiff 0:39
Thanks for having me, Chris. Appreciate it.

Ressa 0:42
pleasures mine Denning, tell us a little bit about who you are, how you got to where you are and what you’re up to these days.

Shiff 0:49
Yeah, I you know, as you said, I’m Senior Vice President real estate for Dave’s hot chicken. We are a 28 unit fast casual, Nashville style hot chicken tender restaurant. So that doesn’t make your mouth water just by saying it. I don’t know what will. But yeah, I’m a retail restaurant leasing junkie. I’ve been doing this since 2005. I started my career with noodles and company back in Boulder, Colorado, and then moved on to Buffalo Wild Wings, where I spent six and a half years helping grow that brand across the country. And then, you know, went to went to learn and went to the dark side, I guess some people would call it went to the landlord side. And it’s been three and a half, great years and mace rich doing food and beverage leasing in a mall environment and kind of took the dive to learn more. And that’s actually where I got introduced to Dave’s hot chicken, where we first met, I had a spot and got introduced to this amazing brand, and ultimately leased them space, which led to where I’m at today, which has helped grow this brand and this concept across the country.

Ressa 2:06
I have to ask how insightful was it going to the dark side and seeing how performers were run on the landlord side and going oh, or did you have any of those like aha moments like going from the buyer to seller side,

Shiff 2:21
it really helped you especially with economics and with internal underwriting, understand how a landlord sees a deal relative to how a tenant sees a p&l and how occupancy and construction allowances and construction costs weigh on both sides of the transaction so that you can pull the different levers and I actually think you know, going to the landlord side I could talk tenant and help them understand well, this is these are the challenges of of operating in California, the margins are so thin the labor is so high it’s a challenge versus now being able to say okay, what if we what if we changed the terms and what if we you know, took dollars from one pile and moved them to the other or you know, thought differently about the rent economics or the construction allowances or the timing such that you know the landlord get the deal you know, approved by their investment committee and the tenant or you know, in our and our franchisees, you know, have a deal that they can feel comfortable with, you know, opening a restaurant in today’s environment.

Ressa 3:29
We’ll get back to today’s environment but first I want to bring you to the hot seat we call this clear the air all right. Now I’ve got three questions for you. Are you ready?

Shiff 3:40
I am here we go. All right. Question one.

Ressa 3:44
What is one skill you don’t possess but wish you did?

Shiff 3:47
I am I cannot play a musical instrument for the life of me other than drumming on my you know, my legs are on a table. That’s about as good as it gets. But I wish I could play the guitar or piano or something that was a little bit more challenging and musically inclined.

Ressa 4:04
Yeah, same. I have such an appreciation for people who like can pick up an instrument and you know we’ve all like known somebody who can play like the guitar or the piano the cello they can do like everything and I literally can’t even whistle so there’s that question too. What is one thing most people agree with but you do not.

Shiff 4:28
I grew up in Minnesota. In Minnesota it is duck duck gray duck, and the rest of the country it is duck duck goose but it is duck duck gray duck it will always be Duck Duck gray duck and forever. There is no such thing as duck duck goose.

Ressa 4:46
I never heard of Duck Duck gray duck. I’m like tempted to Google this right now. Duck Duck gray duck you didn’t make this up. This is

Shiff 4:53
no it is a real game. It is it is the real version of what some people would encourage aptly called duck duck, goose.

Ressa 5:02
Fascinating. So I love this podcast. I’m always learning new things. Okay, last question. When is the last time you tried something for the first time?

Shiff 5:12
So I really had to think about this one. We were out at a restaurant opening. And we went out after the opening a couple months ago. And it’s actually the first time I’ve ever been to a karaoke bar. You know that you had your own little room and your booth and it was me and some coworkers singing karaoke, and we had a blast, but I can honestly say, that’s the first time I’ve ever been to a karaoke bar.

Ressa 5:38
Wow. I like karaoke bars. Pretty fun. Yeah. Pretty fun. All right. Well, thank you for giving us a little more insight on who you are. Let’s pivot a little bit. I’d love for you to tell us a story about a Dave’s hot chicken that opened. Where are we going?

Shiff 5:55
We are going to Lakewood California, which is South Los Angeles near Long Beach. The year is is 2019. And the background on day is hot chicken is you know, these are three elementary school friends that had a love for fried chicken. A love for the restaurants. You know, Dave, who become the brand is named after Dave’s hot chicken is a culinary. He’s culinary institute trained chef. He was kind of known as the spice nerd going through culinary school. He and Armand and Tommy rolled up the their life savings of less than $1,000 and a portable fryer and popped up in a parking lot in East Hollywood in 2017. And the head editor at eater la got wind of it came down and I think it was night three or night four, and then wrote the article that the East Hollywood late night chicken pop up will blow your mind. And from there, it expanded. So I met these guys in 2019. They had two restaurants at the time. And it was introduced to them actually by a broker who was calling to tell me that two deals that we were working on with another one of his clients were dead. They weren’t moving forward. But hey, I got this other this new client that I think you should go check out. So I went to the original location on Western Avenue and and at that time, the lines were about 45 minutes long people standing outside waiting in line for for their national style hot chicken tenders. And as soon as I had it, I knew this was a tenant that I had to have in a senator I was leasing in Lakewood. So we had a fast food chain on an expiring lease, it was coming up. And I said, you know, I know you don’t have any drive throughs I know you don’t have any locations outside of these two in Hollywood, but come on down to Lakewood of all places. And they came down and and you know actually fell in love with the spot. It’s on a hard corner. Highly President visible location. And in September of 19 We gotta you know, we got to deal done. And it took a while, because then we hit COVID. So this is actually one of those, you know, good stories that are in the middle of COVID ends? Well, you know, it took a while to negotiate. But you know, ultimately in June of 2020, we signed the lease, not without hiccups, not without starts and stops and in that environment. But you know, it was able to bring this new, fresh, emerging brand, to a center that we were just trying to do something fun with. And the restaurant turned out phenomenal.

Ressa 8:49
Wow, I have a bunch of questions.

Shiff 8:52
So let’s go what do you got?

Ressa 8:55
Let’s go back to the beginning. You mentioned a 45 minute line, did you wait in that line,

Shiff 9:00
I waited in that line, I wanted that experience just like every other, you know, guest and customer had of waiting in line to order and waiting for the food to come out. You know, that was that was the experience that was you know, people there was a camaraderie to it of, Hey, how’d you hear about this? Where did you come from? How long you’ve been waiting? And everybody kind of had that shared bond and shared excitement about the food?

Ressa 9:25
Well, I think that’s a great lesson just in general business. If you’re doing business with someone to actually experience the brand. You clearly did that before you actually went into business with them. That’s very smart.

Shiff 9:41
I think it’s one of those things when you when you’re leasing space, you can just do a deal but unless you really know both on the tenant side of the landlord side, what you’re leasing and having been there and visited and experienced that it’s really hard to sell to somebody whether it’s you know, an executive committee on the tenant side or on the investment side from the landlord perspective, hey, I think this is what the company should be putting their money into. So you know that, that that visit and that experience and sitting down and understanding what you’re doing, I think is something that a lot of people take for granted.

Ressa 10:17
Totally agree. The deal got signed in June of 2020. This is one of the most trying times in American history. Not only that it was signed in California, which was a tougher state for restaurants still working their way out of that. What was the mindset of the brand? Dave’s hot chicken in signing that lease? How did they get comfortable? Or how did you get comfortable having them sign up for that in that time period? Because I know, that was a very trying time, especially in California.

Shiff 10:54
Yeah, you know, I think it was a little bit about the brand itself as a fast casual brand, especially out here in California. The ability to pivot from in person dining, to to go, you know, take away third party online ordering was something that a lot of brands, you know, did successfully and Dave’s as one of them were in spent, you know, a very short period of time where it was able to turn on digital channels that they might not have been, you know, they weren’t using at the time. And so I think they had the foresight to understand where the business was going with the restaurants that they had, and the deals in the pipeline that there was going to be a way through this. It had a drive thru. So there was the comfort given, you know, how drive thru sales were increasing, in the middle of the pandemic, that there was going to be an ability to serve the guests and ability to drive sales in this location, given that the, you know, dining rooms were closed.

Ressa 11:57
That makes sense. And if I, my math is right, was that restaurant number three for them.

Shiff 12:05
It was signed very early on. They, you know, it only opened about four weeks ago. So this deal actually took two years. I went back and looked at my files on opening day. And it’s it you know, from loi, number one to opening was nearly two years. A lot of it was due to construction, permitting, approvals. And less actually on the deal side to get to a signed lease, given everything that was going on in nine months, was probably a pretty short amount of time.

Ressa 12:41
Yeah, for sure. When you say the permits and construction was this, like labor shortages, municipalities being closed supply chain issues,

Shiff 12:51
it was a little bit of both. So this particular location sits on a hard corner and in the vicinity. There are a few other fast food restaurants with drive throughs there’s a coffee player with the drive thru all of them back out onto the main street that sits right in front of this restaurant. So the city even weighed in and said yes, your drive thru meets code. But if you want, you know another approval, we have to redo the drive thru. So we had to engineer a drive thru solution, which took a little bit of time in the lease process to figure out okay, how can we reconfigure the parking lot and the drive thru to go from what would meet code at I think it was five cars in the stack, to now I think it’s like a 12 or 13 car stack. And then you had to go through, you know, D O. T, and civil engineering and, you know, moving electrical boxes and sidewalks, it just turned into a bigger project, when we all anticipate

Ressa 13:47
Oh, you now I don’t know at that point. I know you had your developer hat on. But all those things. I know from my experience, add a lot of costs to deals.

Shiff 13:57
I would say that it did. We had to we days we had to we had to work on the construction costs. We had to everybody had to share and you know, looking back on it now from the from the other side. You know, I think it’s a win win for everybody. Because you know, the shopping center has a really great tenant and a fresh brand and offering and the tenant got you know, I think a great use, you know, and a better flow to the drive thru. And it actually really worked out well. I was I was there today before our call and it really came out nice.

Ressa 14:37
Wow. So when it was signed, it was one of the first few deals it just opened. Yeah, but that was in June of 2020. In June of 2020. You all had like a couple of restaurants. And did I hear right you now have 20

Shiff 14:53
Yeah, so at the beginning of 2021. So we had seven restaurants we year. To date of open 21, we still have a probably somewhere in the range of 10 to 12 restaurants left to go this year to open. But a lot of our you know, outside of Los Angeles, we’re growing in a franchise model. So it gives us a different ability to grow quickly by leveraging our franchise partners and other markets. And, you know, the ability to grow, where a lot of brands what might grow one or two new markets a year, you know, we’ve added five states and we now have restaurants in Toronto this year. So we’ve been we’ve been able to grow quickly across the country through our franchising model,

Ressa 15:43
wow. Typically getting the ability to franchises and getting all the licensing that takes some time. Was this Getting Started pre pandemic?

Shiff 15:55
Yeah, we hired. You know, our executive team comes from a franchising background. Our CEO, Bill Phelps is one of the co founders of wetzels pretzels, and has invested in other franchise concepts. And so the franchising model was, you know, is very well understood within our company. But in late 2019, brought on our VP of franchise sales, and actually a lot of our growth came through the pandemic. So we were set up to grow via franchising until the pandemic hit. And actually, you know, a lot of a lot of that has happened in the last 18 months.

Ressa 16:33
Wow. So cool. The how amazing is it to see you, we’re on the other side of the table, like in the beginning of 2020, making this deal with Dave’s hot chicken and now you’re working for Dave’s hot chicken is that like surreal for you

Shiff 16:52
that this was a special transaction to be able to see it from the other side now and to be able to experience that, you know, from beginning to end, and you know, really not a lot of dealmakers on either side, you know, get that experience, let alone in some cases, getting to see deals to the end, especially given how long restaurants take. But this one was fun, because now I can you know, I can see where it started to where the vision was of approaching Dave’s in 2019, to, you know, seeing our franchisee operating the restaurant being there opening weekend. And just kind of seeing it all happen, but from the other side now. And now it’s it’s part of the brand that, you know, I’m passionate about. You know, and, you know, it’s just so exciting.

Ressa 17:42
Yeah, it really is. Do you guys have in your head? How many locations maybe Dave’s could be?

Shiff 17:48
You know, we’re growing. I think the, I think there’s a lot of there’s a huge potential runway for this. For this concept. I think, you know, chicken is such a flexible player in the culinary space, that there’s a lot of different opportunities. But you know, Dave’s is something special, we offer one product, it’s a chicken tender, we serve it two ways, with seven different levels of spice, you know, that, that there’s something for everybody on the menu via our chicken. And so it’s, you know, from somebody who doesn’t like spice, or somebody who wants to try our Reaper. You know, there’s kind of an adventure in coming to Dave’s. But you know, the, the quality of the product is outstanding.

Ressa 18:36
You guys have grown fast and gotten a lot of franchisees, I imagine how bigger these were fast

Shiff 18:42
casual, so we’re, you know, somewhere between 2026 2700 square feet.

Ressa 18:49
So the AU visas must be pretty strong to be getting this type of interest for franchisees.

Shiff 18:57
We’re really excited about how the brand has been received. We don’t stay in, you know, in item 19 on our FTD. So I can’t talk too much about that. But we’re really excited about how we’ve been received both, you know, the restaurants that we haven’t sold in California and now as we’ve grown outside, you know, to Oregon and Colorado and Texas and Illinois, and Nevada. We’re really excited just how the brand has been received as we continue to grow.

Ressa 19:25
Last thing I would touch on I always find that you’ve been in the restaurant leasing space for a while restaurant real estate. Now that you’re growing as a franchisee Tell me a little bit about what the real estate function looks like for you because it’s different from franchisor to franchisor. Some people do everything. Some people are just approving sites, some people are going out in site selecting well. How do you envision you shaping this department in the future?

Shiff 19:52
Yeah, you know, we have phenomenal franchisees. Some of them come from Franchise You know, entities and organizations that did the real estate for them, and they walked into a space and a deal was done. And that’s a model that works for some, you know, we really partner with our franchisees, we don’t call it a corporate office, we call it a Support Center, we’re there to support the success and the growth of our franchisees. So to the level that our franchisees want our help, whether it’s on the front end of a deal in the middle of a lease negotiation, you know, we’re there to help. But we’re very active in the strategy and the thought process. And you know, what is special about Dave’s is kind of the DNA as you see, you know, our graphics and our signage, and so cool, our, our kind of ethos is very fun. It’s very out there, a lot of bright colors. And so we’re really, we’re really, you know, cautious about where we go and how we grow it and doing it the right way. So we do, we work a lot on the front end with our franchisees to make sure that the thought process of a deal for a deal is is not the right way to grow a successful organization in the fast casual world, but being strategic and thoughtful, and with a solid decision logic as to why each site makes sense, is really the right way to grow.

Ressa 21:23
I like that philosophy. I think one of the last things I’m thinking about you look at it two ways. One, a lot of restaurants went out last year, your space is hot, right? There’s so many people who want to be in your space, right? Not necessarily chicken just fast, casual, right? There’s every town has someone around the corner that’s got a restaurant that they’re going to take to 2000 locations, right? It’s really, it’s very competitive space, obviously not easy to do. Where do you guys kind of think about the competition? And do like a lot of this rising tide raises all boats do like a lot of fast casual restaurants? Do you want all the food cheer for yourself? You want to be in a place where there’s no other restaurants? How do you guys think about that,

Shiff 22:06
you know, as a new brand, it’s an it’s a really interesting question and one that are, you know, we’re talking a lot about, but as a new brand growing outside of our home market of California, especially, you know, we’ve got to be in the consumers normal traffic pattern, we, you know, you’re not going to necessarily be able to succeed by going off the mark. And by going around the corner or hiding yourself and saying, you know, if we build it, they will come. It’s more of a process of, you know, being where the customer is already going, where are their daily trips, where the daily needs? Where are the other restaurants? And then how do we go find great real estate, where we can be front and center, big spotlight on us. And then, you know, through our marketing efforts, you know, draw the customer and

Ressa 22:59
I’m going to push you a little bit there, because to me, that feels a little bit more about the site selection, as I think about the markets, I talked to some chains that are like, I love this market, it’s under restaurant, and I believe I can open up for and I can keep my competition out, I’m going to take the best real estate in that market. But since it’s under penetrated from a restaurant, I that’s where I want to be I don’t want to go in that market, and bank heads with every other restaurant brand. How are you guys thinking about that?

Shiff 23:26
You know, there’s a different school of thought, you know, of both ways of doing it, I think for us, you know, taking a brand building approach building, you know, brand equity, especially in new markets as we continue to grow as a young brand. You know, I think going into trade areas where you have, you know, strong retail, where are the the influencers? Where are the early adopters going to, you know, try things were kind of the hip neighborhoods, the hip trade areas. And we we think very strategically about our our market planning and what trade areas make sense, in what order so that we can be successful in each individual market, because every market operates differently. LA is so different. And there is very, you know, other than New York, you can’t really replicate it in terms of density in terms of some of the the traffic patterns and the energy, but you can’t replicate New York either. That being said, I can’t take Los Angeles and drop it in Cleveland, Ohio, and say, Okay, this is like this. So we really we look at each market differently. We look at each franchise territory differently and say, Okay, what’s the best thing for this market as we’re going to grow here? So it’s it really is a lot of front end strategy and thought and, you know, collaboration with our franchisees or brokers in each market, to think about what’s the right way to grow, so that we earn the right to grow Oh, and continue to grow. As we open more restaurants

Ressa 25:05
like that earn the right to grow. I’m gonna steal that from you. Okay. All right. Listen, this has been fantastic. Thank you so much. Yeah, I want to, I want to bring us to the last part of the show called retail wisdom. Okay, I’ve got three questions for you. Are you ready? I’m ready. All right. Question one. What extinct retailer Do you wish would come back from the dead?

Shiff 25:29
I miss Dayton’s Dayton’s was a department store in Minneapolis. It is the date and family is also the founding family of target. Both started in Minneapolis but but Dayton’s was you know, just a phenomenal department store. Great customer service. It just growing up it was it was one of those places that you you went to whether it was in the suburbs or you know the flagship, downtown Minneapolis location. Dayton’s was just such a phenomenal brand.

Ressa 26:02
Fascinating. I love that answer. Question two. What’s the last item over $20 You bought in a store? Not named Dave’s hot chicken

Shiff 26:10
and not groceries? It was actually socks at Uniqlo I stocked up on on socks of all random things.

Ressa 26:19
We all need socks. Yes. Have you tried bombas

Shiff 26:23
I have tried bombas i They’re great. But for everyday use Uniqlo has the ones I love.

Ressa 26:31
Perfect. Last question then. Okay. If you and I were shopping. We were shopping at Target and I lost you what I would I find you when you are

Shiff 26:43
going to find me in the snacks Gatorade energy drink aisle for

Ressa 26:49
sure. There was a time I was so obsessed with Gatorade. I love that answer. I was so obsessed with Gatorade. I was cutting wheat for wrestling, right growing up. And like I like was fascinated by Gatorade. I’d said my major was going to be food science because I was going to be the person who made the new flavors for Gatorade. That was going to be me.

Shiff 27:09
I missed some of those old flavors like citrus cooler. It doesn’t exist anymore. That was you know in the glass bottle. I’ll drink that one. That was the best love

Ressa 27:19
that glass bottle. Alright, Dan, this was fantastic. Thank you so much. I really appreciate it. I’d

Shiff 27:27
love to host you on one of our restaurants and and give you the opportunity to try it fresh.

Ressa 27:33
I’m gonna take you up on that. Thank you for listening to retail retold. You want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail rebuild at DLC mgmt.com This show highlights the stories behind the deals, all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode