Oakland, CA, USA

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All Money Ain’t Good Money – Opening a Top-Rated Restaurant

May 5, 2017

Hey Friends & Family, have you ever thought about raising money for a business?  

 

Maybe like our guest today you have even had a dream of opening a restaurant.  But unless you’re independently wealthy you may have been stuck on the question of where the money would come from.

 

It took Adrian Henderson and Nigel Jones over $300,000 to open the doors to Kingston 11 - a booming three year old Jamaican restaurant in Uptown Oakland.

 

But as they found out the hard way – all money ain’t good money.  In raising the money they engaged with some partners who, once they had equity in the company, tried to use their financial needs against them in order to drive up their stake.

 

But these guys weren’t having it.

 

 

 

The podcast this week features a story of perseverance – of hard work and some hella good food.

 

Now what I love about Adrian is the dude is never-endingly positive.  He focuses on the blessings he has, not on the negativity.  But that doesn’t mean he’s going to let himself get trampled on.

 

A bad equity partner is just the beginning of the day to day struggles that he faces to keep his business up and running.  For example the fact that minimum wage in Oakland is at $12.86 per hour, on its way to $15.  Or new laws which mandate 75 hours of paid sick time per employee.

 

If you’re in the restaurant business you have to deal with drama all the time.  Customer drama.  Employee drama.  Folks coming to work high … quitting without notice.

 

One of their employees, scared of being pulled over by the police for a speeding ticket – because, you know, of all the recent reports of police brutality – wound up in a low speed chase on the freeway, which ultimately culminated in the back parking lot of Kingston 11.  I’m talking helicopters, sirens.  The whole 9.   Adrian had to come out and talk the police down from converging on this frightened young waitress.  You can’t make that kind of stuff up.

 

However, despite the drama – their hard work in their restaurant’s young tenure has earned them an extremely loyal clientele and a Michelin recommendation.

 

But how did they get started?

 

Sunday Dinners

 

Adrian comes from a large family.  His family was open and welcoming.  And his Mom would cook Sunday dinner for what seemed like the whole neighborhood.  Sometimes a homeless person would knock on the door.  No problem.  Moms would invite him in and sit him down as though he were family.  

 

So that’s a part of who Adrian is.  Building community – and helping folks.  When Hurricane Katrina happened, Adrian took two kids into his home – for four years.  They graduated high school living in his house.

 

His business partner Nigel is from Jamaica, and emigrated to the US when he was 14.  Pulled up by the bootstraps, he started in the fashion industry in New York, and eventually made his way out west.

 

As Adrian and Nigel were reflecting on the present state of their community, they felt that they were missing the good old Sunday dinners, and decided to host one to bring the community together.  One dinner turned into three, turned into five.  It became a real big deal within their network, with up to 50 people showing up each weekend!

 

When a friend, Keba Konte, now the founder of Red Bay Coffee offered them a chance to do a pop-up restaurant at his Guerilla Cafe they jumped at the chance.

 

It was a flying success and after some time they decided to jump out on their own and go for it.

 

Building the Restaurant:

So, they closed their pop up shop in Berkeley in order to regroup and make their plans …  But as we all know, money doesn’t fall from the sky.  So how did they make it come together?

 

First, they approached friends with deep pockets – a $25,000 loan got them started.  They approached family, a few thousand there, he tapped into his 401k.

 

They did fundraisers from people’s houses.

There were hidden costs that popped up along the way, like $10 grand in city permit fees.

 

And at a certain point they pulled in a third partner, an architect friend who was willing to help on the buildout in exchange for equity.  He had some connections to other capital partners as well.  

 

Eventually that turned out to be a bad partnership, which we will hear about in a minute.  But they had to do what they had to do.

 

And basically from all these various sources they pooled enough money to buy equipment, and secure the location…  a building at the up-and-coming corner of Telegraph and West Grand in Uptown Oakland… but the place was … well let’s just say it was a looong way from being ready to make a big splash on the Oakland culinary scene.

 

So they rolled up their sleeves and got to work.

 

He says it was the hardest he ever worked in his life.  Pulling out concrete, dump runs, installing flooring, getting the place from a self-described “shithole” to a first-rate dining experience.

 

So Nigel and Adrian got the doors open and were getting down to business. But those partnership issues that I brought up earlier began to spring up pretty quickly.  Things should have been golden with a booming new business – but they weren’t.

 

The partnerships went south essentially for two reasons:

  1. The partners were questioning their day-to-day operational decisions (which was not a part of the initial agreement - this was explicitly Adrian and Nigel’s project, they were supposed to simply provide capital)

  2. They tried to use the financially precarious situation of a first year restaurant to gain more equity leverage in the business

 

Things quickly came to a head, and Adrian and Nigel finally told these guys where they could stuff it, and went about booting them from the business.

 

Fortunately they had a mediation clause, which was critical so that they could settle out of court and come to terms without expensive litigation.

 

You’ve probably heard this before – that more than half of all restaurants fail in their first year of business.  Adrian and Nigel were able to not only succeed, but also were able to pay back their investors in full, three years into their business.  This is unheard of in the restaurant business.

 

Food

 

Now, they are through the partnership storm, and business is booming. 

 

Their success is a testament to their perserverance, but also a testament to their food. Their oxtail has been voted Best of the East Bay, and so has their Dark and Stormy rum drink.  The customers on Open Table voted them best restaurant in Oakland.

 

Learn more on the podcast about the delicious food they serve

 

Daily Revenue

 

Alright, now let’s get back to business.  What are some of the hidden costs that they’ve found since they’ve opened?  And how have they had to adjust accordingly?

 

Since minimum wage has gone way up in Oakland since they opened, they have had to cut staff.  So, for example, on Tuesday and Wednesday nights they’ve scaled back their staff from two servers and two bussers to one of each.  And eliminated the barback, so there’s just a bartender.  Adrian supports as a host on those nights.

 

He tries to ensure his labor costs hover around the industry standard 27% of revenue – and for the most part he is successful.

 

On the podcast hear answers to questions like:

  • So how about overall revenue - how much are you making per month?

  • What does that look like in terms of business strategies?  

 

Keeping Pace With The Times

 

At this point Kingston 11 seems here to stay.  And that’s a good thing.

 

Oakland - like many American cities - is experiencing a shift in demographics.  For better or worse, it’s experiencing gentrification.  In some ways this is a good thing for their business as Oakland’s average household income is on the rise.

 

However - it is very damaging to their labor pool.  Restaurant employees can often no longer afford to live in the neighborhoods near the restaurant – even with the increase in minimum wage it is unaffordable.  An average one bedroom apartment rent is now over $2,300 per month.  At $12.86 per hour, that equates to … well … that equates to an illegal amount of hours per month.

 

Not to mention taxes.  So employees move further and further away, creating more problems with hiring and scheduling.

 

Adrian and Nigel are also committed to the community.  As they have to slowly raise prices to keep up with inflated labor costs, they worry that over time the restaurant’s dining experience will become increasingly less affordable to the very community who inspired them to take that leap of faith to begin with.

 

So with this kind of pressure cooker environment, where you have astronomical labor costs and a hyper-competitive restaurant landscape, you have to focus on business basics.  Like cash flow, cash flow, cash flow …

 

And they are doing a great job.  Staying at one with their accountant, and getting clear of debt.  So that they can begin to take home a good stable salary, and begin work on the next goal of buying their own building.

 

And when that time comes... this time, no bad partners.


Now if you want to go try some of the best jerk chicken or plantains in Oakland… plan your next date night at Kingston 11.  Ask for Adrian and mention the podcast … he will give you those plantains for free!

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