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Andrew Lamppa wanted to sell his restaurant within two years of buying it, but it would take another twelve before he had something an acquirer wanted to buy.
Andrew Lamppa bought the 44th Street Diner in Grand Rapids, Michigan in 2004. Within a couple of years he wanted out, but his first attempt at finding a buyer (…and his second, third, fourth and fifth) was unsuccessful.
Did Lamppa have really bad luck?
…or a business that was too dependent on him?
Find out how he was able to (finally) pull himself out of the diner’s weeds and capitalize in an area that was known to cater to “slow service, where grandparents eat” to find an enticing buyer that would ultimately purchase his restaurant.
In this episode, you’ll learn:
In order for Lamppa to build a sellable business, he had to find a way set it apart from the local competition. The Value Builder System™ has a unique tool that can help you discover your niche and pick a point of differentiation with the power to make it irresistible to an acquirer. Get started for free right now by completing Module 1.
John Warrillow: Let’s talk positioning. How do you create some unique turf for your company so that not only customers know what makes you unique, but ultimately acquirers want to buy only what they can’t easily replicate? And that requires you to have something that’s truly unique. My next guest, Andrew Lamppa knows firsthand what it means to change direction from a generic restaurant, where he was growing at around the rate of the economy, to a repositioning into an allergy-free safe place to eat for people who watch what they eat. It had a profound impact, not only on how his customers perceived his company, but ultimately, his attractiveness to a potential acquirer. He also shares two mistakes he made in the negotiation process, which are things to avoid if you get a chance to go through a sale process.
John Warrillow: Here to tell you the rest of the story is Andrew Lamppa.
John Warrillow: Andrew Lamppa, welcome to Built to Sell Radio.
Andrew Lamppa: Thanks for having me, John. Excited to be here.
John Warrillow: Grand Rapids, Michigan. Is this a college town? I’m trying to remember, is there some famous college and Grand Rapids?
Andrew Lamppa: No, there’s not. I mean, there’s probably a dozen plus colleges and universities, but not like a Notre Dame or anything like that.
John Warrillow: As you can probably tell, I’m completely ignorant about college sports. But Michigan is a big college sports town, isn’t it? Aren’t there, like, huge rivalries between … But that’s not Grand Rapids.
Andrew Lamppa: Nope, that’s Ann Arbor and East Lansing.
John Warrillow: There you go.
Andrew Lamppa: So we’re bigger than both, but no major college located here.
John Warrillow: Warrillow, you’ve revealed yourself as a complete ignoramus when it comes to college sports. What else can I reveal myself as an ignoramus around? Tell me a little bit about the restaurant business, because you started a business called Noble. What kind of restaurant did you have?
Andrew Lamppa: I purchased what was then actually the 44th Street Diner in ’04, after graduating college. I owned it for almost 14 years. When I sold it, we were, I would say, a leader in the allergy-friendly, gluten-free, dairy-free, vegan space. It definitely wasn’t that case for a majority of those years. A majority of the years I would say we were a very generic family restaurant, mainly serving breakfast and lunch.
John Warrillow: What made you want to buy a diner? What was the impetus there?
Andrew Lamppa: Besides stupidity? I owned a window cleaning business through college, and that was great. The summer after graduation, I washed windows. It was just residential, so it was mainly spring, summer, and fall. Fall came, and I had never … I really didn’t think what’s next. I had a full time job opportunity at my internship as a church as their head of IT, that I said, “No, I’m good.” In that spring time, I said, “I’m going to keep doing my own thing. I don’t really want a J-O-B right now.”
Andrew Lamppa: And fall came, and my girlfriend at the time, she was like, “So, Andrew, what are you going to do? You’re not going back to school. What’s the plan?” And I had no clue. Didn’t really plan for it, just was sort of living day by day. Went on a couple job interviews, didn’t find anything that really piqued my interest. Opened up the paper, saw a restaurant for sale.
John Warrillow: But how does a college kid with no money, maybe you had money, I don’t know. But how do you buy a restaurant? That seems crazy.
Andrew Lamppa: My parents helped me with the financing.
John Warrillow: Okay.
Andrew Lamppa: That’s pretty much it. It wasn’t an astronomical purchase price, so it was definitely within, it was feasible.
John Warrillow: What’d you pay for it? Do you remember what you paid for it, either the actual amount or a multiple of revenue? How did you, what was the-
Andrew Lamppa: It was under $100,000. And the data, the numbers that were given to me were, I don’t think accurate. Restaurants have a bad history of the owners, especially of small owner-operators, not really reporting accurate numbers. I probably way overpaid for it. I’ll never really know what percentage or multiple of EBITDA that I paid, but it was under $100,000. It just sort of made sense. I liked food and I liked owning a business, and it was like, “Hey, let’s give it a try.”
John Warrillow: How did you structure it with your folks? Did they lend you the money? Did they co-sign a loan? How did you actually come up with the cash?
Andrew Lamppa: They helped with the financing, and then I paid their financial institution back for, until I sold, so 14 plus years. Almost 14 years.
John Warrillow: And how did you come to know that they were fudging the numbers, or that it wasn’t as advertised?
Andrew Lamppa: After the first year of owning it, I bought it in November, so after that following calendar year, just comparing his numbers to my numbers. Something just didn’t make sense. It wasn’t doing what I expected it was going to do.
John Warrillow: In terms of revenue, or profitability, or what?
Andrew Lamppa: Profits. Revenue was in line, but it was not nearly as profitable as it was claimed. At least, to my recollection.
John Warrillow: And so you have this business, your parents have helped you finance it. Tell me the, kind of get me the Cliff Notes, the short version of the story from there to the year before you ultimately sold it. I’d be curious to know how it became Noble versus 14th, what precipitated that? Tell us, obviously we don’t have time for the whole story, but just give us the mountain tops. Because 14 years is a long time to own a business.
Andrew Lamppa: It is. So I purchased it, I pretty much … You know, also it not being profitable, I also did not know what I was doing. I sort of ran into the ground. The following next two years was paying payroll on credit card, practically. Went into debt one or two years. I think my profits were under five grand, total. So it was a, ’05, ’06, ’07, those were some rough learning years. My head cook quit, and I was like, “You know what, I’m just going to, I’m going to work every day and try to sell it.”
Andrew Lamppa: So I think I listed it for the first time in ’06. I ended up listing it with five or six different brokers over ten years. Obviously a restaurant that’s not, a business that’s not making any money, unless you’re a social media start-up or something like that, is not really going to be attractive to a buyer. So those first four or five years were very lean years, very difficult years, very busy years. I added dinners. We were just breakfast and lunch, but I added dinners. I made pretty much every mistake one could make. I chopped my prices, offered every coupon discount, just to try to get people in the doors.
John Warrillow: I’m reminded of, do you ever watch that … I’m kind of embarrassed to admit that I watch it, but you know Gordon Ramsay does that show where he goes in and makes over a family, did you-
Andrew Lamppa: Oh, yeah.
John Warrillow: In what you described, making all these mistakes, I’m kind of going back in my mind recalling all those Gordon Ramsay shows, when he comes in and starts swearing at the owners.
Andrew Lamppa: You know, thankfully, I don’t think my cooler was nearly as disgusting as some of the ones that are on that show. But as far as the P&L, it would have been a worthwhile phone call for me to make to see if I could get on the show.
John Warrillow: But you turned this business around. How did you do that?
Andrew Lamppa: I did. So, in ’09, we moved locations. I was month to month on my lease, and that made me very nervous, at my previous location. It was a stand-alone, which was great, but I was just nervous, if I did one wrong thing, the landlord would be like, “Okay, you’re out next month,” and then now I have all this debt and no building to house my equipment. So I moved locations and told the landlord, “Hey, I’m planning on selling, so let’s put into the lease more favorable, quote-unquote, language, so that when I do want to sell, it’s possible.”
Andrew Lamppa: That did come back to bite me a couple times. But I moved locations, got married the same summer. My wife joined me and we just tried to grow it as much as we can by continuing to maintain payroll. It was all incremental growth, nothing excessive. Then, in 2014, after the second time that I almost sold the restaurant, I realized, “Okay, we need to do something else.” I had owned it for ten years, I didn’t want this to be my entire life. I was in my mid-30s, so clearly not old, but I felt like most of my 20s were gone with owning this restaurant, and I wanted to change that. I found out the term of, or the idea of positioning, which is how your business is viewed in the mind of your customer. And at the time, our position was slow service, and that’s where my grandparents eat. Because we were still just a very generic family restaurant. I was like, “Okay, we gotta change this.”
Andrew Lamppa: So the pivotal moment was, my wife and I were actually trying to get pregnant and we had heard that gluten can be an issue, so we both went gluten-free for a period of time. We were traveling in South Carolina, trying to have breakfast at a restaurant and there was no options. I was like, “You know what? I think we can make some changes and start, almost position our restaurant as a clean and allergy-friendly restaurant.” Because we also ate without as much artificial colors and flavors, and we tried to eat organically and stuff like that. It was a big change, to go from the 44th Street Diner to what we hoped it to be. We started this process of rebranding to Noble Restaurant. Most of our menu was able to be gluten-free, and we started to grow.
Andrew Lamppa: We also had a customer database that I started way back in ’08, using, sending letters in the mail. That turned into coupon sheets, which turned into postcards, and eventually it moved to text messaging, because printing 500 letters and envelopes and stamping them and addressing them every month was exhausting. So texting was my main marketing outlet. That, combined with the change in my position, I was able to communicate what we were doing to, when I sold, we had 2,000 members of my database. I created the position, we changed the branding, changed the food we were offering a little bit. It wasn’t a crazy change. It happened over a couple of years, because we weren’t at the point where I wanted to risk all my customers leaving.
Andrew Lamppa: But over those years from, let’s say 2015 when we became Noble to before selling, we really became well-known as a very safe, gluten-free restaurant, or can be for celiacs. Right before I sold, we added a ton of vegan options. If you go on Yelp and you search Grand Rapids area for any of those key words, vegan, gluten-free, dairy-free, clean eating, we’re usually in the top five and the only breakfast restaurant, or the top breakfast restaurant. We’re 15 minutes, 10 minutes outside of Grand Rapids. So we really did a good job repositioning our brand to fill a couple of these different niches.
John Warrillow: Love it. How did you handle the safety issues? I know, I try to eat gluten-free, I’m not allergic to gluten, but I just try to … And sometimes when I say, “Hey, can I get a gluten-free bun,” if I’m getting a burger, they’ll say, “Is that an allergy or is that just a preference?”
John Warrillow: I guess if it’s an allergy, they have to kind of, scrub some grill down in some other part of the kitchen. Did you guys take that stuff super seriously, or what happened there?
Andrew Lamppa: We definitely had a mixed kitchen, we did have gluten items in our kitchen, but we were able to … Our deep fryer was completely gluten-free, so French fries, chicken strips, onion rings, all of that were gluten-free. So there wasn’t an issue there. And then we had one grill, we had two grills, so one of them was dedicated gluten-free. We didn’t cook pancakes or French toast on it. It was all the gluten-free buns and meats and the gluten-free French toast. And then our waffles were also, we didn’t sell gluten waffles, we only sold gluten-free, so we didn’t have to worry about, “Is this a gluten-free waffle or a gluten waffle?”
Andrew Lamppa: So we just made some significant changes and really sort of went all in on becoming a very reliable restaurant. We still, we have a rare occasion, someone say, “Hey, I think this happened,” so we’re not perfect, but I think we have gone above and beyond to make sure that if you are celiac or trying to eat gluten-free, that there will be as little if not hopefully any gluten in your food when it comes to your table.
John Warrillow: Give us a sense of how this rebranding and repositioning to kind of a clean eating facility, how big an impact did that have on your financials? I’d be particularly interested in both the impacts it had on your top line revenue, but also your bottom line profitability.
Andrew Lamppa: Mm-hmm (affirmative). Like I said, the first ten years, we probably grew at the rate of inflation, 2, 3, 4%, give or take. The last three years, so the first of the three years that we were Noble, we were growing roughly around 20% if not a little bit more. And that’s top line revenue, so that was significant. At every time we made a change, our revenue would dip a little bit because we’d always end up pissing off a couple customers or a bunch of them. A lot of groups that, people who just wanted cheap black water and toast, and they realized that they couldn’t get that for $2 any more, they would go and find a different restaurant to offer coffee and toast for cheap. We realized, “You know what? It’s okay,” and I think a lot of my staff struggled with it, thinking that we’re going to upset some customers.
Andrew Lamppa: I tried so hard to communicate, “It’s okay if we upset, we can’t please everyone, and we want to focus. This is what we’re going to own. We’re going to own this space, and if there are others that we can’t give them their ideal experience, which is cheap food, then we’re not going to do that.”
Andrew Lamppa: So that helped make room for higher paying customers, especially on the weekends, because we started to really grow on the weekends. Instead of, our average tickets went from six-something to 10 or 11 by the time I sold, so over three years almost doubled our average ticket. Revenue went up 20-30%, our food costs, we went down a little bit. Not as much, but our product, our quality, the quality of our products significantly went higher. We were buying a lot of organic eggs and high quality proteins and no artificial nitrates bacon, so a lot of our items were almost double the cost of the standard chicken breast or bacon, but we were able to maintain our cost of goods percentage by the increase of price that we could demand because we were offering things that very few restaurants around us were offering. Our sales, I mean, they really did well. They went up, like I said, 20%. Revenue, I mean, profitability went up a little bit because as we grew, we had to increase payroll.
Andrew Lamppa: Grand Rapids, during this time, and it continues to today, is expanding in the culinary scene. A lot of restaurants are opening. And there was only a limited number of staff that can work in these restaurants, especially with the low unemployment rate, so it’s a real difficult time right now for restaurants to find staffing. I decided to stop, really not worry about what I was paying my staff and just make sure we had staff. I was increasing wages, I was adding staff. When I sold, we had 25 employees, which was more than I could wrap my mind around. That hurt our profitability for those first two years, but then the final year, final six months before I sold, our sales grew so much that the profits then came along with it. By the time I sold it, it was chugging right along pretty good.
John Warrillow: Andrew, it’s funny, because you wanted to sell this company almost from the get-go. Like, you bought it, you realized it wasn’t what you thought it was, and you kind of started listing the business, you said, I think, five or six times. One question I’m having is, you changed this business model, you focus in, and it seemed to have had a really fantastic impact on the financials and the company. Why did you want to sell it after this amazing improvement?
Andrew Lamppa: I asked myself that a lot the last three months before we sold. So, January of 2018 came and I had just done my P&Ls, and I liked what I saw. We had a two year old son, and we were working on another kid. It was hard raising a family, owning a restaurant that’s–
John Warrillow: That’s supposed to be the fun part, the working, the trying, that’s the fun part. The having and the dealing with them and managing is the un-fun part.
Andrew Lamppa: Yup. So family played a role of, “You know what? I want to be there for my kids,” and being gone every Saturday and Sunday, or most Saturday and Sundays, or at least at minimum, being on call every Saturday and Sunday was difficult for my wife and kids. Our sales were good. The company that bought us had recently purchased my closest competitor, so I knew there may have been a opportunity, and I was like, “You know what? It’s time. I’ve owned it for 13 plus years.”
Andrew Lamppa: There weren’t really, for the growth we were having, I didn’t have the right or enough systems in place, and that made me nervous. I was nervous that it could all come crashing down because we were growing so much. I was like, “I have something really good.” When do you want to sell a business? Probably when it’s growing, not when it’s struggling and you’re having to use Groupon or other things to just get butts in seats.
John Warrillow: Yeah, I mean, you’ve gone through that, right? You knew how hard it was to sell a business that was struggling.
Andrew Lamppa: For sure.
John Warrillow: So, give us a sense, you said at the time of the sale you were at roughly 25 employees. Are you able to share, sort of, kind of revenue or profits? Just give us a sense of how big the company was, if you can. If not, that’s okay too.
Andrew Lamppa: Yep. Revenue was low seven digits. We’ll just say, I feel we were very profitable for an independent breakfast and lunch restaurant.
John Warrillow: Fantastic. So what did you do? How did you market the business? How did you ultimately find a buyer?
Andrew Lamppa: Because I had used six or seven different business brokers, I figured, “You know what? I’m just going to try it on my own,” so I really only talked to Restaurant Partners that purchased my restaurant. I had known him, because I talked to him a couple years prior when we were much smaller, and they weren’t interested. But I was like, “You know what? I think I’m going to go back there. I think we now have a sellable business that he may be interested in.” He had just bought my closest competitor.
John Warrillow: So this is the company Restaurant Partners Group.
Andrew Lamppa: Partners, Inc, yeah. RPI.
John Warrillow: And they’re based in Grand Rapids?
Andrew Lamppa: They are. And they own, maybe ten different brands and 20 different actual restaurants, but some of the restaurants have multiple locations. They own all these, a wide variety. A number of breakfast brands and a couple dinner places, mainly in west Michigan, a couple north of here.
John Warrillow: So you knew the guys at RPI.
Andrew Lamppa: I did, yeah, because I had talked to them a couple years ago.
John Warrillow: What was their reaction when you called up?
Andrew Lamppa: They said, “Come on in, let’s chat.” So I went in and we talked a little about it. We talked the growth that I had, we signed an NDA.
John Warrillow: What did you think the company was worth then? Or did you have a sense of what either you thought it was worth or what you wanted for the company?
Andrew Lamppa: Restaurants generally, from what I read, sell from one to three EBITDA, and myself feeling that we were a well-positioned restaurant that had a very, a good place in the marketplace, we had some niche offerings that were hard to replicate for other businesses, I was hoping on the higher side of that. But I knew lack of systems, the fact that I was still pretty involved in the restaurant. I mean, I could take a week off, no problem. Could I take three months off? No. I wouldn’t know what I would come back to. So, I knew it would be somewhere in the, hoping for the two to three multiple.
John Warrillow: Got it. Got it. So, you get into this conversation with RPI. Where does it go from there?
Andrew Lamppa: They started making multiple visits. They had a couple of their managers come for meals, just unannounced, privately. They didn’t call me from the back and chat with me or anything. Just to get a feeling, a sense of how busy we are. They came weekday lunches, weekend lunches, breakfasts, all different times to just sort of try to verify my statement of, “Hey, we’re a busy restaurant. We’re doing good.”
John Warrillow: And did they ever come in unannounced or in disguise?
Andrew Lamppa: Yep, every time. They never mentioned they were coming in. I don’t think any employees knew that they were, who they were or that they were coming in or anything like that. So they were just taking their families in, I think they did a meeting once there. They just, probably, maybe a dozen times.
John Warrillow: But you knew who they were, and therefore you knew when they were in the restaurant.
Andrew Lamppa: If I was in the dining room at the time. I may have been in the office, I may not have been there. So I think I probably saw them twice during that month plus period when they came in.
John Warrillow: And did you grab the server and say, “Okay, see the guys over in table 36? Treat them really, really nicely.”?
Andrew Lamppa: I wasn’t concerned about that. More so, I stepped on the line and saw their order come through and be like, “Okay, guys, this order, this is the order we want to really make sure it’s right.”
John Warrillow: Nice, nice. Okay, good. So you’re into the RPI … When did RPI get serious and put a number on the table? Did they say, “Andrew, what do you want for your restaurant?” Or did they kind of come to you with a number?
Andrew Lamppa: I wish they would have come to me for a number, but one of my probably greatest lessons was, never be the first one, if you’re the seller, to choose a number. But that’s what I did. He asked me, “What are you hoping for?” And not being … I mean, he’s probably purchased at least a dozen different entities over the last 20 years, so he was well more well-versed in the buying and selling than I was. So I picked my number that I wanted and that automatically created the ceiling for how much I would get for it.
Andrew Lamppa: He quickly, and wisely, and good for him, he knew what he was doing. He knocked that number down significantly and we ended at a price that was, he was willing and I was willing as well. But I was hoping for more, but I should have let them start with the number and then go up from there.
John Warrillow: What were the rationale or the reasons that RPI gave you that they weren’t prepared to pay you what you wanted? And it’d be just curious to know what some of those reasons were for other listeners going into the sale process, whether they can start to mitigate some of those potential discounting factors early.
Andrew Lamppa: A lot of it was my involvement. They would say, “How many hours a week do you spend in the business?” And some of those things, and then they’d annualize that out and take that away even though the number I proposed was the EBITDA including my paycheck, we’ll say. So it was a … They did a great job. They were, like I said, very skilled at negotiations. I think he saw, during our conversation, the areas where, “Hey, I think … You know, he mentioned this, I’m going to hit him on this to knock that price down a little bit.” And they out-negotiated me. I think the biggest thing would be, don’t start with the number if you can at all avoid it.
John Warrillow: Got it. Let the buyer come to you with their number. We’ve thrown out this acronym, EBITDA. Let me talk directly to my listeners and let them know, it’s earnings before interest, tax, depreciation and amortization, so essentially, a way of expressing profitability before tax. Usually when a company sells, in expressing EBITDA, they’ve got a line item for the owner or equivalent, a general manager’s sort of salary. They go through the process of kind of normalization, to try and normalize or adjust the profitability of the company, to try to figure out what it would cost or how much profit the company would make once you, the owner, kind of steps away and they bring in a manager to replace you.
John Warrillow: When you talked about EBITDA and thinking that a restaurant sells for one to three, and you were hoping for the high side of that, you’re assuming that there’s a salary for the owner in that, is deducted from, is an expense of the business before you express EBITDA. Is that correct?
Andrew Lamppa: Mm-hmm (affirmative), yep. And I had a full time manager at the time. So I did put all of my income into that calculated number, but I also knew that technically, if I walked away, knowing because it was a restaurant group, the people doing the payroll were going to be the one in corporate and other things. I knew that corporate would be taking over a lot of my duties, so I felt … It made sense to me that, “Hey, I have my full time manager doing the day in, day out stuff, but then corporate’s going to take over a lot of the stuff that I do as the owner,” so that was my justification to coming up with the valuation that I did.
John Warrillow: Right. And they they responded and said, “Yeah, but Andrew, you’re part of the secret sauce here. We can’t just rely on your manager. We’d need to take into consideration some of the hours that you’re personally putting into ordering supplies and doing marketing and bookkeeping.” Is that basically it?
Andrew Lamppa: And they said, “We take a percent from each restaurant,” whatever it is, as they expense out to corporate to do those things. And that made sense, but it was … I think if I would have started the number higher, we would have probably still sold it at a higher amount. If I would have started the number lower, it would have been lower. I think he just found the chink in my armor and knew he could squeeze a little bit out of me, and that’s fair. I came in a little under prepared. I should have probably not replied to his request in that meeting and said, “Let me think about it for a night or two,” but sometimes I’m too forthright in offering up my thoughts, knowledge, whatever.
John Warrillow: If you had it to do over again, how would you answer that question? Because I think every seller, every small business owner who goes to sell their company is going to have to dance around that question. So at some point, the buyer’s going to turn to you and say, “Okay, Andrew, well, what do you want for this thing?” How would you answer it if you could answer it now?
Andrew Lamppa: I think I would start with, “Well, you’ve purchased a dozen plus businesses just like mine. What do you think it’s worth, knowing where we are financially, knowing what our position is in the marketplace, being a leader in a number of up and coming culinary trends, what would you value at it?” And that would at least, if they said a ridiculously low number, then I don’t really lose, I just have more negotiating, but if they say a higher number than I would have started with, then I’m already ahead of the game.
Andrew Lamppa: I think another thing is, I would have probably looked for one other potential buyer. I think for this type of business, it’s hard to probably find too many buyers for, because we’re not big enough to really get a lot of attention, but we’re not small enough that just maybe a restaurant manager that has some experience or something like that could then purchase it.
Andrew Lamppa: We were at a tricky point where I knew if I didn’t sell to them, there may be limited number of other people in my area that would be willing to look at a place like mine. So I think if I would have spent a little bit more time looking for one other potential candidate, that could have helped my negotiations a lot.
John Warrillow: Yeah, for sure. Having that competitive sort of marketplace built for getting some multiple offers. Did you ever reflect, after a glass of wine or whatever, and think, “Man, maybe I just hang onto it. Like, RPI’s going to pay me somewhere between one and three times EBITDA, hopefully on the higher end of that. But if I just hung onto the business for two or three years, essentially, I’d get all of that profit and still own the company.” Did that thought ever creep into your mind?
Andrew Lamppa: Every day. Pretty much since, I think we agreed on a price maybe late February, early March, and starting in March, the business hockey sticked. We were growing 30% compared to the previous year’s month, and I would come home and tell my wife, I was like, “What am I doing? The restaurant has finally achieved what I’ve been trying to for 14 years, and now we’re under contract to sell.” So we had a lot of difficult conversations about, not necessarily do we back out, I don’t think I seriously went down that road, but it was trying, realizing that I had worked 13 plus years to get to this point and we arrived, and it’s for sale, or it’s under contract.
Andrew Lamppa: So yeah, we talked a lot about that. The restaurant just became very profitable starting … January, February’s usually pretty slow in the restaurant business in Michigan, but once March came, we were doing great. But I kept remembering the struggles. I’m not the best at managing people, and with 25 employees, you’re really just managing people at that point. I also knew that at any point, something could change. They could do road construction in front of our restaurant or something like that, and everything could change. So I knew, you want to sell a restaurant when it’s doing good and growing and growing a lot, so that was a driving factor. Plus, at that point, we knew we were pregnant with our second child, and I knew that it just felt like the right thing to do for the family to call it good on this first tenure of my life and move on to something else.
Andrew Lamppa: But it was difficult. I’m not going to lie, it was very emotionally trying, because I wasn’t working much those last three months before we sold it, because we had managers and tons of employees and a pretty good retention rate for staff, and growing sales and huge profitability. It was really emotional those last few months.
John Warrillow: And that was about a year ago now, right?
Andrew Lamppa: Yep, exactly a year ago.
John Warrillow: Yeah. So as we sit here now, spring 2019, how do you reflect on the same sort of idea today, given a year’s worth of water under the bridge?
Andrew Lamppa: Mm-hmm (affirmative). I’m thankful we got to close. I think I read a Forbes article that said 90% of business listings never sell, and I think that number’s probably worse for restaurants, especially restaurants that are just independently operated. So I know, if I wouldn’t have, who knows what it’d be? Hopefully we’d still be growing and it’d be great, but I didn’t love my position in the business. It didn’t use my strengths. It was really difficult to turn that business around after not wanting to own it for ten plus years to then almost go all in continually to improve it. But I knew I didn’t have another option.
Andrew Lamppa: So it is, I’m thankful that we are out. It is still difficult sometimes. A, the community that I had, I had employees who I considered my friends. I had some purpose to my day, we’ll say. We did good stuff. I know a number of customers are disappointed that I sold. I tried to really separate myself from the business in the last two years, because I didn’t want it to be Andrew’s restaurant that was being sold, I wanted it to be Noble Restaurant, and I didn’t want prospective buyers to be like, “Well, if Andrew’s not out there BSing with the customers or pouring coffee, will they come back?”
Andrew Lamppa: So I made that clear distinction that I’m not going to be the guy walking around chatting with everyone. I’m going to walk in my office, do my thing, leave, say hi. I’m not going to be rude, but I tried to separate myself from the business. But it still, it was a home for 13 or 14 years. I still go back there maybe once a month for breakfast or do take-out or something. It’s still a little emotional. But I’m super thankful. They did a great job with the transition. They made all the transitioning, all the behind the scenes stuff really good. I think I still have a pretty good relationship with the organization.
John Warrillow: How long did you have to work in the restaurant after selling it?
Andrew Lamppa: Sold on a Tuesday, and I think, like 12 days.
John Warrillow: Wow, that is incredible. I’m surprised that you were able to get out so easily and so quickly.
Andrew Lamppa: Well, they did a great job with changing internet and telephone and utilities. I would literally get e-mails saying, “Hey, your music service provider’s been changed,” and this and that, so that transition was, they did it almost flawlessly and quickly.
John Warrillow: How did they lock in your general manager, the person who is running the company day to day?
Andrew Lamppa: About two months before our expected sales date, she tells me, “Hey, come July, I’m moving to Florida.” So that was one of the hiccups that we had to get through. I told them, I think probably mid-April, I was like, “Just a heads up, my manager, she’ll be with you for just about a month and then she’s leaving town.” I thought that was going to cancel the deal, for sure. It did not. They knew about it, they knew that they had to … And their plan was, I think, to bring in other managers that they had trained in other restaurants there and work with my manager. But once they knew that, they knew that they would be replacing said manager.
Andrew Lamppa: So that went the way it did. I’m not going say there weren’t some missteps. They struggled, as I think most transitions do, the first month or so with losing some staff and just integrating my business into the way they do what they do. But yeah, I was only there 12 days. I had family vacation on the 4th, 4th of July, and I told them, “I want to be done by whatever, that Monday or that Sunday,” so we closed the deal two weeks before that, and I worked my last weekend. I had a little bit of a consulting payout through the end of the year, and I was thinking, “Oh, I’m going to get called multiple times a day. I’ll have to swing by there,” so on and so forth. They called me once during that seven month period, and then called me one other time in early January after the consulting agreement, but no big deal.
John Warrillow: How was the consulting agreement structured? Was that a fixed amount of money that you were guaranteed or was it sort of, you were going to bill them by the hour, by the day if they needed you? Or how did you structure that?
Andrew Lamppa: It was part of the purchase price. The purchase price had three components. The initial amount, the consulting, and then I’m carrying a note for a few years as well. But it was laid out in the consulting that I think they could occupy, or take up maybe two hours at most, of my time per week for … And I think that went down as the months went by. [crosstalk 00:38:51]. Because I was nervous. What was that?
John Warrillow: Go ahead, Andrew. No, no, you were nervous for what?
Andrew Lamppa: I was nervous that I would still be pretty attached to it, or that they’d be calling me constantly, because I’m like, “This is a restaurant that I intimately knew, now I’m hands off.” It seemed very hard to think within two weeks they’re going to know everything they need to operate it successfully. So that’s how it was, it was a guaranteed amount every month, so no by the hour or anything like that. And I was-
John Warrillow: How does the note work, Andrew? For folks who aren’t familiar with a term like a vendor take-back or a VTB, how did the note work?
Andrew Lamppa: Because they own their corporation and they own 18, 19 other restaurants, it was simply they were just going to pay me X amount per month for the next, like, four years or something. If they failed on that, I don’t remember what my recourse was, I didn’t really explore that a whole lot because I was pretty confident that they weren’t going to fail on that. And thus far their payment has come in on the 1st every month and things have gone extremely smoothly. Not one hiccup post-sale.
John Warrillow: What proportion of your deal was in a note?
Andrew Lamppa: A pretty small, under 25%.
John Warrillow: Got it. So it wasn’t a huge percentage of the-
Andrew Lamppa: No.
John Warrillow: And it’s still meaningful.
Andrew Lamppa: But I considered it, in the previous two deals that I had, or the previous one that had a note, I considered as, “Hey, it’s a bonus if this check comes in the mail every month.” And I sort of thought of it that way with this deal as well. But they’ve shown themselves to be very honest and have integrity when it comes to that. So yeah, it’s just, check comes in and it’ll keep coming in for another three or so years.
John Warrillow: And Andrew, what are you up to now? What’s next on the horizon for you?
Andrew Lamppa: Yep. I took a few months off. Well, that few turned into maybe a few too many. We welcomed our second child in October, so we took the summer off.
John Warrillow: Congratulations.
Andrew Lamppa: Thank you. I took the summer off. My wife had, just a rough last month of pregnancy, so September, which is when I was planning on starting what’s next, I decided, “Well, I can take one more month off,” and then October, my daughter came and I took another month off. And then the holidays came, and so it just … We enjoyed the end of last year, just sort of being with family, spending time together after, I would say, putting in my dues at a seven day a week restaurant for a majority of my adult working career.
Andrew Lamppa: Currently, what I’m doing is, I’m working on a community-based loyalty program for independent restaurants called Local Bites.
John Warrillow: Oh, cool.
Andrew Lamppa: I’m very early, early stages, talking to restaurants, getting a MVP created. And then, my side project or-
John Warrillow: The minimal viable product, for those-
Andrew Lamppa: Correct, yep.
John Warrillow: Maybe hadn’t heard that acronym before. Yep. And your side project was?
Andrew Lamppa: My side project is helping other restaurants similar to mine, help them with their positioning, so figure out, do you matter and who you matter to. Because I think a lot of restaurants in the marketplace, they just say, “Hey, we have good food. Open the doors, we’ll hope for the best.” But positioning, I think, was the number one differentiator of my business of saying, “Hey, what are we going to stand for and what aren’t we going to stand for?”
Andrew Lamppa: So I do that, or I’m starting to do that as a little side project under the handle RestaurantGrowthHacker.com.
John Warrillow: Great. And is there a way for people to reach out if they wanted to connect with you on social medias? Is there a website or a LinkedIn, or what’s the best way for people to reach out?
Andrew Lamppa: My e-mail’s AndrewLamppa, and that’s with two P’s, L-A-M-P-P-A, at Gmail, or you can find me on LinkedIn. I don’t have the most developed profile. I just visited for the first time, I think a month ago, in maybe five years. So I’m trying to get that updated. And then yeah, Local Bites or Restaurant Growth Hacker are my two websites that I’m going to be building out over the next following months.
John Warrillow: That’s awesome. Well, Andrew, thank you so much for joining us.
Andrew Lamppa: Thanks a lot, John.