CAVA: Ted Xenohristos and Brett Schulman

This podcast is brought to you by Squarespace. I talk to entrepreneurs all the time who are looking for a way to upgrade their digital footprint. Well, whether you're just starting out or you're scaling your business, Squarespace is the easiest way to build a great website that stands out. It's an all-in-one website platform that gives you everything you need to claim your domain, showcase your products, and get paid.

Anyone can use Squarespace's cutting-edge design tools to build an online presence that truly reflects what makes your business special. There are templates, intuitive drag-and-drop editing, and even an AI-enhanced website builder. Then, Squarespace's built-in analytics tools help you make smarter business decisions, review website traffic, learn where to focus engagement, and track revenue all in one place. Looking to grow your business?

Squarespace even offers fast, easy business financing through Squarespace Capital. Go to squarespace.com.com.com for a free trial. And when you're ready to launch, use offer code BUILT to save 10% off your first purchase of a website or domain. Loans issued by Celtic Bank and Service by Stripe, all loans subject to credit approval.

This episode is brought to you in partnership with Airbnb. This past summer, I took my family to Athens, and it was truly an incredible trip. We ate amazing food, we saw the Parthenon and the Agora, and all the incredible things that you can see in one of the most amazing cities in the world. And one of the things that made it special was the home we booked on Airbnb.

We could see the Parthenon from our bedrooms. It even had a small jacuzzi on the roof, and we were walking distance from everything you'd want to see. We had such an amazing time cooking and just spending time together as a family in that home on Airbnb. If you've ever had a chance to visit Athens, I cannot recommend it enough.

That's the thing about Airbnb. You're not just getting a place to sleep, you're getting a home base that fits your trip. And while you're away, your own home doesn't have to sit empty. Hosting on Airbnb can help you earn extra money on your schedule with full control.

Your home might be worth more than you think. Find out how much at airbnb.ca. Host, hey, before we start the show, a question for you, do you ever get nervous when performing or speaking in front of an audience? Because I definitely do, and I have to stand in front of you a lot of big audiences.

Well, I recently interviewed Ellie Golding about being shy on stage, and even though she's a music superstar who's performed at Coachella and a royal wedding, she told me that she finds ways to break through the anxiety and be present in the moment. You can hear my conversation with Ellie Golding on my other podcast. It's called The Great Creators. Just search for The Great Creators with Guy Raws, wherever you listen to podcasts, or go to TheGreatCreators.com.

And now, on to today's show. Welcome to How I Build This, a show that innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raws, and on the show today, have three childhood friends who grew up on Greek through Monster Restaurant, who found just the right guys helped them grow it from a struggling sit-down into a sprawling national chain, Kaba. You may have heard this statistic around the restaurant industry.

90% of restaurants fail in year one, which actually is an exaggeration, but still only 80% of restaurants survive past year five. The restaurant business is hard because there are so many variables that can put you in trouble, backed. If there's bad weather, people don't need out. One bad review from a disgruntled customer can lower your rating.

If you overestimate your supply needs, you could lose thousands of dollars in spoiled inventory. If you underestimate them, you leave your customers disappointed when they can't get what they want. The list goes on and on. And by the way, the margins are usually pretty slim.

So why do people do it? Well, in the case of Kaba, the founders really wanted to share their Greek culinary heritage. Tencent of Christos, Dimitri Moshebedis, and Ike Grigorapolis all met as kids in their Greek Orthodox youth group. They grew up eating things like lamb meatballs, flakeets, and siki, and fresh salads with Benaches.

And as adults, they all ended up working at restaurants. So when they came together in their 20s to open a small Greek Taverna in suburban Washington, D.C. That was the plan. Run a restaurant, be a gathering place for the community, and maybe earn enough to live off.

What they didn't plan for or anticipate was for Kaba to become a national chain of fast casual restaurants, a chain of more than 280 restaurants across the U.S. But to get there, the three friends had to go through a lot of pain, permanent violations, near bankruptcy, and a money-losing venture to package their products. But a few years in, the founders connected with a guy named Brett Shulman, and Brett believed there was potential to turn Kaba into something much bigger. And together, after a few more years of pain and financial struggle, they managed to figure out how to make Kaba work.

In today's episode, go here from Ted San El-Kristos and Brett Shulman. Brett will join us a bit later because the story really starts with Ted and his childhood friends Dimitri and Ike. Ted grew up in suburban Maryland in the 80s and 90s. His parents were working class immigrants from Greece.

And at home, Ted was immersed in Greek culture, not just the food, but the language, the holidays, and the Greek Orthodox Church. His mom worked as a waitress and his dad worked in construction. He did jobs on his own, you know, it was a company, but he was the only employee, right? So it was called JX Contractor, and my dad would come home pretty late from those construction days.

And I remember him dragging me to a few days of work with him, whether it was, you know, a construction site or roofing job or whatever that was. And I remember a day where he said, I need you to move all that wood from this side of the room to that side of the room. And I did it. And when I was done, I said, what's next?

He's like, I need you to move that wood back to the other side of the room. So it's definitely testing me. And I just remember it being so hot. And I was like, I cannot do this for the rest of my life.

I'm going to have to figure out something to do. And what about your mom? I mean, did you go to the restaurant? Yeah, my mom worked at Talley Hill restaurant, which is actually her sister's restaurant.

So my aunt, uncle owned it. And she used to take me all the time because she couldn't afford childcare, but I loved it. I loved being there. This restaurant is in Potomac, Maryland.

It is still there, by the way. Yeah, Potomac, Maryland. Classic Greek American diner. It's like Greek American diner.

You have oddly Italian items, pizza, Greek items. Making an egg, breakfast. Yeah. A little bit of everything.

My uncle actually still cooks breakfast there every single day. So it's whenever I get the chance to stop by, too. But I remember her dragging me there and I fell in love with it. I was able to watch dishes.

I would bus tables. I loved interacting with the customers. It's really where I fell in love with the restaurant business. And I have to assume Greek culture was probably pretty sort of central at home.

Like you probably eating Greek food, bringing Greek food to school for lunch. Like, right? That is literally all I ate. I mean, I was truly amazed and I am more amazed today because I know how difficult it is to have a family and have work.

Then my mom would go to work and still have time to prepare these elaborate, amazing meals. You know, whether it was like a whole leg of lamb or stuffed tomatoes or a spina colpita that she would make from scratch. I mean, I tried to make one other day and it took me like five hours. I'm like, I don't have time for this.

And it was really amazing the experiences that we had around the dinner table. And in my mind, it seems like it was yesterday where I opened my lunch at school and the smell that came out of the tin foil container was of a spina colpita, which is spinach and fetichis, sitting in my lunch box for a few hours before I opened it, kind of smelled up the whole cafeteria. And people were like, what is that? What are you eating?

And I was always embarrassed to explain what that was, right? I was a young kid and I was trying to explain what spina colpita was. And it was really, really hard kind of growing up being so different. Now I obviously really appreciate it and love it.

And any chance I get to eat my mom's food is a treat. So you met, I mean, you basically met the guys who would go on to start this business with Demetri and Ike as kids. They were, I mean, we met them in the neighborhood or the church or the youth group. Yeah, we met at the church.

I mean, one thing about there were so many different churches around us, all Greek churches and you got to interact with the kids from all over, right? So I met both Demetri and Ike through that church system. And we were a little different than ages. I was the oldest.

I was one year old in Demetri, two years old at the night, but we had it off as soon as we met through those church programs. I know that you did a couple of years at the University of Maryland, but you obviously grown up watching your mom in the restaurant business. And I guess you in the early 2000s, you dropped out and basically started working restaurants as a server, right? Yeah, mainly as a server.

I did work in on the line a few times in the kitchens. I would bartend. I managed a little bit, a good friend of mine opened up an Italian restaurant called Alotso in Bethesda. Still there?

Still there. Still there. Yeah. They do a great job.

Both Ike and myself worked there. And I really loved it. I did everything there. It's where I really learned and started to understand the restaurant business, started to understand what it meant to have a P&L.

And they really let Ike and myself kind of entrench ourselves in that business and do a lot of the wine ordering, the food ordering, the menu creation. Ike, who was an accountant by trade, was doing a lot of the bookkeeping for them. So it was an awesome opportunity to learn. So, all right.

So you guys were all working. And you and I are working at Alotso and Demetri, he was working at another restaurant. I think it was an Israeli restaurant, right? Yeah.

It was called actually Tel Aviv Cafe. It was literally right around the corner from where we were at. And I remember we would kind of grab coffee and talk about doing our own restaurant one day and talk about doing a real version of a Greek restaurant that really represented what Greek cuisine was. And we grew up visiting Greece.

We grew up visiting our villages. We grew up really seeing what Greek food was about, whether it was our parents cooking it or those experiences in Greece and in our villages. And Greek cuisine was never technique driven like the French or the Italians or Japanese, right? It was always about the quality of ingredients.

So even when my mom cooked here, she didn't need Greek tomatoes or Greek rosemary. She just needed the best version of those from here to make amazing Greek food. So that's really what we wanted to kind of bring here to open a restaurant. I guess you had some money from winning tables, but can I imagine you had enough money to open a restaurant?

Clearly, you all came to this idea of let's start something together. But how did you make that happen? So, you know, we didn't have any money. You're right about that.

We just had the will to want to do something different. And I remember, you know, Demetri got a call from one of his distributors who said there's this Russian bakery going out of business. And this is probably 40, 45 minutes outside of Washington, D.C. in Rockville, Maryland.

And we went up and we looked at the spot. And I mean, this shopping center was just barren. There was no cars in it. We went into this kind of Russian bakery.

It looked like a subway if I could best describe it. You know, and so we offered to buy the business. And I remember it was, I don't know, I think it was like $10, $15,000. And the agreement would be that we would pay that over time.

And buying the business, you would buy the brand name. What would you buy? Just the all the equipment. Yeah, just the equipment and everything inside, which I later came to find out was worthless because we couldn't use any of it.

But so when we met with the landlord, the landlord actually said no because some of the same things we ran into in the past, our finances weren't there. We didn't have the personal guarantees. We didn't have any cars or homes to put up. So he didn't want to give us the space.

We were 26, 27 years old. He just didn't do it. So we eventually we come up with this plan. We had found out through conversations with the woman who owned the Russian bakery that she owed back rent.

And so we went to the landlord and we said, well, what if we paid her back rent? Would you give us this place then? And I'm sure as many of your listeners will know already is that money talk. And he immediately said, yeah, I can do that.

So then the question was, where are we going to find this money now? Yeah, we offered something that we didn't have. And by the way, how much was the rent per month? I'm not sure what the actual rent was per month, but I knew that she owed about $20,000.

And so we were going to find this $20,000, right? None of us had 20 bucks in our pocket. So I think I always prefaced it. Like this isn't this is what you shouldn't do when you start a business.

But we took all our credit cards, our personal credit cards and we just pulled money off them. Here's what's your cash? What's your cash? We basically max them out and we were able to come up with that money to pay the landlord off.

Like what you walked in with like a suitcase of cash. I think we turned it all into a cashier's check, but it's a story by me much better if we did walk in with a suitcase of cash. Here's the 20 grand. It's all there.

It felt like it did feel like that. Hand number bills. Yeah. So and what was the concept that you were thinking of?

It was, I mean, this is a Russian bakery that you were taking over. Tell me what it was going to be. So the idea was that we would do meza, which many people know as topos or small plates, shared plates, because that's how they eat and grease when you go, you order a bunch of these plates and you kind of share them. So the idea was that we would create these dishes, Zadzeki.

We had crazy feta, which was feta and fus of jalapenos and shallots. We had baby lamb chops over french fries, but we would hand cut them every day, fry them in olive oil, top them with a reganoso. The way that we had them in Greece, right? With real fresh potatoes.

And so and this was a sit down restaurant. You ordered the counter and sit down. You sat down. We had full service.

We had a full bar full service, waiters, everything, full service bar, host stand, everything that you would experience at a nice restaurant. And the three of you guys are going to do everything? Everything. The matrios and a cook.

I was going to run the kind of front of the house with Ike. He would use his time to focus on the finances. But that was the plan that we would own and work in this restaurant for the rest of our lives. All right.

So you got the 20 grand to pay off the back rent, but you still need money to like get supplies and get and build it out and you know, right? So where the rest of money come from? So the rest of the money came from us working during the day during the evenings. I should say we worked at night at a lots of restaurant and to make sure work to his restaurant and during the day we would build and we would do all the work ourselves.

Your dad was a contractor. So presumably you had some guidance. They helped. They were really disappointed that we were going into the restaurant business and that we were not lawyers and attorneys.

I'm not going to be a lawyer or doctor. Yeah. What are you doing? What do you want to move from Greece for this?

Yeah. And they and you know, they saw the center and they were like, are you going to even have any business here? Yeah, they weren't happy about that, but they did help. Ike's dad, Ike's uncle, my dad, Demetri's dad, they all really helped us bring it together.

But I'm telling you, we built this thing for right around like 10 grand. We everything was from Marshall's TJ Maxx target. We would go into these to target or Walmart. We would open up the credit card so we could get that extra 10% discount, you know, and they offer that at the point of sale.

And and we did everything ourselves. It was it was there were crazy stories that happened along the way. I mean, we did our own electricity. Wow.

Was it permitted? I'm going to plead the fifth on that. You know, it's not everything was done by the books. I will say for the build out and everything's up to code today.

So we resolved any issues we had, but before it was a Russian bakery was a tile shop. So the person who was selling tile there had tiled every part of this place in different color tiles. And so we tried to hand chills with this stuff up. We tried to get it up with machinery.

None of the tiles would come up once we hand chills it all off. There was about an inch of glue underneath them. I don't know why anyone would need that much glue, but for some reason, it just was there and we can not get it off. And I remember asking people what they recommended and someone said to me, you know, you should try and myriad acid.

And I said, OK, that sounds cool. I head over to Home Depot. I buy some really good acid. I remember mixing it with my flip flops and a t-shirt and shorts.

It starts kind of, you know, steaming up. The vapors are coming up. I poured all over that glue and I'll tell you what, that glue was gone. That periodic acid worked miracles, but I was literally at the doctor and in the hospital hours later.

I was just I cannot breathe. Weezing. Weezing. I had blood was dripping from my nose and you're supposed to wear goggles and a mask and gloves and there I was just really just pouring that stuff out.

But it worked. We got the glue up and we can move on. So you guys are working your day jobs as waiters or night jobs and then or maybe in the daytime you're working on the build out. How long did it be to the time that you got the lease and the time that you eventually opened?

How long did it take? I think it took I think we were working on it in the summer of 06 and we eventually got to opening day was in November of 06, a few days before Thanksgiving. And I remember right around October, we went for final inspection and the fire the fire inspector came in and he looked at us and he said he was there to test the ansel system and the restaurant is basically what puts out fires on your grill or fire. If you have one and he said, where's your grease hood and we said what do you mean?

It's just there's the hood right there and he said, well, this is a baker's hood call me when you have a grease hood and we went out and we got a quote for this and it was going to cost over twenty grand. It was like twenty three grand to remove that hood and put a new one in and I just remember we were sitting in that restaurant. It was all built out. The candles were lit.

We had the tables the tables and chairs were all set. I mean, there was we were just ready to go and we thought we were done right then and there because I don't know we just didn't know how we were going to find that money to put that hood in. Wow. I can only imagine how how just dispiriting those because you need that approval to open up.

You can't open it up until you get that final inspection. So what did you do? So that was one moment where it felt insurmountable because where was this money going to come from? Our credit was already down the tubes by the way because we were not paying those credit cards.

We maxed out. So nobody was was really going to give us another credit card and I remember talking to my uncle who had recommended we talk to a banker. He knew and so we met with this banker and he met us. He came into that restaurant and sat down by the way, the restaurant at the time had no sign on the outside.

So it was hard enough for him to find it. I let alone our customers were going to experience down the road. So he comes in and he's like, where's your sign? And we start to tell him our story about the money and how we run out and the hood.

But he kind of looks around and he sees the space and he's like, well, how did you get it to this point? And I told him the story that I've been telling you about all the work we had done ourselves and he looked at us and he said, you know what? I believe in you guys. There's something here.

I love the story. I love everything you've done in here. I'm going to lend you the money. Wow.

You guys have no credit. No credit. But this is I mean, it happens less than banks and solidations, but this is what used to happen more often when you had small local banks. I mean, you're actually with a bank or a banker because I never even had any money to put in a bank.

So I kind of thought it always worked like this. You meet a guy, he gives you money and you build your business. But you know, obviously, as we've been a business since then and we've learned that that was actually pretty miraculous. Right.

Yeah. Very lucky. Great. What kind of collateral did you guys have to put up against it?

Well, there was no collateral except for the restaurant itself. So there was a lean on the restaurant, which, like I said, I mean, we built that place for 10 grand. So the collateral is less than the loan was going to be. So what was impressive is how quickly we also got that loan.

I mean, it was probably a week, maybe 10 days later. We keep the check came in. So you then went out and bought that greasoid. We bought the greasoid.

We got it installed and we called the inspector and everything worked, everything clicked and we were set to go. And that was the Tuesday before Thanksgiving of 2006. So let me ask you what the name, Kava, Maza. Why did you choose it?

Does Kava mean like a seller or like a cave? So, Kava with an O on the end means seller or cave. And the word Kava actually comes from that word. It's when you go to Greece, you'll see a lot of stores called Kava or you'll see a lot of bottles of wine with the word Kava on them.

And it's not the sparkling wine from Spain. It really means that this wine has spent a little time in a seller and becomes kind of like a reserve wine. And tell me about the menu. It was like it was it Spanakopita, Musaka, Tzatziki, Doma, Zubaki, was it like that kind of stuff?

Yeah, we had some of the basics. Again, it was like all small plates. We had the chicken, Zubaki, but we also, you know, did these beautiful like U-10 scallops that we sauteed in our Greek olive oil. We did lamb chops.

We did grilled meatballs. A lot of the recipes came from Dimitri's mom and just doing it in the way that Greeks would do their food or treat their food or cuisine and have the best possible products and create food out of that. All right. So you eventually get to go ahead to open.

I'm assuming when you open, there was probably a lot of friends and family and people from the church to support you at the beginning, right? Like people were coming in and you were probably busy from day one. So we had some friends and family who came in just to kind of help us practice and, you know, things kind of went wild. We didn't really know what we were doing and we were trying to figure that out because we didn't have a POS system.

We didn't have any way of like tracking orders. We were handwriting everything. We were using all these. Handwriting orders on tickets.

Everything. We were so we were writing it on a ticket and then we were going in the kitchen and transferring that order onto yellow sticky notes. And, you know, I remember one of the early moments of those sticky notes. You know, I think the common theme has been we didn't have a lot of money and we were trying to save money and everything we bought.

And I remember we bought the knockoff brand of the 3M sticky notes and walked into the kitchen. We had a packed house. I'm looking around. I'm wondering where the chefs have gone.

I'm wondering where all the food is. I looked down and they're all on their hands and knees kind of looking through these tickets. It was so hot in the kitchen that the glue was melting on the back of these knockoff sticky notes and they were all falling down on the ground. So I remember we ended up kind of giving all this food away for free.

And that was a little bit later after opening. But I just I remember funny stories like that along the way. I mean, restaurant is a very risky business, right? I mean, anyone who's been in the business knows that you're more likely to fail than succeed in the first three years.

I mean, once you factor in, you know, the cost of labor, the cost of rent, the cost of food, there's very little margin left. I mean, it was just a three of you. So you didn't have, presumably, you didn't have to pay employees. But were you bringing money in?

Were you losing money? I think in the restaurant industry, maybe it's just, I don't know, maybe it's in our blood, but every single day you feel like the restaurant could fail. It's kind of a crazy feeling. Even even that first day of opening, we had one customer come in.

I remember he came in, he sat down. I was the waiter and I went up to him and I said, this is what we're doing here. We're doing this Greek concept, small plate shared. And he said, well, I want big plates.

I want a dinner. I came to have a meal and, you know, I tried to be as charming as I could. I love talking to people. I love making people happy and I went into the kitchen.

And I think it was like that pointed out that we had only purchased small plates. So there were not even any big plates in the restaurant. Literally you only get small plates. Exactly.

So I went back out there and I said, I'll figure it out. I'll make him happy. And he got up and left. And we didn't have another customer for two more days.

And again, we thought we were going to fail there. And so like as we kind of got busier and busier, we didn't really know what we were doing. We were bringing in octopus and let's just say the octopus weighed 40 pounds. We would divide that by the ounces that we served and we were like, great, we'd serve octopus for six bucks.

Well, we didn't take an account that once we cooked that octopus off, that 40 pounds became 18 pounds. And so all the loss in that, we didn't capture that in the pricing. So we were really giving way octopus for way less than you could buy anywhere in the world probably. And we did the same for scallops and lamb chops.

And we were kind of getting busier and busier and losing more and more money. When we come back in just a moment, how Kaba starts hitting its stride with the help of a new partner who sees the marketability of the Mediterranean diet. Stay with us. I'm Guy Ros and you're listening to How I Build This.

Raise the bar of your entertainment with Sonos Beam, the compact smart sound bar for TV, music and more. Enjoy panoramic sound for shows, movies and games when the TV is on and stream music podcasts and more when it's off. Feel even more immersed when you listen to Dolby Atmos. I recently got a Sonos Beam for our family's TV room and wow, it's like being transported to a movie theater.

The sound is that good. It's that immersive. And I got to tell you, I cannot imagine ever going back to the normal built-in TV speakers. These speakers are precision engineered and then fine-tuned by Oscar and Grammy winning producers.

Beam delivers crystal clear dialogue and powerful bass. True Play Tuning software takes the sound to the next level and optimizes the EQ for the unique acoustics of the exact room you're in. So head over to Sonos.com and enjoy up to 25% off. Select Products now through November 27th or while supplies last.

This holiday season on-rap inspiration with super fun science, technology and art projects for kids with Kebiko. Kebiko is so much more than a box of toys. It's the gift of discovery through hands-on experiences, giving kids the tools to learn about topics that they love from dinosaurs to rocket ships. There's something for kids of all ages, from infants and preschoolers to teens and beyond.

Kids can discover everything from the science of magic to engineering a domino machine and more. Every Kebiko activity I've worked on with my kids has brought us hours of laughter and conversation and discovery. And best of all, they've helped my kids develop a love for science and for learning that I know they're going to carry with them for their whole lives. Discover Hands-On Fun with Kebiko.

Get your first month free on any crate line at kebiko.com. That's your first month free at KIWICO.com. Hey guys, my name's Keith, I'm from Bush Mills in Northern Ireland. I love the story of Uni Pizza Orleans.

It was great to hear how two people in the UK were able to take a concept and build and grow a business enabling people to produce true Neapolitan quality pizza in their own home. I'm also a teacher, I live in the UK and I was captivated by the story so much so that I'm now the proud owner of an uni Code Out for Sixty. I love your show, keep up the good work. Thanks.

If you want to share your favorite episode of How I Build This, record a short voice memo on your phone, telling us your name, where you're from, what your favorite episode is and why. A lot like the voice memo you just heard. And email it to us at hibt.id.wondry.com and we'll share your favorites right here in the ad breaks in future episodes. And thanks so much.

We love you guys. You're the best. And now, back to the show. Hey, welcome back to How I Build This.

I'm Guy Ros. So it's around 2008 and even though Ka-Pameze is popular, the restaurant is losing money. Ted and his partners are paying themselves basically nothing. But then the customers start giving them an idea for how to expand the business.

We had people kind of requesting to buy our dips and spreads like our home in a sense of ziki and like, they were like, oh, can I get a pint of that? Can I get a, can I get a gallon of that? Like, can I get a gallon of that? Like, what are people doing with a gallon of home that starts at ziki, right?

And eventually, you know, we had a customer who came to the restaurant all the time, Kenny Maynes, who said to me, like, well, why do you guys sell it in the grocery store? And I said, well, I'm not really sure how we're going to do that. I don't have any experience doing that. And so we decided to do it because everything that we had done in the past, we had no experience doing and it's found a way to work itself out.

So we started doing that whole business. And, you know, at that same time, we started talking about doing a second restaurant. We're like, hey, we figured out what we're doing. We must be geniuses, right?

Let's go do a second restaurant and let's try to sell, you know, our different spreads and grocery stores at the same time. And I remember we would make these dips at night. We would hand scoop them into the packages. We would use these little scales.

And then we would use blow dryers to melt the ring of plastic around the top to crimp them and then eventually deliver them to the grocery stores in the early morning. Was the payoff good? I mean, it's, you're getting into a few small local groceries, but a lot of work, you're going to make all that to Tziki and you're going to make all that fed up and you're going to make all that hummus and then package it. And was it worthwhile?

Was it a good revenue stream? It was not a good revenue stream. It was losing money. It was giving us hard ache.

I remember even the first delivery I took, the grocery store refused it. I delivered it in the backseat of my car and they said, well, you know, has this been refrigerated? You know, since you delivered it, I go, no, we pretty much made it through it in my car and brought it over. So I had to throw that all away.

Obviously, we're making the stuff without preservatives. And as we made it a few days later, these packages were kind of blowing up because we didn't have any preservatives in it. So we didn't really understand the business at all. And it really, really struggled.

I guess this is sort of around the time when you get connected with Brett Schulman. First of all, why were you looking to reach out to somebody? You sort of felt like you guys need help figuring this part of your business out. Yeah, I mean, at that time, we had signed a lease for our second location.

We were delivering to a few Whole Foods in the Mid Atlantic and a few smaller other grocery brands. And we were having issues. We were having logistical issues. We were having production issues.

It was not profitable. And right around that time, the economy started to kind of collapse. This 2008. Yeah, it was 2009.

Yeah, we were building that restaurant. We had a loan for that restaurant. And the bank eventually pulled it because of the collapse. And so we were in a tight spot.

Things were not going well. And I guess this is a pretty good time to bring in Brett Schulman, who, soon at this point, became a partner. You kind of come into the picture at this point, Brett. And you've been sitting here quietly the whole time listening.

But just to kind of paint a picture here, while Ted and Demetri and Ike were building up Kava, you were working at your wife's business, which was a startup that she had called Snickety Snacks. A small, like, snack food business, which I guess eventually got acquired. So at this point in your life, you were kind of looking for your next move, right? Yeah.

You know, I'd been heads down for four years helping build that business. And the exit that we did, it was a success. I wouldn't say it was, you know, a tremendous success by any means. Like it was like pushing a boulder up a hill.

But it was a tremendous learning experience in what it takes to build a business and build a brand. Yeah. But now, here I was at a crossroads. What was I going to do next?

So I did seek a council from people around me and thinking about what I wanted to do next. And that's where I started thinking about consulting. And even before I started thinking about that is when I got connected with Ted. And from what I understand, from what I read, the two of you basically get introduced and you get to get used to talking about Kava.

And I guess, eventually, Brett, in exchange for your consulting help, because I don't really get a four to pay you. Ted basically offered you some equity in that grocery business that they were doing, like, the dips and spreads, right? Yeah. First, that was the idea.

But why were you interested in doing that? I mean, it's a small restaurant. They're hand-packaging dips and spreads to a couple of little things. I mean, that's a tough business, right?

There's big brands out there, Sabra and other big brands that are making hummus and dips and stuff. And it's the question is, why would you take this opportunity? I mean, you were looking for something to do, but they couldn't pay you. Yeah.

They were offering you equity, but equity is something that wasn't worth anything. Well, it's interesting, guys. The time I've been speaking with a former colleague from my finance days about starting up a consulting practice where we would consult with small emerging brands and potentially take equity in lieu of compensation and help create value with that equity interest. And when I met Ted, we kind of clipped right away.

And then we were customers of the product. We had it in our refrigerator and really believed in the opportunity in that category. So you start to learn about what they're doing and why was it not working based on what you were looking at? One of the things I learned in the snack food business is just how precise and how detailed you have to be as Ted said earlier.

It's a pretty low margin business. And I remember walking in and saying, how much does this tub of hummus cost us to make? And it was like, oh, you know, around $2. I said, well, like to the third decimal point, hundreds of a penny, including the label, including the seal, like making sure we have all our costs down a little bit like Ted talked about what they learned in the full service restaurant and then how are we monitoring our batch production and our yields.

And I remember the business was using just QuickBooks at the time and QuickBooks had a manufacturing version. And that was very relevant. So you could build what's called build materials for those products to have a true understanding of every production you run, what the yield is, what the usage is, what the true costs are in the business. There was a lot of just experience I had gained through the snack food business that I was able to apply very quickly to that business to drive more profitability and efficiency.

So you were focused entirely on the dips and spreads that were being sold to grocery stores. You were not at all focused on the restaurant at all. No, I solely, when I first came on board, I was focused on the dips and spreads business. And Ted, you sounds like you guys were happy to just let him run with that.

That was more of a burden for you guys and you guys could go back to focusing on the restaurant. Yeah, I mean, we were super happy to have the help. And what we really saw was that business slowly started to turn around. And I saw him so complimentary of what I do.

I like to be a little more creative. I like to be a little loose with the numbers. I'm like the guy with the briefcase of cash, right? And he really just brings this completely different way about thinking about the business.

And I really started to think right then and there like how he could help us in a restaurant business. So Brett, before that happened, right, what was your sort of thinking around the dips business? Were you thinking, all right, this is really going to be the thing that grows this overall business. And this thing is going to be could potentially be huge.

Like we should go raise money. We should turn it to a brand. Like, was that how you were thinking about it? Yeah, that's exactly how I was thinking about that we could raise capital and really grow this into a large player in the hummus in the dips and spreads category.

That this could be a brand we could scale. And it was around that time that I had experienced the full service restaurant and was really struck by a couple things. I was struck by the authenticity of what Ted Eke and Demetri had started. Just the soulfulness of the brand.

And B, here was a way of eating that was satisfying and flavorful. And by the way, it happened to be healthy. And I said to the guys, we could bring this to a larger audience. Yeah.

He said to us, he's like, guys, look around. This kind of Mediterranean food is already healthy. And I don't think I realized that I just grew up eating that, right? The pre-biotics and yogurt, the amazing qualities of olive oil, the chickpeas, just the natural healthfulness of all the different items that we had at our restaurant.

And so I remember saying, hey, let's talk. Let's have a coffee. And we sat down and I said to him, hey, I really love what you're doing. The guys love what you're doing.

I think what you bring to the table is very different than all the tools that we have. And I would love nothing more than for you to join us as our fourth partner. And I remember, you know, to his credit, he looked at me and he actually told me that that's actually a bad decision. That's bad.

You know, he's trying to give me good advice as a business partner already. That's not a good thing. Just give away 25% of your equity of a company, right? And I said, I really see something.

I believe in what you're doing. I believe in our partnership. And you wanted him to be the CEO? Yeah.

I literally was interviewing him to be my boss, right? And so, you know, outside advice that we got, we're like, oh, you're crazy. Why would you want to hire a boss? Why would you want to give this up?

And I just saw a bigger picture. I knew and I could see it what he was going to bring to the three of us. And it was going to be much bigger than what the three of us were going to accomplish on our own. And at that point, do you guys profitable?

So the restaurants were making profit. The dips, of course, were not. We were funding those with the restaurant profit. But, you know, we were starting to see the light at the end of the tunnel coming out of that whole economic collapse of 0809.

And we were in a good place. I was running the books. Brett was actually even helping us a little with that without having any kind of consulting green. We were just kind of going to him for advice.

And so, things were going well at that time. I'm curious about the dips business. I mean, if that business was so hard to turn a profit, why continue doing it at the time? Well, we thought that there was opportunity to continue to make it more profitable, which we were able to do.

And we wanted to maintain being a culinary brand and really bring that it's Iranian to consumers across the country. So having those dips and spreads, being able to be in our customers' refrigerator in their house, being served to their friends and family, having that awareness touchpoint, having the validation of the quality of being sold in Whole Foods markets was just a great brand amplifier to what we were trying to do in the fast casual. I mean, when you and the other guy started to talk about, all right, what can we do next? The idea was let's open a fast casual version of Kava, right?

Let's do something more like, like, were you thinking more like a Chipotle or something like that? Was that what you were thinking? Yeah, I had been a customer of the early fast casuals like Chipotle and Panera and had looked at the different business models, counter service, the Walk the Line assembly line format. And one of the things that struck me that really helped us make the decision was that the Walk the Line format allowed very efficient labor costs.

You know, it's the old Henry Ford production line that allowed you to invest in high quality ingredients. And the guys were already using these great high quality ingredients, whether in the dips and spreads or at the restaurant, and we felt like that's what was going to matter. And if we could bring those high quality ingredients like we served in the restaurant or put in the dips and spreads to a larger audience at a more affordable price point, that, you know, that could be a great proposition. And so we ultimately settled on that format.

And I remember immediately kind of getting into the kitchen with Dimitri and working on bowl ideas and calling bread and be like, hey, come up to Kava and as at the time, I was at the restaurant and we kind of put these bowls in front of them. And it was the start of what we've kind of been doing for the last 12 years here and last 16 years overall, this partnership of kind of working through what the concept would be, what the food would be, how it would look, how it would taste. So we were super excited. I think we love the idea.

All right. So now you have to get the money to open this restaurant. How did you get it? Yeah, it was, you know, the guys had a lot of customers of the original Kava Mezzie restaurant who were successful local business folks who had come to them and say we want to invest in your next Kava Mezzie restaurant.

And so we reached out to all of them. We got them all together at the original Kava Mezzie closed for lunch one day. We mocked up all this food, put a presentation together and we said, look, this isn't going to be another Kava Mezzie, but here's our idea. We want to take the great food of Kava Mezzie, put it in a fast, health-based format, open two or three, prove that this, you know, has the appeal, we think it will, and then look to scale it from there.

And that's what we're looking to raise money for. So we got everybody together at that original restaurant in Rockville. You know, we had people who worked there and invested, bartenders, servers, family members. I mean, we had almost anybody who wanted to.

We were willing to take money to help get this thing off the ground. Yeah. It was really interesting. I remember one investor that I met with when we were trying to raise that original friends and family around.

He said to me, after I finished presenting the idea to him, he's like, I like this idea. He's like, how many restaurants can you name off the top 100 Washingtonian restaurant list from 10 years ago? And I'm sitting there thinking and I'm like, gosh, I don't know. He's like, exactly.

He's like, full service restaurants are hard. And it's hard to build a brand around. And he said, I love what you're trying to do to take the great aspects of what you have in your full service restaurant. And create a brand around it in this fast format that's much more scalable.

All right. So this was not going to be a small place restaurant. It's going to be more like a chipotle. Like you go in and there's a line.

So tell me, so you have to streamline the menu and tell me how you guys started thinking about it. Like it was going to be like a chipotle like salads or rice bowls or stuff to eat sandwiches. Well, one of the first things we thought about was we had a commissary that we were making the dips and spreads at a central commissary. And we also felt like those handcrafted dips and spreads were the flavor centerpiece of the menu.

So we started to think about building the menu around that in that grain bowls and greens and mains that were elements of the full service restaurant, whether spicy lamb, meatballs or the chicken marinade that was used at the restaurant. So that's how we started to build out the menu. And then Ted and Dimitri really working on how do you take these items from a maid to order format to a cook and hold format on the serving line. And so tell me about that first location.

Yeah, it was really funny. I still have a picture from our friends and family night, you know, before we officially opened. And it was in the first in Bethesda. Yeah, it was January of 2011.

And we had raised money from friends and family to open two to three locations. And this was the first and it was a good market for this type of fast format. There's a lot of office workers, but there was a lot of also residential and families and high school students. So I remember standing in front of the line with Ted on the friends and family night and we're looking at the topping section.

We're like, this kind of looks like a salad bar. You know, it's just like a bunch of chopped tomatoes, a bunch of chopped cucumbers. And so we were constantly iterating and thinking about how do we elevate it. We did not have dressings at that time.

We only had one type of greens. So, you know, it was a very basic version of what we have now. We've always continued to try and iterate and evolve. But yeah, we did not want it to be a salad bar.

And how did it do in comparison to the sit down restaurants? I mean, this is not a restaurant for popular, but how did the fast casual place do? It didn't do great at first. Yeah, I mean, we had guests walking in who knew the full service who were like, what do you mean?

I have to serve myself here. I have to walk through a line. Where's my lamb chops? Where's my scallops?

Where's my martini? Where's my great use? You know, so we had many, many moments of that. It was a really bit of a struggle in the beginning trying to educate people on what this cover was because the full service was called Kava meza, which still exists today.

And then this was called Kava. And so there was a little bit of confusion as they walked through the front door. Was there a clear at this point vision? Like you knew that you'd raise some money, I think about two and a half million dollars from friends and family to open those three locations?

But were you thinking, Brett, like, okay, let's start like this. And then let's go to investors and raise a lot of money and really see what we can do. I don't think we had the time to be raising a lot of money. I think it was really, let's prove these out and then maybe go raise a little bit more money to keep growing it.

And I mean, it sounds like every kind of decision you made up until this point was very sort of methodical and baby steps, but I imagine that there were also some mistakes that you were making at that time. Always. You laugh at what were you doing wrong? Well, really, I think it started with the second location.

An opportunity came up at Tyson's Corner Center, which is at the time one of the top malls in the country. And there was an opportunity for a location that was at a mall entrance with an interior and exterior storefront. And it was a bit of a sleepier entrance, but we opened in March of 2012 and we opened our doors expecting people to show up. And it was tumbleweeds.

There were very few people that showed up. And I just remember thinking, oh, no, I've made a bad decision. I've undermined this business. This is a lot of money we just committed.

We only have so much money to build so many locations and no one's coming. And then it really spurred the idea that has become customary tradition. How do we introduce ourselves to our new neighbors and the new communities? And so we started this idea of our community day where about three weeks after we had opened, I mean, the sales were really anemic.

We did what's called our community day and we advertised and got out on social media and radio that we were doing this free lunch service. So anybody could come and have free lunch and we didn't require a donation. But if you donated, we would match your donation. Donated to what, by the way, a local philanthropic partner that addresses food insecurity.

So you're offering free free lunch for the day? Yeah. So we had a huge crowd that day. And then that was at the end of March.

And then in July, something else interesting happened. It's called a derecho. I don't know if you know this weather event where we had a derecho. It's like a mini tornado.

Yeah. And so we had a really severe one come through the DC area and it knocked everyone's power out. Yeah. Tens of thousands of people were without power for like three, four days.

And so people could need at home. So everyone came to the mall and everyone came and there were huge crowds. And so it drove even greater awareness. And by the end of July, early August, we had such significant lines.

We had to get those movie stanchions and ropes to corral the lines so that they didn't block the concourse entrance. Well, all right. So at what point do you remember saying, all right, let's see if we can build this out even further. I mean, you've got the three fast casual restaurants and they're all in the DC metro area and they're doing well.

What do you remember, Brett? What was the kind of the tipping point where you're like, let's go bake. Let's go out and raise money and make this into a much bigger concept. Well, there was an interim step where we raised another friends and family around because we felt like we had something that was starting to work, but we didn't have clarity that this was going to be a huge opportunity.

And so we did another small friends and family around to open a couple more locations. And I think the tipping point really came and we opened the fifth location. So this was in February of 2013 in a new mixed use project in Fairfax, Virginia called Mosaic. And we did our community day.

We did a free lunch and a free dinner. And we had two hour long lines and the restaurant opened for its regular service the next day at twice the revenue run rate of the other restaurants that had opened and the other restaurants all started to grow in concert with it. Yeah, but I mean, the lure when you're successful is to really expand quickly. And that can sometimes really damage a business.

That can be a death knell for certain companies, especially they can manage inventory. They can't manage efficiencies. So did you think methodically or not about, let's expand this slowly or I don't know where there were moments where we thought let's just go all out. Well, when we knew we had something or we felt like we had something after Mosaic, we really wanted to expand further and we started looking at new markets.

Outside of the Midlandic, you mean? Outside of the Midlandic. So we had committed to a couple more locations in the DMV, but we started looking at new markets. And we had the brilliant idea or I made the brilliant decision to have our second market be Los Angeles.

3,000 miles away from home where no one knew us. When we come back in just a moment, why expanding to LA feels like starting the business all over again. And why the Kaaba founders decided to buy another restaurant chain that's three times bigger but failing. Stay with us.

I'm Guy Ros and you're listening to How I Built This. This episode is brought to you by 8 Sleep. Better Sleep is the gift that keeps on giving. Now, I have to tell you, the 8 Sleep Pod Cover is one of my favorite products of the last few years.

I have told everybody who will listen about how it has revolutionized my sleep. It has had an immense impact on the quality of my life, on my mental health and just on being a nice person. The Pod Cover will improve your sleep by automatically adjusting your bed's temperature based on your individual needs. So if Better Sleep is on your wish list this holiday season, look no further than 8 Sleep.

Until November 30th, 8 Sleep is offering our listeners up to $500 off when you build a bundle with my personal favorite. Go to 8sleep.com.com. Built for these exclusive holiday savings. 8 Sleep currently ships within the USA, Canada, the UK, select countries in the EU and Australia.

Hey, welcome back to How I Built This. I'm Guy Ros. So it's 2015 and Ted and Brett are planning to expand Kaaba to LA. 3,000 miles from home base.

Yeah, at the time, we were thinking about the Dips and Spreads business alongside this business. And we were thinking about a hub and spoke model for our Commissary production. Because we didn't have the shelf life on our Dips and Spreads that we do now. And we wanted to open in a large market.

And Southern California was a great customer profile. A really large market opportunity, which was the attraction of doing that. And so we actually opened a small Commissary there. But it didn't open until after our first restaurant opened there.

So we had to do the Dips and Spreads in that original Los Angeles restaurant. And the challenge of Los Angeles was so difficult already before we had even opened that restaurant. That I went to Ted and I said, what do you think about moving to LA? So tell me why you moved out there.

What was the challenge in LA? So I actually moved out there in 14 to start building that Commissary and to build that restaurant. And the Commissary, just to be clear, would be making the Dips and Spreads for mainly for Whole Foods. And the restaurant.