Franchise QB

Episode 85: John Gelastopoulis- Founder of Broken Yolk Cafe

• Mike Halpern • Season 1 • Episode 85

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In this episode of the Franchise QB Podcast, host Mike Halpern interviews John Gelastopolous, Founder and President of Broken Yolk Cafe. 

John shares his journey from Greece to becoming a successful restaurant owner and franchisor. He discusses the unique concept of Broken Yolk Cafe, the challenges faced in the restaurant industry, and the importance of maintaining high average unit volumes. 

Takeaways

John Gelastopolous started in the restaurant industry with no money or skills.
He used credit cards to finance his first restaurant purchase.
Marketing strategies can create momentum for a new business.
The restaurant industry is fundamentally about people and service.
Franchising began for Broken Yolk Cafe in 2010 after 17 years of operation.
High average unit volume is achieved through consistency and quality.
Active franchise owners are preferred over passive ones.
The brand aims to expand into new states and territories.
Teamwork and employee contributions are crucial to success.

Chapters

00:00 Introduction
01:04 John Gelastopolous: Journey into the Restaurant Business
03:39 The Concept of Broken Yolk Cafe
06:20 Challenges in the Restaurant Industry
08:57 Achieving High Average Unit Volume (AUV)
10:50 Franchise Ownership Characteristics
13:35 Franchise Costs and Financial Performance
16:28 Conclusion

https://www.thebrokenyolkcafe.com/franchising/

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Contact me and my team with any questions along the way. www.calendly.com/franchiseguy
Mike Halpern, CAFC
mike@franchiseqb.com

This is the Franchise QB Podcast, where we empower entrepreneurs to win big in franchising. We huddle up weekly to educate our audience about the most successful small business model ever created, franchising. Welcome to the Franchise QB podcast. I'm your host, Mike Halpern, a 20 year industry veteran and entrepreneur. My mission is for listeners to achieve their American dreams of creating wealth and independence through franchise ownership. Every week we speak with franchisees, franchisors or vendors that support the industry. Thank you for joining us and let's get started. Joining us in the huddle today is John Gelastopolous, founder and president of Broken Yolk Cafe. Welcome to the show, John. Thank you. Thank you for having me. Absolutely. It is great to have you here. So you have been in the restaurant space for over 30 years. I'd love to start with getting your background so that listeners understand where it all started. So how did you get into the restaurant business back in the day? All right. Here's a little bit about me. came to U.S. from Greece right after graduating high school in the late seventies. uh It was a challenging time back then with no money and no skills. My first job was getting a job in the restaurant industry. else? When you have no skills, right? And uh that's how I started. While I was working in different restaurants like the Sheraton, the Hilton, some seafood places, steak houses, Right after that, I joined the commercial real estate world. Being at this, it wasn't what I expected. However, it exposed me to the business world. And between this and the restaurant experience, it put me in a good position on being a restaurant owner for myself. So in 91, during the Gulf War, if you remember, if you're old enough, right? I sure do remember that. Real estate wasn't great. So I wanted to get out of it. I wanted to go somewhere else. So I came across the Broken Yolk Cafe, which at that time I tried to list it. But when I noticed that they only open for eight hours a day, they close at 3 p.m. I thought maybe that would be something for myself. So it took me a year and a half and I made the deal. Now, back then it was challenging. was no money. So what I did is I used my credit cards, I maxed them all out, and I assumed a big loan. I was in debt up to here, as they say. Taking over the restaurant, the first couple of weeks, traffic was not there. I was desperate. I was thinking, what could I do? Right in front of me, I had, if you look behind me, the Rolodex. And you know what that is. But I had that from real estate with all kinds of credit cards, et cetera. So I called a bunch of people that I met in my real estate years and I invited them over for breakfast with their families. So they came and I, come to the reveals and we started getting some traction on traffic, which helped us. And here's where we are today. We built the momentum for the first couple of months with my marketing, you know, out of desperation idea and it worked. here, wow, that's really quite a story. I appreciate that, John. So It's a really interesting background of having that restaurant experience coupled with the commercial real estate background, because that's so critical as you're growing a brand and you're selecting site two and site three. And then subsequently, when you get into franchising, because in the restaurant space, we all know that real estate is critically important to the success of the unit. um So I'd like to take kind of a step back. Like you built this thing as an immigrant and it's a hundred million dollar franchise brand. I know there's 30 years of stories between then and now, but let's start with the concept itself, the Broken Yolk Cafe. I'm sure it's gone through many iterations from back in the 70s until now, but can you tell the audience a little bit about the concept for those that aren't from San Diego and may not know the brand, like people that are local to the market? Yes, BYC as we call it for short. BYC is a breakfast, uh lunch and brunch concept. and it's only operating eight hours per day, which makes it very uh much attractive because of the hours, having the evenings free. Our menu items vary from traditional specialties like bacon and eggs, ham 'n eggs, uh eggs benedict, to trendy items like the avocado toast with salmon. uh We strive to continue compelling guests. to dine with us, maintaining the basics in a consistent way, which is very, very important. With service and quality and quantity, and most importantly, with hospitality, it's all about making the guests feel good. Yep, that makes sense. And I like the fact that your brand is centered around the quality of life for the staff, like the owner, the manager. You could be home for dinner with your family and you know, there's a lot of restaurant concepts where you can't have that. So when you have a kid who's anywhere from, you know, a toddler up and through a high school kid, you don't really get to see them that often if you're in the restaurant late night. So your concept enables someone to be an entrepreneur and have a business, but also have a family life. To me, that was very attractive, the hours primarily, because I was working in the office in the morning. I in real estate and at night I was working in the restaurant. So I would never see the sun go down. I'll never see the wife and the kids. And when I saw it, I go, I gotta have this. So, and that's why I was persistent for a year and a half and, and we made it happen. That's awesome. So you mentioned, you mentioned the guest experience being the most important thing. Um, I know that's one of the factors that differentiates you from the space, but obviously the You know, breakfast and lunch space is very competitive. You know, what makes it different? How come people come to you guys as opposed to the other folks that are out there competing in the space? ah It's all about having the right people with the positive attitude that not necessarily the experience. You know, what we say or what I say actually to my people, we're in the people business. Anybody can give you two exits, how they give them to you. It's all about making the guests feel good. That's our primary aim and goal to do that. So John, how long did you operate as an independent restaurant owner before you became a multi-unit owner? And then subsequently, when did you decide to franchise the concept? I operated the original location for 17 years, which I still operate. And after this time, and with many inquiries about franchising, and the thing is that we are in beautiful San Diego, we get a lot of tourists. And when people see a lot of people in a restaurant and they see we close at 3pm, they say, okay, that's what I want to have. So we were getting a lot of inquiries. Finally, I was convinced by a regular local San Diego man. to go ahead and do it. And we started in 2010. Okay. So did you open a second location yourself prior to franchising or did you use that 17-year track record and just immediately launch into franchising the concept? Correct. That's exactly what I did. Okay, perfect. Thanks for that. um So let's talk about some of the, like at the macro level, what are some of the challenges that are facing the restaurant industry today, perhaps specific to the emerging concept segment. I think in today's world, the biggest challenge is finding the right people to work. I look primarily for positive attitude and not necessarily for experience. I've been fortunate on this because I have people in my original location that they've been here from 8 years to 31 years. Well, that's impressive. you. Having an emerging concept, yes, there are challenges. However, We built infrastructure and create tools so the franchise owners can have a smooth operation. And we constantly do that. We keep up with the technology, the trends and everything that is out there. Very cool. So this is really interesting to me. I spent many years early on in my career. I'm in the franchising space with food concepts. work with brands like Five Guys Burgers and Paisano's Pizza, Glory Days Grill, regional chains, some became national chains. And your AUV, your average unit volume is $2.7 million, which is a very large AUV, which is how you get to a hundred million in sales at 41 locations. How do you explain that? How do you get to a $2.7 million AUV in the concept? There must be, you know, a a reason behind that? Consistency is a challenge. Building market share in new and existing markets, however, again, it's all about providing the tools to maintain that consistency and having continuously regular audits on every location to assure consistency. So you got to have the tools to assure consistency. It's not easy, but it can be done. bring on good people, you train them right, you build a really good culture around them, treat the guests right, and then you're able to kind of achieve those type of milestones. Very cool. So I know you mentioned Southern California. I know that's important to you. been there a long time. Does that culture translate with the brand? Like if you open one where I live in the DC area, am I going to get that SoCal vibe to the concept? I think so. Yes. After all, our aim is to please the guests. And no matter which market we go to, I have found out that the guests are embracing us. Please remember, we are as real as it gets. We have comfort food, trendy food, fresh food, fresh food. We just have good food, period. Yeah. It sounds like you have something for everyone. So people that are young, old, there's going to be classics on the menu, kind of trendier items on the menu, young and old. um It seems like a pretty good place to go get a bite to eat. So do you have any specific goals on the franchise system side that you're targeting over the next couple of years? Our goal is to keep growing from 41 to 51 to 101 and beyond. So John, what characteristics make a great BYC franchise owner. What are you looking for in a new owner? The characteristics that would be great on a potential new Broken Yolk owner would be for someone that can have their finger on the pulse of the business and to getting things done. I've been in this a long time and the people who get things done accomplish things. So we want somebody not to be like a passive owner, but to be an active owner. This is what we're looking for. Yeah. Now this is a tough business. There's a lot of moving parts with food and with people and with employees. And you just want to make sure that somebody is responsible and accountable for everything that goes on under the roof. So that makes sense. So why would a candidate that's exploring franchise ownership select Broken Yolk Cafe as their franchise? Having all the infrastructure, the tools, the constant innovation, which is very important in today's world, how things evolve, and the continuous support from us, it makes it attractive why a candidate would explore being an owner for our franchise system. So when you say support, that, I know there's a big construction project that takes place and then beyond that, there's kind of training and operations. So you guys provide kind of turnkey support in all facets of kind of launching the business? Correct. And, but the support is continuous, you know, with the uh audits to provide consistency uh with the graphics, reputation management, social media, and, uh you know, trying to make uh partnerships with food purveyors, you know, to to buy the right way, to buy volume, to save some money. So we're always supportive. Okay. Now in terms of where the system is now, you mentioned 41. So that's the flagship location that you own and operate in San Diego plus 40 franchise locations? That's correct. Yes. Okay. And is that 40 owners or do some owners have multiple locations? Some owners have multiple. We have anywhere from single location owner to two locations to five to seven, nine and ten. Okay. And are all of the locations in California or have you gone to other states? We're in five states. You're in five states. Okay. And where are you like geographically? Idaho, Nevada, Arizona, California and Texas. Okay, very cool. um So it seems like there's a lot of white space available for new territories. Are there certain geographical locations, markets or states that you're targeting? Well, we'd like to be in all 52 states, but we want to be realistic. We get calls from landlords telling us their uh area is underserved for breakfast, while breakfast has been growing for the last five to seven years. And you've seen it before. It used to be mom and pop and the big ones. Now everybody wants to do breakfast. ah From a real estate perspective, it's easier to find a suitable breakfast site because the market is not, we believe is not saturated and landlords like us. Why they like us is because we bring traffic to their centers in the AM hours and ah that's what they like. Very cool. So let's talk about item seven in the franchise document. How much does it cost? know there's going to be a variance in cost based on is it first generation, second generation? How much tenant improvement allowance is the landlord contributing? I'm assuming most of these are leaseholds. Can you tell us a little bit about what it costs to kind of get into a single location with BYC? Item seven shows a range from $553,000 to $1.7 million. Of course, the $553k would be for a second gen and $1.7M it would be for a vanilla shell. oh And uh that's what it is. Of course, these numbers vary and depending on the second gen or generation, oh the second gen location, uh what they have in place. oh And of course, their geographic location uh also uh because of wages, et cetera. uh from the construction uh aspect. Okay, great. So let's talk item 19. em Are there any financial performance representations you can share with us today? I already know we talked about the 2.7 million AUV. Is there anything else that you're able to share with candidates that might be exploring BYC as an option? Well, the only thing that I can share is what's disclosed in the FTD. As you mentioned, our AUV is $2.7 million and our food cost is at 26.4% and our labor is 27.3%. And of course, varies depending on what state you're in. In California, it's a little higher. In Texas, it's lower. Yep. Very cool. So John, you've added a lot. I really appreciate you sharing your story with us. Anything else you want to add to the mix today before we wrap up? Well, we're looking forward to opening new markets. eh We're currently talking to a few prospects for three different states. The brand has been around since 1978. We're eh here ah to stay and keep growing. I just want to say one more thing. All this became what it is today because of the great team that I have beside me. And I just want to say big thanks to them because after all, it's our people, our employees that make the whole thing happen. I always say I have two hands. cannot do everything. Big shout out to John's team. And if anyone listening. I'd like to connect with John and his team to learn more about becoming a franchise owner with Broken Yolk Cafe. Contact me at FranchiseQB.com or on X @QBFranchiseQB. I'll get you connected. Thank you so much, John, for taking the time to get in the huddle to discuss BYC with us today. Thank you very much. Thank you for the opportunity. You're certainly welcome. Thank you for listening to the Franchise QB podcast where you're at the helm of your future as a franchise owner. If you enjoyed the content, please rate the show and recommend it to anyone that might be interested in franchising. Make sure to visit franchiseQB.com to subscribe to my newsletter and for an actionable playbook to go from walk-on to legend in your new business. Follow us on Twitter at QB franchiseQB and join us every week for a new episode. See you next time. franchiseQB.com to take the next step of your journey towards wealth, independence and franchise ownership. And remember, When working for the man gets old, you must do something bold. Thank you for listening.