The Intentional Restaurant

Hi, my name is Erin Wade and I am the founder of Homeroom, a mac and cheese restaurant in Oakland, California. Woo! I'm here today because we're achieving some pretty extraordinary results by using some unconventional methods. And what do I mean by extraordinary results? Well, for one, Homeroom's revenue per square foot is some of the highest you'll find in the industry. Our retention is some of the highest you'll find in any industry. And our mac and cheese, I know I'm biased, but it's the best in the world. Woo! So, in addition, despite being one small restaurant in Oakland, California, we are consistently recognized in national media for all the innovation that we're creating in our workplace. So, before I get into how we're doing this, I want to talk a little bit about the why. So, my path to mac and cheese superstardom began in a very unlikely place, a boring law office. Now, I had worked as a line cook in restaurants for years, and I just got fed up with the low pay and the poor working conditions, so I decided to leave it all behind and pursue this much more staid, boring, lucrative career as a lawyer. But the problem was that I hated it. And I missed everything about restaurants except what it felt like to work in them. So, I started wondering, you know, if I could start my own restaurant, could I maybe create the kind of culture that I had wanted to experience as a young cook but never had? And to be honest, the legal profession was not much more inspiring in terms of a workplace environment. So, you know, I decided, I decided in 2011 to take the leap and to open Homeroom. And armed with my dad's mac and cheese recipe, I opened this temple to cheesy carbs. And over the next decade, I devoted my life to really figuring out how to make good on that original question of how do you create a great place to work. And so, that's what I'm here to talk about today. Now, the best story that I know to explain exactly what we were doing at Homeroom is actually not by talking about food or cooking or even restaurants, but it's a story about my favorite sport, surfing. So, if you don't know anything about surfing, the rules are simple. When a wave comes, there's a group of people out at the break, the first person to get on the wave gets it all to themselves. So, that means in this picture where you see me, there's like a group of really disappointed people off in the background somewhere that didn't get on the wave. I didn't get on this one. And it makes the sport incredibly aggressive, competitive, and winner-take-all. It is also, to this day, extremely male-dominated. And if you go to local beaches, locals are very protective of their local break. And it's very hierarchical to try to sort of work your way up to get better waves and more respect. Now, there's nothing wrong with the way that surfing has been practiced for hundreds of years, but this one day, I went to a beach in a remote spot in Northern California. And when I arrived, something surprising happened. Usually, it's me and a bunch of dudes, but on this day, there was only women in the water. And none of us knew each other, but without saying a word, it was as though hundreds of years of surfing tradition was turned on its head. Instead of competing for the waves, we started collaborating on how to get the most possible people on the most possible waves. We took turns, we cheered each other on. And it was one of the most fulfilling and joyful days I have ever had. Now, when I went to work the next day, I realized that that moment on that surf break was what I, as a female leader, had actually been doing at homeroom, but had been really struggling to articulate. Oh, oops, sorry, guys. Forgot to move through my slides. I was so excited about surfing. So, here's the sort of historical norms of the sport. And here's what it was like that day on that female lineup. So, I'm here today to talk about if you get as excited as I do about that surfing story, how do you create that kind of culture in your restaurant? And I found that there are three tricks. You have to define it, discuss it, and protect it. So, let's start with defining it. So, the truth is that innovative, collaborative environments, they generally don't happen on their own. If this is your goal, you have to say what it is. And so, how we defined it at Homeroom is we called this concept collective success. And what we meant by that is that we would look at every decision we were going to make, whether it was to stay open an hour later, to open a new location, and the goal was to maximize the benefit to the team, to our customers, and to our community. And now, maybe that doesn't sound that exciting to you, but the truth is that very few companies in any field are run that way. So, if you think about something like Amazon, you know, they're known as having incredible customer service. They are providing incredible profits for their shareholders, but they're also known as a terrible place to work, right? And then restaurants, we have sort of this opposite fail mode, where, you know, we're very obsessed with the guest experience. Occasionally, we're also really into the team experience. But profits are often really, really lacking, right? So, this value of collective success was very meaningful to us. And we built it into absolutely everything that we would do. So, you can't just say what it is. We would hire for it. We would train for this value. We would include it in our performance evaluations, like, are people really living this? And we would require it for promotions. You had to really show that this was, you know, something that you were dedicated to if you ever wanted to be a leader. Now, in terms of the impact that this kind of thing has on an organization, I'd love to share a little story, which is, a number of years ago, we included a service charge on our menu. And we had some language saying that, you know, if you wanted to leave your server an extra tip, you could leave, like, an extra 5 or 10 percent, but it wasn't necessary. And so, there were some disgruntled servers who, you know, came into my office one day. They're like, hey, we want to get rid of that language on the menu because it's reducing our tips. And, I mean, it was. The whole purpose that was on the menu was to reduce their tips. So, anyway, so we started a conversation. And I was like, all right, well, I need you to walk me through, you know, how do we think about this with collective success? And so, we walked through. They were like, well, hey, for the team, you know, your servers are going to be so much happier because we're going to make so much more money. You know, but then we talked about the kitchen. And they were like, oh, well, I guess, you know, the kitchen does already make less than we do. And, you know, that would increase our pay disparity. So, they realized it was a bit of a net neutral when you thought about the team. And then we talked about the customers and realized that they were going to be paying more for, you know, the same experience. So, probably not the best for them. And when you add a greater pay disparity coupled with customers paying more for the same experience, it was pretty hard to imagine that this was going to be a sustainably profitable decision for the business. And so, those same folks who walked into my office asking for a raise, you know, whatever, for this language to be taken off the menu, walked out of the office basically talking themselves out of it. And why I think this is an interesting story is that if you think about most restaurants or most businesses, those folks would have come into a leader. They would have asked for a manager's office. They would have asked for something. That person would have said no. They would have left. They would have been disgruntled. Maybe they'd leave. Maybe they'd go to another place with higher pay. But not a single person left. And, in fact, you know, they felt pretty good leaving the office. They understood why it happened. They had actually pretty much made the decision themselves. And so, when you look at what happens in aggregate with this, this is really a key to our retention metrics, which were 10x the industry average. So, the average tenure at homeroom is two and a half years. The average tenure in the industry, in the United States, anyway, is a depressing less than 90 days. And it's because it feels good, it feels meaningful to be a part of something that is bigger than yourself. So, now that we've defined this value of collective success, what do you do next? Well, you need to talk about it. And the reason why is that discussion, active discussion, is what really evolves culture. So, if you think about that surfing example, you know, I was only in water for an hour. But we were better at the end of that hour than we were in the beginning. And that's because we were talking, we were communicating, we were figuring out, you know, how are we going to catch the most waves? Who's going to go next? And we got more efficient at what we were doing. And so, you know, a restaurant is no different. But I'm sure you're probably thinking, well, how the heck do we do this? You know, this is a really busy industry. Everyone's on their feet. So, what we found, was the best way. So, we became an open book company. So, we would share our financials with our team. We'd teach basic financial literacy. And we'd have a meeting every single week where anyone in the organization was paid to attend and we'd run through numbers. And it wasn't just financial numbers because if you're going to be dedicated to collective success, you've got to also measure things happening, you know, having to do with your customer and your team experience. And different people throughout the restaurant, whether you're a dishwasher, a server, whatever, would be responsible for tracking those numbers. And so, we were all a part of that meeting. And we'd hold it every single week, you know, measuring all these different metrics that mattered to us, that all had to do with the collective success and health of the business. And we would get improvement ideas. And so, what is, you know, an example of the impact of this? Well, at some point, we were having an issue where our dairy costs were skyrocketing. You know, we're a mac and cheese restaurant. We include a quarter pound of cheese in every single order. And we measure the amount of cheese that goes into every single one. So, couldn't figure out why are our dairy costs skyrocketing? The cost of cheese and milk had not gone up. We didn't think anyone was running off with the cheese in the back of a truck. So, we were like, what's happening here? So, we learned this really early because we have these meetings every week. And at that meeting, there were so many different people from so many different parts of the restaurant that were able to quickly identify that it was actually a training issue with the staff. Sure enough, these cheese portions aren't being done correctly. I mean, it sounds like a small thing, but when you sell, as many tens of thousands of mac and cheeses as we do every year, that's the kind of problem that actually would have cost us tens of thousands of dollars that year if we hadn't recognized it. Now, again, at many restaurants, you know, there'd be a kitchen manager who's responsible for this. Maybe it takes them a month, two, three, to notice this, like, line item on their P&L has gotten a little worse. And then they're sitting there by themselves trying to figure out how it happened. But we were able to fix this in an instant. And so, what is the business impact of this? We were able to increase our sales at our same location, we didn't expand locations, from one and a half million to seven million in seven years. And, yeah. And it's because these kind of incremental changes, having dozens and dozens of great minds sitting around a table every week, makes a huge, huge difference in terms of how efficient your business is, how good you are at serving your customers, how great you are at keeping your team. Those are the things that lead to something like the revenue per square foot numbers that we are able to hit. So, now that you've defined what you want this value to be, this value of collective success, now that you've created a forum to discuss it, what do you do next? Well, you have to protect it. And the truth is that great culture needs to be protected. Because, again, all it takes is one jerk to ruin a really great thing. You know, if you think again about that surfing example, you know, we're all out there, we're sharing waves, we're having this, like, kumbaya moment. Like, what would have happened if some jerk had, like, come into the lineup and just started catching all the waves? Would have destroyed the entire experience. And a restaurant is no different. I'm sure you've all worked somewhere where there was just, like, one toxic jerk and it made it really, really hard for whatever else you were trying to create. And, you know, what I found is, like, at this point I consider myself an expert in, like, how do you create a great workplace? And no matter how well you hire, there's always going to be a bottom 10%. There's always going to be the folks that just aren't the right fit. And, you know, and sometimes those folks are who started as exactly the right fit, but your culture has evolved and you have folks that were at one point perfect for that culture, but maybe they're not the right fit for the culture that you're trying to create. And the truth is that you need to find a way to move them on their way if you actually want to achieve the culture that you want. So, you know, years ago, I actually brought on, it was the most experienced person I'd ever brought on. I was so excited. He was super well respected in the industry, had, like, 20 years of experience, which at the time was, like, a solid 15 more than me. And, you know, he came in and started making all these really great changes. But the problem was that he just couldn't quite get this culture of collective success. So, you know, that meeting that I told you about where we're all sharing numbers, he's like, you know, this is super inefficient. We are just losing money hand over fist, paying all these people to sit in a room for an hour a week. So I think we could really, you know, cut it in half if I just went through all the numbers myself and people would still learn and it'd be great. And, you know, I don't know about you, like, that meeting, like, I'd rather die than go sit in that meeting. It sounds terrible. But it just, he really, really missed the forest for the trees, that, you know, this was the real value, was having everyone at the, you know, there every week, looking at these numbers, talking. And so ultimately, even though he was this super high performer, and I really respected him a lot, I had to let him go, because he just wasn't the right fit. So, what is the impact when you let go of people who are not a good fit for your culture? Well, this is a really hard number. You'll get rid of assholes. And, you know, it's a lot more fun to come to an asshole-free workplace, I can say that. But also, when you protect your culture, something else cool that happens is that then your employees and the other folks that work with you will want to protect it as well. So I want to share one more story, which is one of the things I'm most proud of that we've ever accomplished at Homeroom, which is that years ago, again, I have a great group of servers, comes into my office, and they're like, hey, we're experiencing a problem. We have all, at various points, been harassed by customers, and it's upsetting, we don't know what to do about it. And I was pretty devastated, because, you know, we've created this, like, sort of utopian work culture, and yet this is happening right under my nose, I didn't even know. But we did what we always do, and got together, and said, you know, how are we going to solve this problem, and how are we going to use collective success to sort of guide us to the answer? And so, we had all sorts of brainstorm sessions, we tried a bunch of stuff, that didn't work. But then we landed upon this thing that did, and it was just a really simple color-coded system, and basically, different customer behaviors were given colors. So, something like a yellow, or an orange, or a red. And a yellow or orange was just, you know, you get a bad vibe at a table, or someone says an ambiguous comment, and a red is something more serious, like an overtly sexual comment. And all that a staff member has to do is, you know, tell a manager, hey, I've got a lot of stuff that didn't work. I've got a yellow at table two, a yellow and orange, and then that manager is required to take it over for them. And then if it's a red, they say the same thing, I've got a red at table three, and then the manager is required to take it over and kick that person out. And what's so cool about this system is, you know, it is really modeled on this sense of collective success. This worked for the team, because all of a sudden no one had to explain what had happened to them. You know, you're on the floor of a busy restaurant, managers just automatically, like, know what they're supposed to do, so it's really efficient. You know, customers who are creepy don't even know we're, like, using this on them, so, you know, it works for them. And it was great for the business, because it virtually eradicated the more serious forms of harassment that we were seeing, because the truth is, very few people come in and say something really offensive or touch someone inappropriately. What they do is they come in, they sort of check them out from afar, they lob some low-level comments, and they escalate, and they escalate, and they escalate. So it virtually eradicated the serious forms of harassment. And it cut even all the lower levels by more than 50%. And I ended up writing a very viral op-ed in the Washington Post about it. It was adopted as a best practice by the United States EEOC, and is currently used by restaurants and bars around the globe. Thanks. And, you know, why I think this is so exciting is not just because it affects, you know, the one in ten Americans that work in hospitality, but I think it's really this example of how just as one small restaurant, you can have a truly global impact when you engage your entire team. And there are so many problems that we face in this world, and, you know, I feel so heartened knowing that there are answers and there are solutions, I think, if we engage, you know, the very people who surround us. So, I'm hoping that if you want to create this culture, to reiterate, you need to define what it is, you need to discuss it, and you need to protect it. And, you know, the theme of today, of this conference, is Build to Last. And I really think that this concept of collective success is the missing sauce in helping us create, you know, lasting restaurants that can go on for generations. And, you know, you're all here because you're innovators in the field, you want to create the next generation of restaurants, you want to do the right thing, you want to be inspired and be inspiring. So, I hope that you'll adopt this concept of collective success, I hope you'll build the next generation of restaurants that I'm excited to eat in, and that you'll help solve all the world's big problems. Thank you.