I always wanted to teach as I’ve always believed that education is the cornerstone for a prosperous society. Much in the same way that eating healthy is for the human body. Being a fourth-generation restaurant owner, I had an excellent opportunity to view my industry from multiple angles; the independent, corporate, and generational operator. These perspectives provided me with insight and affirmation that the hospitality industry most definitely wasn’t created equally.
Most corporate managers were highly trained and highly focused on operating a restaurant, while the independent operators were stressed out, constantly on the verge of insolvency, and had very little ability to be proactive with their time. Given the same playing field, my thesis became that the independent operators would flourish over their corporate counterparts. The reason, they knew the pain of being broke – After all, it’s their cash.
RASI – A Journey in Patience
I had the idea. I wanted to create an end-to-end solution backed by a service of industry professionals. I wanted to bring a corporate discipline to independent restaurants, and I wanted a service that encouraged and relied on its clients to form a partnership with RASI, which required the client to take ownership and accountability over their business.
We weren’t just going to provide the bookkeeping, payroll, and accounting services. We had to close the gap between unit operations and the corporate office. We (RASI) also needed to promote trust and verification of the clients’ abilities against their results. The only way I saw to accomplish this task was to educate them to the highest standards possible.
In August of 2000, I was fortunate enough to meet my business partners through an introduction from a mutual client. They had created an accounting and payroll platform specifically designed for the hospitality industry. Ironically, they had no restaurant experience. We met, and I pitched them a management system concept (known now as an ERP solution). It focused on the significant operational management tasks occurring between the POS and the IRS.
As I said above, the results would speak for themselves if I could provide a level playing field for colleagues who understood the value of cash flow while we focused on their operational education (the WHY factor). They did and continue to do to this very day: RASI clients are ten times more likely to succeed within the first year, unbranded restaurants. Additionally, RASI clients experience, on average, a 14% increase in their EBITDA in their first year on RASI.
There were five partners; each had a specific role. We had no Private Equity money and no investors. We built the company on the backs and the trust of our early clients. Fortunately for us, they knew my background; I was one of them. Our greatest strength was our honesty with our clients. It is incumbent upon us to earn our clients’ trust and business each day. When we stumble, we own it. When we succeed, we share it. When a client opens a new restaurant, we celebrate with them.
RASI Grew Organically
Over the next 15 years, RASI grew organically. We were an accounting service wrapped in its own proprietary ERP. Primarily, the only competition in our space was Intuit and another corporate-focused ERP solution. None of which provided education with the combined service of Accounting and Payroll solutions.
RASI became one of the largest Accounting and Payroll firms for independent operators in the USA. Reflecting on these years, I’ve realized how complacent we became with our success. It’s effortless to fall into this trap when winning sales as the incumbent. While the company thrives on the outside, complacency kills the roots on the inside.
Being complacent also enables competition to leapfrog you when you’re too busy patting yourself on the back. In 2015 we saw the beginnings of well-funded competition. They were PE-backed, focused on software only, and were well developed overseas. I learned many lessons in 2015. The most notable was that losing clients happened much faster than acquiring them and building trust.
I also learned that your competition has the tremendous benefit of knowing what features to add because they’ve listened to your clients. Lastly, I learned that supporting a service company utilizing proprietary software is incredibly difficult and expensive. You’re essentially telling the world, I don’t care about your point solution; my pride tells me I need to own it all – and be the best.
The Industry I Grew Up in Was Dead
Usher in the pandemic. On March 10, 2020, I half-heartedly wished my business partners a Happy 20th anniversary. On March 15, 2020, I looked at my wife after hearing the country had just been placed on lockdown and said, “I think I just retired.” The industry I grew up in was dead (or that was my take on it). My wife promptly reminded me that I do my best work during a crisis – a crisis always provides an opportunity to rise from the ashes.
I went back in my mind and remembered my desire to educate the industry that called me one of their own. I felt as I did when I joined the Army as a youth; a sense of purpose and my work wasn’t ending. The industry called for me to reinvent the company during the scariest time in our business lives. I quickly re-read Good to Great (by Jim Collins) and, A New Brand World (by Scott Bedbury).
I hadn’t read either of these books for 15 years. Both reaffirmed the next necessary course of action. It’s time to walk the walk we’ve been preaching for 20 years. I subsequently bought out my partners; they were eager to retire, and I was inspired to move forward unencumbered. In a matter of 120 days, I rebuilt RASI into a leaner, far more scalable, and profitable organization.
The Hedgehog Concept
Our Hedgehog Concept became, “Get close to our clients; provide them with survivable options and do as much as we can for as many people as we can for as long as we can.” We provided $780,000 in service fee relief, created a lending network, and performed over $580M in PPP, ERTC, and RRF loans, all without charging fees. We created two new service models that prevented our clients from having to choose between service and software.
We then provided 35% fee reductions for all clients. The result: 94% of RASI clients remained healthy during the pandemic. We retained 98.5% of those clients. Currently, RASI clients are at 106% of their pre-pandemic sales.
Change doesn’t come without growing pains. I lost 72% of our 159 person staff. Transforming a company from a lethargic, bloated lifestyle firm into a forward-leaning, “excellence isn’t optional” firm took its toll. The pandemic robbed us of being proactive, and many of the necessary decisions were unpopular. We eliminated 100% of middle management and created portfolio teams with a 20% team bonus potential.
Communicating company goals often and effectively became our internal battle cry, and we dedicated ourselves to providing ongoing education and a clear career path for our remaining team. While large PE-backed firms were laying off 85% of their staff, we transformed into our fighting weight. Our churn went from 10% to >3%.
The Best 4th Quarter in Our Company History
We’ve had the best 4th quarter in company history. We hired both a CTO and CFO that had startup and PE experience. They organized our business and prepared us for future scale and growth. Simply put, while others ran from the fire, we ran into it with one purpose. Win.
Adversity challenges people to become their best selves. In my case, this meant a dedicated leader, a consoling parent, a loving partner, and a trusted neighbor. I’ve learned that you cannot achieve all of these things without incredible colleagues and friends who know you better than you know yourself.
Be prepared to accept all forms of criticism without prejudice and listen to those who matter. Oh, and some solid motivational quotes from TikTok never hurts.