For those in the restaurant industry, Nick Hogan may need very little introduction. He’s had incredible success as the co-owner and CEO of the Flagship Restaurant Group, the parent company of Blue Sushi Sake Grill, Anthem, Roja Mexican Grill, Palma, Plank Seafood Provisions, Revival House, Blatt Beer & Table, Cham Pang Lanes, and Ghost Donkey.
His brands cover the full spectrum, from fast-casual to full-service, with the common theme of creating an exceptional dining experience that incorporates fun and creative food.
Recently, he shared some insights with Mathew Focht, CEO of EMERGING. Let’s see what they had to say about the restaurant industry at large.
The Makings of a Successful Restaurant Group
Focht: Nick, thanks for taking the time to speak with me today. I’m obviously excited to have you in the EMERGING Fund as an innovation partner, and one who’s had tremendous success in the industry. So, let’s get some insights from you. How did you get into this career?
Hogan: I always had a strong desire to do something entrepreneurial. I went to college at Southwestern University of Arizona and then law school, and traveled quite a bit. Through those experiences, I ended up falling in love with food and the industry, and it seemed like a natural fit.
At the time, I saw that there was a shortage of good, new creative concepts in the Midwest, and so, not knowing what I didn’t know, and I didn’t know a lot, I jumped in with some partners. That was the genesis of the Flagship Restaurant Group.
Focht: So, what is Flagship today, and how would you describe it?
Hogan: Flagship is primarily full-service, polished, casual, experiential dining. Most of our restaurants do 25-35% alcohol sales. We’ve challenged ourselves in a lot of different spaces, including sushi, seafood, Tex-Mex, burger and beer, and an American grill concept.
Our first concept was Blue Sushi, which opened in 2002. By the end of 2022, we should have about 20 units. We’re also opening the third Plank Seafood Provisions this year as well as another Anthem. Blatt Beer & Table, a burger and beer concept, has three locations in Omaha, Nebraska.
Another concept just starting out is Ghost Donkey, a cocktail bar that we worked with the Amoco Design Group on. It’s currently in Denver, with expected openings in Phoenix, Omaha, and Dallas. We also opened Palma this last year. It’s our big 5,000-square-foot patio concept with full-service and two bars and is probably closer to 50% alcohol sales.
Cham Pang Lanes is an entertainment concept with duckpin bowling, DJs, and a big circle bar. It also has pinball and pool tables and attracts many late-night customers. We’re also working on an American grill concept that’s going to be called Memoir. It’s a polished, casual, full-service concept with burgers, steaks, and seafood. Another new venture is a wine bar called the Corner Bar in Omaha.
Pyro is also a new concept we’ll be opening in Phoenix at 44th and Camelback. It will be our highest-end concept—a full-service Japanese Izakaya meets American bistro concept but polished with a selection of fine wines and a big outdoor patio space. That’s one I’m really excited about.
Focht: That’s quite a combination of concepts. Amazing.
Hogan: It’s 20 years in the making.
Joining the EMERGING Fund
Focht: So, why do you want to be a part of the EMERGING Fund, and why do you think it’s a good venture?
Hogan: Of course, we all got into business to earn a paycheck and support ourselves and our families. And I love the industry that I chose. It was so exciting to get that first restaurant open and then open another one on the other side of town. Then, we opened the first concept in a different city and recognized ourselves as a regional group operating in various markets.
So, at this point, 20 years in, while still motivated by the bottom line, my partners and I are also motivated by being active in the industry and all the different facets. And that’s what’s exciting about participating in the EMERGING Fund—the networking opportunities and getting to work with peers.
I don’t often have the chance to meet other individuals that are starting restaurant groups or developing and building a concept. While they’re my industry peers, we don’t necessarily interact very often. So, just being engaged at that level and seeing things develop from the ground floor in different verticals of the industry is really exciting.
Focht: Well said. What value do you think we can provide the founders of these early-stage tech and restaurant entertainment concepts?
Hogan: You’ve got a good group of people who have experience and have built brands on the tech side of the business. I’m sure these individuals will be really good at poking holes and identifying opportunities. They understand the mechanics and the challenges from a technical standpoint of delivering and the expectations on the restaurant side. I don’t think it takes too long to determine if there’s real value there for us, and if there is, then there’s value there for the industry as a whole.
Collectively, we operate a number of different kinds of concepts in various markets, each with a lot of different needs. So, when tech comes in and presents themselves to us, if we don’t find a use for it, it will probably be a problem in the industry as a whole. You’ve got the right people sitting around the table to determine pretty quickly whether or not the tech has a place in the industry, both on the technical and application sides.
Investing in the Restaurant Industry
Focht: Yes, that’s so true. Many of your concepts are different, so if a tech concept is useful to the industry, it would most likely be a good fit for at least one, if not all, of them.
So, as we go to market, we’re talking to private equity firms and high-net-worth individuals. Sometimes, the conversation is, “You know, Mat, we typically invest in technology or concepts, but food and beverage technology and concepts coming together is pretty different.”
How do you feel about that? Do you see a place for concepts and technology to come together in the fund? And how do you see that as important to the future of this industry?
Hogan: I’m looking at it through the lens of an operator. For myself and others in the fund, we can quickly determine whether or not it has legs. Even though I’m not on the tech side, I’ve implemented or employed a fair amount of tech in our business, and I credit it with helping us in our accomplishments. For example, back-office technology has come a long way since I’ve been in the industry, as well as the takeout and delivery platforms and reservation systems. Some of those things didn’t exist 20 years ago, and now they’re almost irreplaceable.
Today, if you really want to scale a concept and go into multiple markets, you’re going to be at a great disadvantage if you can’t wrap your head around the tech. When COVID hit, we couldn’t survive without takeout and delivery and had to figure out what the economics was on our end and what we needed to do to make it work. Now, it works beautifully, thanks to tech. Today, if you try to scale without the tech, you’re doing your investors a disservice. You have to embrace it and realize it’s as important as any other element.
While I don’t pretend to know all things tech, I think myself and the other actors can determine the value in our industry. When it comes to back-office inventory management systems, accounting programs, or reservation programs, these things will drive incremental revenue.
Focht: We’re in a disruptive period right now, with labor and COGS getting pressure. If you don’t have control of the data and what’s happening in your four walls, it’s going to be super challenging. Brands have to identify the problem before they can take action.
Hogan: So true. And tech allows groups that are smaller to scale quickly and take it to the next level in a way that was previously reserved for the biggest players out there. The big groups would create their own tech. Now, that tech is readily available for the smaller operators.
The Future of the Restaurant Industry
Focht: So, in closing, what do you see for the industry as a whole in the future? What are some trends that stick out to you?
Hogan: I think, due to COVID, that we’re still coming out of a period when the supply was very low in terms of any new units coming online. As I look out over the next 12-18 months, I see growth. I’m not saying that there won’t be some kind of a recession over the next 12 months, but I think the industry is in a pretty good place to absorb it, because we’ve been dealing with all of the headwinds, from labor to lockdowns.
Now, we’re coming out of it. I think, to our advantage going forward, we’re going to take a while for the unit count in the full-service category to get in line with where it was before the pandemic. And some of the labor challenges may start to ease as the unemployment situation changes.
I’m generally very optimistic. We continue to look for, absorb, and implement new technologies that allow us to run a cleaner, better, and more efficient operation and grow responsibly.
Focht: I think the restaurant industry’s projected growth is 10% annually for many years to come. Yet, it’s also facing disruptions with labor and the cost of goods. As an investor, why would somebody look at putting their capital in this space?
Hogan: Theoretically, it’s a higher risk proposition when looking at the industry as a whole, but I don’t necessarily see it that way. We’ve gotten great returns out of the industry over the last 20 years. What it comes down to is that you need to put that money into a concept that has a stickiness to it, that people respond to and want to frequent, and that has the opportunity and a plan in place to grow.
You need to put your capital to work with a vetted concept run by professionals doing it the right way with a clear path forward. The guys you’ve put together have a long track record in the industry. They’re looking at it through pretty clear lenses and can make heads or tails of various concepts and what their opportunities are for growth.
It’s funny that, even in the restaurant industry, it’s known as high risk, but it’s really not if done by the right group of people with the right concept and you get things pointed in the right direction. Then, I think it offers some of the better returns that you can get out there. For instance, we’ve been cash flow positive since the day we started this business. Now, 20 years later, we’ve gotten a lot bigger.