Operations

Leadership Dish: Nick Hogan, Flagship Restaurant Group

Mathew Focht interviews Nick Hogan the CEO at Flagship restaurant group about his journey in the restaurant industry.

Mathew Focht: Tell me a little bit about Flagship today.

Nick Hogan: You know, I think that Flagship today is at an inflection point, and there’s a real opportunity for us to take our program to the next level. I think that putting the team we have in place and the partnerships that we’ve had in place for the last 19 years has been a slow grind but in a very positive way. Because we’ve really resisted the temptation to take the institutional capital and go real fast and over the long haul that has really paid dividends for us and put us in a position especially now coming towards a post COVID world to really play the game at the highest level. So that’s pretty exciting.

Mathew Focht: That is exciting. So what are the different units operating under Flagship today?

Nick Hogan: Everything kind of is centralized with a common holding company, and that is Flagship LLC. But within Flagship, we’ve got Blue Sushi, and there are 15 of those today with another three that will open up this year. There’s Plank Seafood, we just opened up the second one and are working on more of those. If we don’t get them open this year, they’ll start opening early next year. There is our bar forward concept, Anthem, and then the second iteration of that is in Austin, Texas, and will be coming here to Phoenix opening later this year. I see those three as probably our current growth vehicles in the order that I mentioned them. And then we’ve got some one-off passion projects that we’ll see what happens with those, from Champagne Lanes to this Ghost Donkey thing that we’re working on in partnerships with Ivan Orkin and Foodhall. So there’s a lot of one-off stuff in there that can go different directions. But I think we’re kind of balancing the one-off stuff with our various different growth vehicles.

Mathew Focht: You’ve got amazing diversification in a relatively short period of time because you’re continuously innovating. I saw Plank’s initial location, what year was that?

Nick Hogan: I think that we’re on year nine right now. So 2012, maybe.

Mathew Focht: Amazing. And in the latest version at Domain, you can see that a lot of those same design elements stayed with you. And obviously, this iteration is beautiful, what you’ve done at the Domain location. Can you give us a little background on you?

Nick Hogan: Yeah, I was born in Omaha and I decided to go to Arizona for undergrad, which was a serendipitous kind of decision because that is where I started eating sushi. And that was in the mid-90s, when I was in college. Going out for sushi was a big thing that I liked to do and that certainly did not exist in the Midwest at that time. But down in the southwest and in Tucson college kids were all doing that. I fell in love with the food and from the University of Arizona, I went to law school in San Diego and got my license to practice law. But I never started practicing, I really never had that much of an interest in representing clients in that way. I always wanted to do something entrepreneurial. So when I went back to the Midwest, there’s just this, you know, noticeable void in the market for the kind of elevated dining and especially sushi. I was just young and dumb enough at that time to think that I had what it took to pull it off. And I know you hear a lot of people say when they’re starting a business and reflecting back on it, that their naivety was probably one of their best resources. And I think that was probably true for us as well. We didn’t know what we were doing necessarily, but it was, it was bliss. I guess, in that sense, it was a fortunate convergence of events.

Mathew Focht: Yeah, that is pretty wild. So what motivated you in the restaurant space? The pure fact that you love sushi? Did you just see an opportunity coming from the University of Arizona, to go back home and you saw a void in the marketplace?

Nick Hogan: Yeah, my family had done commercial real estate development in the Midwest and especially in Omaha and I had some experience in that.  I’d done some work with them and had a little bit of experience in retail and retail real estate. And I’m still somewhat involved in that with the family, but I wasn’t super motivated to grow that business. I was really more interested in doing something that had more energy to it, something more dynamic. I wasn’t super interested in retail, per se. But I’d fallen in love with food and some of my friends had as well. Those friends are now my partners. And so, I did see a void in the marketplace and I was lucky enough to find a few people that were the missing link. We all brought something different to the party. Nine out of 10 people said we were crazy, but at least the four of us kind of believed in what we were doing and it worked out for us.

Mathew Focht: Did you have some mentors in the F&B space? How did you bridge getting into this new field?

Nick Hogan: I mean, to be honest, no. I had no clue, we knew we wanted to do something that was different than was being done in our towns. There wasn’t really anybody directly to reach out to that I felt very confident in asking for opinions. We just did a lot of research and we kind of generally knew what we wanted. First of all, you know unit number one we were, me and my partners, working in there on a daily basis. And so that was in large part offsetting what we worry about today – our labor costs because it was just us in there sweating it out. For the most part, initially, we didn’t really know what our cost of goods should be but we did enough research to know that the ballpark where we should fall. The real estate was family-owned real estate, so we had some mitigation there in terms of that downside exposure. We collectively had a strong community around us, and in retrospect, our sales were not much that first year but to us, at that time they were off the charts. So we just kind of started swinging. The first unit was pretty strong out of the gates and so we had the benefit of sales as we grew. That kind of carried us into future stores. We had some challenges, the second store we opened was more of a challenge. If the second store would have been the first that might have been the only store we ever did, so in some ways, we were lucky too.

Mathew Focht: The industry has obviously evolved quite a bit since you jumped in, what do you see as the biggest challenge today to building a national brand?

Nick Hogan: Everybody always talks about labor. And I think that labor is a huge concern, let’s not spend too much time talking about that, and just recognize that it will inevitably be a challenge. I think what’s interesting since we started is that legacy brands were still very much in vogue at that time. I mean the Cheesecake Factory and PF Changs, these guys were the way of the world at that point. I think what started to happen, right after we got into the business, was nationally more of a focus on dining, culture, and social media, and that excited people. And so I think people started generally slowly pivoting away from a lot of the legacy brands because they started to identify with the one-off or the local operator. I think that that really kind of helped us along the way.

I’ve also often said, I think that the quickest path to the biggest pile of money for us would have just been to take our original Blue Sushi concept and have done 50 of them as quickly as we could. But we couldn’t help ourselves and we got involved in other concepts. And, although that probably slowed us down over the years, I think it has also paid dividends. Now we’re in a place where we do have multiple concepts and are making gains in different markets. I think our brands still have a spirit because we haven’t gone out there and raised the big institutional money and tried to go public or anything on that scale. We’ve kept it somewhat boutique. So I think that that’s extended the life expectancy of these brands because they still have a spirit and because they’re not overexposed. There is still something special about them that resonates with people. I think that that’s probably important today as operators to think to scale about how you can keep that spirit. People often say that they want to support local and I get what they’re saying, but I’m not always sold that local is what they mean. I think that what they want is to support brands that still have a soul. If you grow too big, too fast, you lose that somewhere along the way. And so it’s all about trying to keep it in check and keep those things in place.

Mathew Focht: Yeah, that is well said. Where do you find your inspiration today? I know you love to travel Every, every time I talk to you sounds like there’s a new trip planned.

Nick Hogan: Yeah, I mean, I do love to travel. In this last year, because we’ve been so limited in terms of what we can do on the travel front I’ve probably been to Mexico five times, and I might go again next week. My recent inspiration is interior Mexico.  We’re doing this mezcal concept with Abaca group in Denver, and then Ghost Donkey later this year in Phoenix. So I’m thinking about getting down to Oaxaca in the near term, I was just in Mexico City last week. So my inspiration lately is just everything Mexico. Interior Mexico is currently super inspiring, not as much the coast because everybody’s kind of been there and done that, but there’s this whole incredible cosmopolitan meets rural meets modern meets traditional interior of Mexico that everybody just kind of misses. Culinarily, from a design perspective, and from a service perspective it would just blow your mind. But everybody overlooks it and doesn’t pay much attention to it. There’s a huge amount of inspiration down there I’d like to weave into the brands that we have. Not calling it or referring to it as Mexican, per se. I mean it is, but it’s not in a traditional sense. It’s very modern and cutting edge and on-trend, It’s really some neat stuff.

Mathew Focht: That’s exciting. So you recently moved to Phoenix full time. How has that been? How does the restaurant scene look different? You went to school in Phoenix so you know the industry and the market, but how does it look today? I know you’re used to being the big guy in Omaha, does it feel humbling to be in Phoenix surrounded by all these other operators?

Nick Hogan: Yeah humbling, but it’s great. I kind of welcome that challenge and I will get some stuff opened down here. We have one significant project opening up here later this year and several more that I’m kind of working on striking deals with various landlords on. You know it humbling to spend time down here in different markets, and you visit different places and there are people here doing some great work. But I don’t go to restaurants and think that they necessarily have anything on us or us on them. I just think that we’re all playing the same game. And I like it, it’s inspiring. On any given Monday or Tuesday night I can go out to dinner at somebody’s restaurant and it’s a new source of inspiration. I think it’s been positive overall.

Mathew Focht: Is there anything in particular that sticks out to your mind that was a particular challenge that you had overcome? Or a point inflection for your growth?

Nick Hogan: You know, going all the way back to the beginning I think when we got to about unit number four there was that moment in time where you kind of decide that this is what we’re going to do. We’re all going to do this together, and you’re going to have to build out a corporate office. That was one certain kind of inflection point where you commit to the fact that you’re going to dedicate a certain percent of your sales or bottom line to supporting a real back office, a real marketing department, an accounting department, and all of those things. When you’ve got one or two units, you can kind of just circle back and get it figured out. But if you go into growth mode then you need to make that leap. And then when you make that leap, then at a certain point you’re probably asking yourself, whether or not you want to bring on institutional capital, family office money, or private equity or whatever. Certainly, there were times when I wanted to do it just because I had the drive or the desire to go faster. I think that in our case, it benefited us that we did not do it. While it slowed us down a little bit, it really made us reflect. When every dollar that we invest is our own dollar it is different. And I think it probably paid dividends for us in the long run.

Prior to COVID, for the previous couple of years, we had been cautious about our growth. While nobody was predicting COVID, obviously, we had a sense that the US economy had grown pretty aggressively for an extended period of time, and eventually, that there might be a little bit of a slow down. And so I think I was kind of cautious, I didn’t want to get ahead of ourselves. As of July this last year, during COVID, we realized we were going to survive it. And so now it’s just time to put the pedal to the metal for a little while here and grow on the backside. I think we’ve navigated the various challenges brought by COVID effectively, not to say we haven’t had problems. But we came out on the other side and that has really propelled us to a new higher level.

Mathew Focht: How would your partners describe you if you weren’t in the room?

Nick Hogan: I think that they would say that I’m thoughtful, that I have all of our best interests in mind, and that they trust me in my role. I think over the long haul I’ve demonstrated a capacity to make good decisions at least when it comes to the financial well-being of the company. I tend to focus on the strategic growth plan for the company and I think they would feel confident in me in those roles. I’m somewhat introverted and I’m not somebody who necessarily seeks all of the attention but I don’t necessarily shy away from it all the time either. There might be some criticisms that I’m not fully aware of too.

Mathew Focht: Not too many I can’t imagine. So what do you see as potential trends in the industry? You’ve been on the cutting edge and led by creating a sushi concept that was perfectly positioned. You’ve got a new seafood concept in Plank opening the second location with a lot of growth potential. It seems like you’re always innovating, even within your own concepts. How are you changing your own concepts as the industry changes?

Nick Hogan: Well, fortunately for us in the restaurant industry, restaurants still seem to be something that you can’t put in a box. And so people are still looking to this industry as an outlet, as a form of entertainment and an opportunity to maybe to expand their horizons. Customers are looking for new culinary experiences as well as cocktails, wine, and beer. I think that what we have done well, at Blue Sushi for the last 19 years is to evolve with the industry. You’ve seen sushi operators come and go, but the difference between a good successful long-term restaurant in today’s world is that the concept has to evolve. I think that in the old days, the legacy brands way of doing things, it was more a matter of you come up with a menu, everybody loved it, and then big money would come in and they would take that concept and they would figure out how to cut all these costs out. So you’d maybe use a less expensive product or get rid of items that didn’t have the proper costs. And in a way, you start to dumb down the experience and suck out some of the soul of the place in order to make the numbers work for you. And then, even more, to make the scale work.

We’ve not gone the other direction in the sense that we’re really cognizant of our costs and manage our menu in order to accomplish that. However, if you look at our menu from 2002, and you track the changes that happened over the 19 years of Blue Sushi you’ll see a lot has changed.  In 2002, we were serving a lot of California rolls and other simple sushi more comfortable with the American palate at the time. If you look at our menu today it’s much more aligned with modern sushi. There are more interesting ingredients such as sea urchin on there, we’ve got a large vegetarian and vegan section, and a lot more new world sashimi.  We’ve taken the menu from something that was innovative in 2002, but by today’s standards would have been seen as fairly simple fare, and kept pace with changing trends. We’ve also done the same thing with the ambiance inside the restaurants as well, we invest a lot more money into the interiors than we did 19 years ago, or even 10 or five years ago. I think it’s super important with each concept evolved, and we’re not stamping out the same units today or the same menu and design.

Mathew Focht: That’s a really good point. Three really good points, you could probably look at your menu at Blue Sushi and tell you what year it is from.

Nick Hogan: Yeah, I’ll credit a couple of my partners more to that change than myself, but there was a period of time, probably 10 or 12 years ago, when we started changing the menu every three months. It was driving me crazy a little bit because I just wanted to find something and stick with it. But my partners convinced me it was important. And you know, it helped us keep up with the times.  I think I’d be perfectly happy having 25 Blue Sushi locations that just really stand the test of time and are here for decades to come versus 60 or 70 but having them be a flash in the pan.

Mathew Focht: Right. That’s awesome. So Nick, last question, what do you find the most enjoyment in outside of work?

Nick Hogan: Oh, you know I love to travel. To the point where I burned myself out on it. I am super fortunate in the fact that I really do like what I do and what we do. I really appreciate the partnership that I have with these guys. I also like to eat out and check out the new cocktail places.  You go to some local cocktail bar down the street and you get jealous of what they’re doing because you’re like wow, this is super cool. I like all of that. Of course, I’ve got a couple of kids and I love being a parent. They’re still young, but I’d love to see them get engaged and find their passions in the world. And so my home life, my personal life, and my business life are all just one.

Mathew Focht: Yeah, today it’s the right way to do it. As long as I’ve known you, you’ve always loved going to experience new cuisines and the new hot restaurants. We were at a site and I remember you talking to a landlord about this restaurant in Singapore you were going to go visit.

Nick Hogan: One of my favorite of all of them is Pujol down in Mexico City. And it’s only a couple hours flight from Houston.

Mathew Focht: Awesome. Thanks, Nick.

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