Garrett Reed, CEO of Layne's Chicken Fingers

Guest: Garrett Reed, CEO, Layne's Chicken Fingers

Host: Chris Hatch

Listen on Spotify

Summary

Chris Hatch visits with Garrett Reed, CEO of Layne's Chicken Fingers, a College Station, Texas, original from 1994 that Garrett and his partners bought in 2017. A career real estate guy (Radio Shack, Starbucks, then nearly 500 buildings with his development firm Main & Main), Garrett explains how the team modernized a true mom-and-pop, stress-tested the concept with three Dallas openings 90 days apart, and built a franchise system around "protect the brand, protect the franchisee." They dig into the new 2,600-square-foot prototype, the sites Layne's targets, its picky approach to franchisees, and why the premium chicken tender category still has a long runway.

Key Takeaways

• Running restaurants and being a franchisor are two different businesses. Layne's treats franchisees as its customers.

• When converting second-generation space, design the kitchen first. If the kitchen fits, everything else can be made to work.

• The new prototype is about 2,600 square feet with roughly 45 seats and needs three-fourths of an acre to an acre, depending on lot dimensions. Expect it to keep evolving, often from franchisee ideas.

• Layne's has moved past its college-town roots. Daily-needs locations near Target, Costco, major grocers and other QSRs bring more predictable, consistent sales.

• The ideal franchisee is well capitalized, already runs good restaurants, and passes the "have a beer with" test. Layne's has turned away 70% to 80% of Discovery Day candidates.

• Hire a year to a year and a half ahead of need so the team is trained when the growth wave arrives.

• "You can't unhit a golf shot." Learn from the mistake and move on to the next shot.

Transcript

Editor's note: Samir [Wattar]'s name is spelled from the audio and should be confirmed.

[01:45] Chris Hatch: Welcome back to the Dirt Dog Pod. Today we're privileged to have Garrett Reed, CEO of Layne's Chicken Fingers.

[01:53] Garrett Reed: Good to be here. Thanks for having me. It's an honor.

[01:55] Chris Hatch: Yeah, thanks for joining me. Yeah, so Layne's started in College Station, Texas, correct? What year did it open there?

[02:02] Garrett Reed: Correct, yep. 1994.

[02:08] Chris Hatch: Okay, so you didn't start Layne's. What were you doing in 1994?

[02:17] Garrett Reed: Yeah.

[02:18] Chris Hatch: There you go. And then your path though, you didn't go into the world, you didn't start as a retailer, right? You were doing real estate with retail, correct?

[02:27] Garrett Reed: I am not a restaurant guy 100%. That's correct. My background is real estate. Yeah. So I started my career as a real estate manager at Radio Shack in the late 90s. Migrated from there to Starbucks where I ran a territory for them with my soon to be business partner. And we did that for a few years and then ventured out into the world of real estate development. So yeah, I have an extensive background in market planning, site selection, construction, all that kind of stuff. Restaurants was, other than working at Wendy's in high school, really had no idea how restaurants worked.

[03:17] Chris Hatch: So I think one of the most interesting parts from my perspective at looking at your story with Layne's is I wouldn't defame you by calling you a peer. You were running a development shop, which really is what I would like to be when I grow up, is what I would describe that as, right? And a wildly successful development shop, right? And the name there is Main & Main.

[03:41] Garrett Reed: Well, thank you.

[03:47] Chris Hatch: And you built several hundred buildings.

[03:49] Garrett Reed: Hundreds, yeah, yeah, yeah. Probably approaching 500, yeah.

[03:52] Chris Hatch: So you built somewhere near 500 buildings and then you decided one day, hey, I'm not having enough fun. Let's run a chicken finger concept.

[04:05] Garrett Reed: Yeah, something like that. I mean, the grass is always greener on the other side, right? So no matter what success you find in life, think when we're sitting with our buddies, wherever you experience this, right? Somebody that's successful in one industry looks at another one and says, golly, you make your money so easy, right? Or look how easy that looks. I had built so many restaurant concepts, fast food concepts, got to know the operators, watched what they did, saw their success. I thought why can't I do that? And, really, really entertained being a franchisee for a while. Looked into it. Honestly, how do you say this?

I wasn't enthralled with a lot of the franchise programs out there. And it just so happened that Mike, who owned Layne's, I was visiting with him about expansion, actually on the development side: hey, let me go build some of these buildings for you and everything. And he said I really don't want to grow. I love being in College Station. I love what I do. Love my cows, love my ranch. Super happy, make good money. You know, why would I ever allow you to go grow my brand. You know, that just doesn't make any sense. And so me and some of my partners started thinking, hey, we talked about being franchisees before.

Why not just buy Layne's? You know, how hard could it be? Right? Let's buy it. The food is phenomenal. The culture is great. There's this cult following that exists. It's been around at the time 25 years. Now 31 years. And so it was one of those things that the conversation began to build organically. Mike was not very excited at first about selling his brand. He was concerned that we didn't know what we were doing, we might ruin it. In the end, he decided that we would be a great partner to have. He still owns a small piece of Layne's. In the end, he decided that, yeah, I'm going to sell it to these guys.

They're very well capitalized. They're passionate about the brand. Let's give them a shot, right? How bad could it be? If nothing else, I still have College Station. So we ventured out in that. And the story just gets long and complicated from there.

[06:37] Chris Hatch: Well, I was going to say, during my career, usually when somebody has told me something like that, and especially when they give the catchphrases that they're, yeah, anybody can do this. How hard can it be, right? That's typically coming from like a doctor or an attorney or some other professional that's made good money professionally in whatever their career path is. And they're yoloing into some concept. And then usually they're calling us because it's like, this is a train wreck. We're losing our butts. We can't figure out what's up or down. How do you help us get out of this thing? And that's usually what follows, right? But that hasn't been the case. So when did you step into the partnership with Mike?

[07:22] Garrett Reed: So we actually bought the brand from him in 2017. And we went into it eyes wide open, right? We went into it with a purpose. The goal was to create a different kind of franchise brand. You know, I don't know how different you can be. This industry has been around for probably 100 plus years franchising. But we really wanted to build a brand that was focused completely around the support of franchisees. So, when you were in the office the other day, I showed you on the wall, our motto is protect the brand, protect the franchisee. So we wanted to build an ecosystem that was around that mission statement.

How do we protect the brand, protect the franchisee? You know, and a lot of things we talked about was not charging our franchisees for supply chain, not marking things up, creating an infrastructure of complete and total support from the minute they signed to the end. Now, that's not easy to do. It did take a lot of capital to invest in that. What we knew, again, was we had great food and we had a great history of the brand. So what we needed to do was go find a phenomenal operator that could actually come in and create processes and procedures. And that's what we did. We bought the brand in 17.

We spent an entire year developing the infrastructure, because when we bought it from Mike, remember, there was no POS. He had the old Casio register that you get at Sam's Club. There was no technology. At the drive-thru, you pulled all the way up to the window and placed your order at the window. Everything was written down on tickets. I mean it was a true mom and pop. So we spent about a year solidifying and developing the brand and then we did the craziest thing ever restaurant people will understand this they'll laugh. But we opened up three units in Dallas, 90 days apart. 90 days we opened one, 90 days we opened one, 90 days we opened one.

Stress test is not the right word. It was building diamonds. But by the time we finished that process, we knew we had, we absolutely knew we had something. We're like, holy crap. We got a hold of something. So we revamped, retooled a little bit. There was a few things we wanted to change. We opened up another corporate location two years after that and then began the FDD. We brought on Samir [Wattar], who was with a bunch of great brands before: Fuzzy's and MOOYAH Burger. And he had taken brands from 10, 11 units up to over a hundred units. And we brought him on board. That was life-changing for what we did and started signing franchisees at that point.

After that, it's just been a whirlwind. When you get into the industry, I'll give a shout out to like guys like Aaron Harris, some of those guys that are restaurant guys that know what they're doing. I had a lot of guys whispering in my ear, right? You know, I had some mentors that I could bounce things off of, and I think that's important. To have an outside perspective from people that say, did you think about this? Did you think about that? So once Samir joined and we had a lot of these kind of whispers in your ear, we found a lot of success now.

[10:50] Chris Hatch: I built a couple of Dutch Bros. You build a lot more Dutch Bros. I think we're all indebted to Aaron Harris. He's been mentioned, I think, on every podcast so far today. Yeah. So.

[11:00] Garrett Reed: Well, then cut that part out of the podcast if you will for me, please.

[11:04] Chris Hatch: I'd say we both owe him a nice dinner at ICSC next time we see them. Yeah, right? The three stores you opened, were they corporate units then?

[11:09] Garrett Reed: It might be the other way around, but we'll see. They were corporate units. Yeah. So we opened three. We were really fortunate. I hate to benefit from others failures, but Pollo Tropical had just closed everything in Dallas. Just so happened. And we were able to acquire three of the buildings that were relatively new. Too big for what we wanted to do, but great locations. They had some A-plus real estate. So we were able to acquire those corporately and that was kind of our launching point.

[11:48] Chris Hatch: A lot of people like to talk about buying some really cool concept like a Layne's that's out there. They found it on Instagram. They've eaten there. They've consumed the product. They like it. And then they want to turn it into a chain as you've just done. How was it going from the one unit in College Station? Did it have a drive-thru or not? And then how big was that?

[11:59] Garrett Reed: Yeah, the original one did have a drive-thru. It was 1,200 square feet. Yeah.

[12:17] Chris Hatch: Okay, in 1200 feet, wow. Okay, so what's it like going from a 1200 foot, because the Pollo Tropicals were what, about 3,000?

[12:24] Garrett Reed: Yeah, we took three of them. They were between 3,400 and 3,600 square feet. Massive.

[12:32] Chris Hatch: Yeah, big footprint. What was it like just trying to figure out how to do the layout and how it was going to function and work? I would assume you probably had some pretty hands-on nature with your new operator and probably Mike involved as well. What was that like?

[12:34] Garrett Reed: We'll get into our new prototype and all that, but the first couple of years we did exclusively second-generation space and what we found was the easiest way to convert second generation space and make it work right is design the kitchen first. Our kitchens are exactly the same in every location our line runs the same, everything's the same. So we built the kitchen first, and then decided what we do with the space after that. And we still do that today. Like if we took a Dairy Queen or a Wendy's, we lay the kitchen out, make the kitchen fit, and then we do what we can with the rest of the space. So just made it super simple, right? Kitchen fits, good. We can make everything else work.

[13:36] Chris Hatch: Okay, so you do the three units and then you realize you got something there, you got a viable concept, and then you start going through the franchise doc process.

[13:47] Garrett Reed: Correct, yeah. So there's a huge difference in having a viable concept and having a concept that you can franchise. Because I cannot state this enough for anybody getting into this business or anybody that's in this business. Operating a restaurant and being a franchisor are two completely different businesses. They're not even remotely the same. So Layne's, at the end of the day, we own eight corporate units. They operate as any other restaurant concept would operate. The franchisor portion of our business is a completely separate business. They don't, I mean, they commingle a little bit because we have to train and things like that. So once we proved we had a viable concept, then we had to create the franchising machine that could support franchisees.

So it was a whole other step, right? We got the business going, we got the processes down, we got everything. Now we have to build the team to where we can actually sit down with the entrepreneur and say, I can support you, I can make sure that you're successful. So that was the next step in the journey.

[14:58] Chris Hatch: Do you think running those corporate units helps you be a better franchisor?

[15:03] Garrett Reed: Yes, it does. Obviously you have to know what you're doing from an operational standpoint. But again, they're two different businesses. I can't explain how different they are. My customer is my franchisee. My franchisee's customers are the guests that come in and eat at the restaurants. So everybody here in this office, I always say this, protect the brand, protect the franchisee. Everybody that offices here knows that their customer at the end of the day is not the person that comes in and buys chicken fingers. That's not our customer. Our customer is our franchisee. So that took a little while, to make sure we got the right people on board. And we brought some good people in from different brands to do that, but we are definitely a support. We're definitely a support team.

[15:52] Chris Hatch: So you step into the franchise side, you get your docs done, and then did you start geographically in a certain area or did you look for the best operator, the best franchisee candidate that you could find?

[16:07] Garrett Reed: It's both, the answer is both, but we wanted to stay in Texas first. And so, we hit up markets like Houston, which are heavily, we're a Texas A&M brand, there's a lot of former students there. So we wanted to go to Houston, San Antonio first. Those sold really quick. The amount of, the amount of enthusiasm that we had, or we still do have today, of people that want to be a part of the brand was overwhelming. You know, we knew we had to kind of tap the brakes and we couldn't sign everybody. In fact, I bet of the people that come in for Discovery Days, 80% of them, maybe 70% of them, we just said no for one reason or another. But yeah, we did start in Texas. Found a lot of success in Houston. And then kind of started growing Texas out from there.

[17:05] Chris Hatch: As you sell to franchisees, is it the Layne's business model to sell them like a territory? Hey, here's an area we'd like you to develop this out and put in a dozen or so restaurants.

[17:20] Garrett Reed: Right, yeah. There's two different types of franchisees. And I've learned this being in the business. There's what we call a dreamer. And then there's the business entrepreneur. The dreamer is the person that's ready to get out of their job. They've got a great 401k and everything, and they want to open up a unit and start to create wealth for their family. Those aren't our franchisees. We're entertaining people that have existing operations, have other restaurant concepts, and they're looking to add something to their portfolio. So yeah, five store, 10 store, 15 store development deal, that's really what we look for.

[18:05] Chris Hatch: With your background, the way you're wired is you're so real estate strong, right? You have such a good presence for a good pad site, good drive-through site. How involved do you stay in the real estate site selection process?

[18:19] Garrett Reed: Probably more so than... I don't know what other guys do, but we are heavily involved from the minute they sign all the market planning site selection. We just got back from a tour. We say no to way more sites than we say yes to. I mean, we really drill down on the sites. But yeah, obviously the franchisees get to pick their brokers. We screen the brokers, but the real estate process is thorough, extremely thorough. You know, I just take all the learnings I had from when I worked in corporate America. And then I take all the learnings that I had working for clients in corporate America and just kind of, you try to take the best parts of those things and apply.

[19:08] Chris Hatch: You know, it's got to be an interesting one to be expanding right now just because the chicken concept has been so hot. And a lot of these prime pads, I assume you have a fair amount of competition for them.

[19:22] Garrett Reed: Sure, yeah, and it's tough. I mean, the Raising Cane's of the world, the Chick-fil-As of the world, the McDonald's of the world, and in this part of the world, Whataburger, there's a lot of big guys that can go out and compete for those pads. But we're scrappy. You know, we get in there and pitch our case and we win some, we lose some, but you know, that's the world we live in. And you're right, chicken fingers is like the burger wars of the '80s, right? I mean, it's real, but there's a lot of runway for chicken fingers. Slim's keeps opening, Cane's keeps opening, we keep opening, Dave's Hot keeps opening, and for some weird reason, I think if you look at, there may be the exception of one of those guys in there, you see our AUVs just keep jumping every single year.

So at some point, the American public decided that the protein of choice was chicken, and they didn't want it on the bone. You know the Popeyes, KFCs and you can see that and everybody's selling chicken tenders. Then you get into the premium chicken tender market which there's a handful of us that are in the premium market. The demand for that is that's a big pie. I don't even think we started to see how that thing's going to get sliced up. So there'll be more competitors enter into the market but right now there's a lot of room in the chicken finger market.

[20:49] Chris Hatch: I was going to say we got to attribute probably some of that success to the WallStreetBets Reddit crowd, right? They're constantly talking about the tendies.

[20:56] Garrett Reed: You're 100% correct. And kids just grew up, this generation of kids, I mean, they eat burgers, but I mean, I don't remember my kids ordering cheeseburgers. It was always chicken nuggets or Chick-fil-A going through. It was always the nuggets. You get bigger and now you want tenders. You want a bigger meal. You want a little more flavor. The bland sauces that a lot of guys serve, they don't want anymore. And so you land at Layne's as you grow and your palate grows. You're in college, you get into it and you want a premium product. There's a couple of us that do it real well. So there's a lot of runway, a lot of space for tenders.

[21:38] Chris Hatch: How many stores does Layne's have open today?

[21:40] Garrett Reed: We have 25 today. With things that are under construction right now, we should be right between 45 and 50 at the end of the year.

[21:51] Chris Hatch: Yeah, so really starting to pick that pace in the growth volume out there.

[21:56] Garrett Reed: Yeah, yeah. The introduction of our new prototype, which we did in 2024... we continue to grow up as a brand, even though we're 31 years old. Our new prototype that we kicked off in Corsicana in 24 was monumental. I think we've got 12 of them in development right now. And it's just, it's been a game changer to have our own brand identity, to have our own prototype, to run the efficiencies in it. It's been a game changer.

[22:30] Chris Hatch: Walk us through the prototype. What's the kind of ideal lot size? What's that building look like seating, et cetera?

[22:38] Garrett Reed: Yeah, so when we built the first one, the pains of a prototype... when we built the first one, we started and our AUV was around like 1.5, something like that. By the time we had completed it, our AUV was up to 1.9. So let me talk about the pains of that. The first prototype was 2,400 square feet. We thought we had some extra room. We're up to 2,600 square feet, increasing some cooler space. It's got about 45 seats in it. Tons of natural light, floor to ceiling glass, stained concrete floors. We built it with the intention of efficiencies. And we have this idea that I talked about how we're a different franchisor.

We truly focus on not selling units, but we truly focus on the return of the investment for our franchisee. So we wanted to build a prototype that could be efficient. Now it fits on anywhere from three-fourths of an acre to an acre, it all depends on the way that the lot's dimensioned. So you've got a long skinny one, you're probably going to need an acre. You get something that's maybe a little bit fatter and wider, you can get away with three fourths. So, 35,000 to 43,000 square feet, something like that.

[23:52] Chris Hatch: You know, it's so interesting the way fast food development occurs because everybody's constantly tweaking the model. You get the building done and you've created a customer experience there, in Corsicana, right, that the customers are going to get used to. And then you evolve and you change. The brand changes, right? And what's so fascinating to me is that the customers at the next location get a different experience, possibly slightly different than the Corsicana customers.

[24:22] Garrett Reed: Yeah. And it's what's great about being a part of a franchise brand. I learn new things every day. That happened when we signed one of the largest franchisees in the Whataburger chain. Really good guys. His name's Taylor. My point in what I'm about to say is you learn from your franchisees. So. We took the prototype with him and he's like, I want to do this, I want this, I want this, I want the walk out door like Chick-fil-A's doing, Whataburger's doing this now. So you up your game, right? You're like, okay, we'll do that. And then all the franchisees go out and see it. And it's like, wow, this really works.

And now we're building the two buildings just like his in Arkansas. And it's neat to learn from your franchisees. But when you think you have the perfect prototype, you've got partners in the game that go, what if we did this? Did you think about this? And I truly love the collaboration of us and our franchisees and say, let's raise the bar. Let's raise the bar. So in 2024, which was just a year ago, I thought I had built the perfect prototype that we're going to go build 500 of these, no problem. And three stores into it, we've already tweaked it enough and you see the volumes that are coming off those stores, you're like, my gosh, what's the next franchisee going to say, hey, did you think about this?

So that is kind of the exciting part of it. But like you said, I don't think a prototype's ever done. There's always going to be a little tweak here and there, but hopefully we can get maybe 100 of these built before we do it again, but we'll see.

[25:58] Chris Hatch: What's so entertaining about that with your background is you were on the other side of the coin. So frequently with a brand that was constantly changing the prototype, right? And I'm sure that probably similar to what my office is that tends to cause the construction people here some fits, right? Because it's constantly like, oh, you have the wrong proto. And it's like, yeah, right. Well, you've evolved it 12 times this year, so sorry. So what's so entertaining about that is here you are operating, right? You're trying to dial in this perfect unit, and then instantly you're like, oh, man, we probably should have done that a little differently.

[26:34] Garrett Reed: So all the things I yelled and screamed about when I was on the other side of the table and called a myriad of people words I shouldn't have, now I'm sitting in their chair going, well, I kind of understand now, whoops. Probably owe a lot of people apology letters. I'm not going to write them yet, but they know who they are if they're watching this.

[26:59] Chris Hatch: You know, it's interesting though to hear that what the genesis is of some of that or whatever the idea creation that goes into modifying this proto is coming back from the lifetime feedback that you walk through with operators. That's really fascinating.

[27:14] Garrett Reed: Yeah, and that's where it's got to come from. I mean, the only reason we were able to build the prototypes is because we were operating them. But now you've got these guys that are spending their money, investing their capital, and they're saying this could be better, this could be better. And so, take it into account, execute it, and so far so good.

[27:32] Chris Hatch: Yeah. Well, what a fun brand and so great. I got to get to the Corsicana unit so I can go look at the Proto. Look forward to seeing that next time down.

[27:41] Garrett Reed: It's cool. Tell you what, go, if next time you're in Texas, go out to Tyler, Texas, or you can go to Little Rock. We've got there's one on McCain that's almost done and then one on Chenal that's about to start construction. But if you happen to be in the Little Rock market or the Tyler market... we just opened up one in, hang on a second, San Marcos, Texas, that's another brand new prototype. So they're starting to pop up. You'll see a lot less of the second gen rehabs and more of that prototype. Although we just did one in Virginia. I believe it was a Burger King and that's just absolutely slaying it.

That was one of the biggest surprises and fears I had was leaving the Texas market. How well would this brand translate outside of the state of Texas? You know, we went to Wisconsin, we went to Virginia, we went to Pittsburgh, and they all outperformed the locations. It was amazing and kudos to our marketing team and all that. But what a shock when we started opening in Virginia and Wisconsin. I mean, small town Wisconsin is just crushing it.

[29:07] Chris Hatch: Interesting. So you started really as kind of a college kid concept. The majority of the customers being college kids. And then you've obviously evolved from that, right? Customer profiles change.

[29:23] Garrett Reed: Right. Yeah. You know, we have people ask us that all the time. Hey, should I open my first store next to a college campus? Sure. That's cool. You're going to get a lot of people and all that kind of stuff. But at this point, Layne's has now become a brand where I truly want to go next to Target, next to Costco, next to, name the major grocer, H-E-B, Publix, whatever it is in that particular market, Smith's Utah. If we're around the daily needs, we like to be next to McDonald's, Wendy's, Carl's Jr. Chick-fil-A. You know, the sales are more predictable. They're more consistent. Problem with being in college towns is they ebb and flow, right?

Everybody goes on spring break, everybody goes away for Christmas, all those kinds of things. Staffing's difficult. Yeah, you build brand awareness, but with the way that our marketing team operates and the way that we've been able to open these restaurants, I'd much rather be with all the other QSRs and just be, hey, there's another Layne's, right? There's another whatever. That's really where we need to be. That's the space we need to be operating in. Although we have college roots, I think we've graduated far past that.

[30:45] Chris Hatch: Yeah, it's interesting. As you systemized the point of sale and made that easier, and started using the technology to your advantage, what are some of the different metrics that you look at from the franchisor standpoint?

[31:05] Garrett Reed: You know, we obviously, from our standpoint, what we're coaching is speed of service. I think in the fast food world, that's probably the most important thing is how fast do you deliver the food to your guests. We like to call it hot food fast. It's one of our pillars in the restaurants. And then quality, obviously the quality of the food is important. And then the cleanliness of the restaurants and those kinds of things. When it comes to food costs, really, outside of waste, we have such an unbelievable supply chain group here. Food costs shouldn't be a problem unless you're just mismanaging that. So we do keep an eye on that.

We do have a pretty tight labor program that we like to coach our franchisees on. So there's not a lot of controllable costs in the fast food business outside of your labor and your food costs. So we focus on times, we focus on quality, and then just focus on the experience that the guest has in coaching our franchisees to deliver.

[32:11] Chris Hatch: With the original store that Mike had in College Station, was he doing any of the meal delivery apps?

[32:19] Garrett Reed: Gosh, no. When I say he was writing paper tickets, truly, it was like you went into a diner back in the fifties. That's the only way to describe it. I don't even know if he had a telephone in the stupid restaurant. Mike is a, he's a simple dude. He cared about: did you have a great experience, and did you eat some good food? Outside of that, how long it took you to get your food? Not concerned. Whether you could get it delivered through technology, not concerned. I mean, I'll never forget when we were buying the brand. I had never gone through the drive-through in College Station.

I'd always gone in and dined, because that's the experience you want. I didn't live there at the time. So I was like, hey, we need to swing through. We're doing our due diligence. Let's see how the drive-through times are. And I pulled up to the menu board. And I'm kind of waiting. And it's like, voice comes over there, hey, pull up to the window. I'm like, what? And we pull up to the window and he's like, no, we take all the orders at the window. I go, you got a speaker. No, we don't do that. We like face-to-face. I'm like, oh my gosh. So I'm going to order at the window.

You're going to take my order and send it to the... I'm going to be here for 10 minutes. He's like, that's good food, man. We're going to visit with them. So no, Mike didn't have any of those platforms. But third-party delivery is a massive part of the restaurant business, COVID really pushed that like crazy. It's probably 20 to 25% of our business. Integrating those platforms into our POS system and integrating them into the way that we run our cook line and everything was we really got to fine tune that during COVID. So a lot of bad things came out of COVID, but I can say that really helped us get that process down. So now it's an integral part of everything we do.

[34:15] Chris Hatch: It's an interesting thing watching some of the concepts that haven't still really responded to it and some really big ones at that, right? Where a customer coming into the restaurant might sit there and have to wait for a few minutes while a to-go order is filled in front of them, right? It's such an interesting part of the business.

[34:33] Garrett Reed: Our app development we've got a loyalty app and all that kind of stuff. Now you can order off of that. It's been neat. I'm not a technology guy. Trust me, I can barely set this computer up to get on this call with you. But we got some really good people that we hired from some really cool companies. We do a good job of poaching really good people and we got some good guys that are designing that stuff.

[35:02] Chris Hatch: Okay, so I assume you still have areas for development in the country that are available for potential franchisees. Yeah.

[35:09] Garrett Reed: We do, yeah, absolutely. Yeah, I mean, we've sold part of Florida. You know, the majority of the country is open right now, I would say. Arkansas is gone. Almost all of Texas is gone. There's a few little places here and there, but outside of those markets, part of Virginia is gone. Pittsburgh. At the end of the day, we only have 18 franchisees, and we've sold 250 units. So those will be developed over a probably a six year period. Those 250, maybe seven years, depending on some of the lags at the end. But we'll probably have, we'll probably have 30 to 35 franchisees signed up by the end of this year.

So there's a lot of territory left to be gathered. We could have sold the whole United States out at this point, but we're just so daggum picky about who we bring on board.

[36:05] Chris Hatch: So back to the picky point, for somebody who's listening who likes to operate restaurants, who's your ideal franchisee candidate?

[36:13] Garrett Reed: Yeah. Our ideal franchise candidate is somebody that's one, well capitalized. A lot of people don't realize that. If you're going to be in the QSR space, you have to be well capitalized because we build buildings or we're leasing expensive buildings. That's the first thing. The second thing is you have to have a restaurant background. We have to be able to go look at your existing operations and see that you know what you're doing. And then the third thing is it's the... They say it's politics. Can you sit down and have a beer with these guys? Right? We're going to be your business partner for a minimum of 20 years.

Are you going to be the guy I can pick up the phone and call? Now, we're going to disagree. We're going to have some friction and all that, but it's really the have-a-beer-with test. Right? So you're well capitalized. You run good restaurants currently. You know, you have a good operational system and then it's like, do we get along? And we've had a lot of people in here where we've, they've run great restaurants, they've got great capital, and you just don't feel that connection. And I know that sounds strange, but it's like, this brand is so important to me and the other people inside the office.

It's like, are you going to trust your kid, your baby with somebody? And if you don't have that "I'd have a beer with you" feeling, Pick up the phone and crack a joke with you or whatever, then no. So those are really the three things. And that last one, it's just who you are, right? I mean, sometimes you're just not a fit for the personalities that are on the other side of the table.

[37:43] Chris Hatch: That last litmus test is pretty much the one we mentally go through any time we have a new potential investor that wants to do things with us. Because to your point, when you go through an active operating business with someone, you are going to disagree. But can you actually relate to them? Are they relatable humans that you can have a conversation with? That's an adult conversation.

[38:19] Garrett Reed: Yeah, absolutely. We say this all the time in our meetings. We're not in the business of selling franchise units. We're in the business of opening successful restaurants. Two different things. We do not set goals and say, hey, we have to sell this many this year. We set goals and say, we have to find this many good partners this year. Find the good partners. We have the great real estate team. The restaurants will open, as long as we keep that mentality. Another thing is you see this all the time. I know I'm kind of riffing now, but we get this question asked 100% of the time without fail.

What's your exit strategy? Are you owned by private equity? I don't know what's going on in this world, the restaurant world with all that stuff, but that is the one universal question we get asked. And we're a family company that's having a blast. Like, we don't want to sell. We have no private equity. We have no debt. I mean, we run a company with no debt, no private equity. It's funded by the partners that own it. And we're having a ball. So the franchise partners that we pick are going to be in it for the long run. My kids have worked in the store, you met Preston the other day, he's in here working. Our kids all work here, they get involved with the franchisees. It's true, my dad works here, he's here, it's a true family brand.

[39:47] Chris Hatch: I walk through a lot of retailer and developer offices. Yesterday, that was a first for me in a long time to walk through and meet your son and then see your dad's office and then see your brother's office and put it all together like, this is legit a family operation running this thing. It's great.

[40:06] Garrett Reed: Yeah, it's a true and we have such a passion for the brand. And so, yeah, we've been offered money, we've been offered all kinds of things, but it's like, no, this is my third kid, right? I'm not letting you know, I don't know what the next generation will do 20 years from now, but I'm going to die sitting in this chair and just love, I love Layne's. Absolutely love it. It is my passion. It is everything to me. Obviously, I ran a successful development company for years and I said, you know what? Now I want to go do this chicken thing. So, we had that conversation yesterday.

[40:44] Chris Hatch: What was it about Layne's that made you fall head over heels in love with this thing?

[40:51] Garrett Reed: I have the answer to that question and I didn't realize it until I really got involved in the brand. In the beginning, the answer is the same. It's at different levels. You actually have the ability to change people's lives, give people the opportunity to change their lives. When you're a developer, you build a building. You sell the building, you build the building, you sell the building, you make money, you make your investors money and you have some employees, right? You might change a few employees lives. When I got involved in the restaurant and there were 16 year olds, 30 year olds, career people, and you saw that you could provide an opportunity, you could provide coaching.

At the point I was in my life, it was so fulfilling to be able to say, hey, I got to do a little something that maybe made their life better. And I've got kids now that have worked for me, graduated from college, and are off on their careers that still email me. And I've got a handwritten letter from one that graduated from the University of Oklahoma the other day. And it said, hey, thanks for doing this. And we talked yesterday a little bit about one of my professors in college that changed my entire life. And I never had that in my life, but now being a part of this brand, you literally have the ability to touch somebody's life.

Now, whether they listen or don't listen or whether they do it here or do it somewhere else, you can change somebody's life. Now we change lives for franchisees. And we see their families and other things like that. So I think the difference is at my point in my life, when I saw that I could actually affect positively the trajectory of somebody's life, I was like, this is what I want to do. Like, this is my calling. I'm going to go do something like this. Once I got a hold of those kids and just got to mingle with them, because when we first opened the first restaurant, I was there seven days a week, 13 hours a day.

My wife was so done with me. She's like, you're a successful real estate developer. You come home stinking like chicken and grease. What are you doing? I'm like, I'm having a ball. This is so awesome. She's like, what? No. So that's a long, long answer to a very short question. It's the ability to affect people's lives.

[43:15] Chris Hatch: You know, one of the funnest parts, I think, for Porter and me about putting on this podcast is being able to spend an hour with people like you. You are full of energy. You are full of life. You are in on this brand. And it's so cool. It's infectious, right? We come away from these things and we have more energy, right? We've been impacted positively by you, right? Which is so fun. Yesterday, before I arrived at your office, I had told you I had gone to the Raising Cane's office, which was also amazing. I met with the senior director of real estate there and we had a coffee, we were catching up and talking about a couple of opportunities and I had not met him in person and so it was a nice chance to meet and greet with him.

And same thing, here's a chain that's got a thousand stores, right? And an energy level that is parallel with what yours was. It was so fascinating to me, leaving their office and then walking in at your office and feeling some more energy level. Amazing.

[44:26] Garrett Reed: Well, I appreciate that those guys are obviously our competition for what it's worth, Todd's done a great job over there. He's still our little brother. I like to take that shot. They're like my younger brother. I shouldn't say little, right? My brother Eric's younger than me, but a lot bigger than me, right? We're we might be older than them, but they're a lot bigger than us and they do a good job. Again, there's a lot of room for a premium chicken tender in the space. And I appreciate the compliment. If we can keep an energy level comparable to the big boys out there, the Chick-fil-A's, the Raising Cane's, the Whataburgers, that's awesome. I love it. We're doing something right.

[45:12] Chris Hatch: OK, so you got your prototype dialed and sure it's modifying, right? But you got the prototype figured out and it'll tweak from here. But that's great. You're starting to sell some solid franchisees that are starting to get store development plans in. That sounds like great store growth over the next five or seven years. What's next for Layne's?

[45:34] Garrett Reed: You know, I think we just continue to grow. Right now we're focused on building the training team that's got to keep growing, support. You know, what's next is we got to get past that 100 store mark, which should happen sometime next year, we're hoping. Might fall into 2027, but just continue to open good restaurants. That's the plan. We don't plan on changing the menu. We're not an LTO company. We're not a breakfast company. We're not that. We do chicken tenders, wraps, milkshakes, and lots of different sauces. So we've kind of got to that point where really what's next is finding the right partners and growing the brand responsibly.

[46:21] Chris Hatch: Well, I think that was one of the other parts that I was really impressed about after walking through your office and meeting so many of your team members yesterday. You have built a great support team, right? And I think for me, felt with the size and how many stores you have open today, I didn't anticipate having a team that size. And so many great team members. I mean, everybody I met was so bright, attentive, and amazing.

[46:47] Garrett Reed: Yeah, and I got to give kudos to my partner, Matt. You know, he came from a business development background and he and I made a conscious decision. We used to joke about this. We finally surpassed it, but we used to have more corporate employees than we had restaurants open. It was a joke. It was a running joke around here. It's like, Hey, we got 15 stores open and we have 22 people that work in this office. Like what's going on. And, that was really Matt's vision of let's hire a year to a year and a half out. And this was from the very beginning. Let's hire a year to a year and a half out.

We're going to have to spend capital. We're going to have to invest our money in it, but he always said, when we need them, they're ready instead of saying we need them now and they're not ready. And that goes back to that support. So we always hire so far out. So that's why you see so many faces around here. And, there was a time when we're just building and developing and we'd bring people on and say, Hey, your workload is going to be a little bit light, but we want you to understand the Layne's culture. We want you to understand what we're doing. We want you to understand.

We want you to be fluent in what we do. So when it does, when the tidal wave comes, you'll be ready. I mean, we open, we will have open nine stores in 90 days. We've got another 45 days in that. Nine stores without a miss, without a hiccup, without a problem. And that's a testament to hiring way in advance and being ready for that. So that's the commitment that the ownership group has to the brand. And so that's why you see so many faces. That's why you see such a big office with the concept that doesn't have that many restaurants open.

[48:43] Chris Hatch: You shared with me yesterday that Preston started in the kitchen at one of your three units, right?

[48:47] Garrett Reed: He did, yep. Correct, yeah, yeah, yeah. When he was 14, I made both of my kids work when they turned 14. So my daughter, Bree, worked from 14 to 18 at the Frisco location, and then Preston worked from 14 to probably 19. He actually worked at three different other locations. But yeah, my family has slung chicken, mopped floors, and taken orders, so yeah. I did a little time in the restaurant too.

[49:19] Chris Hatch: Why did you encourage them to do that?

[49:26] Garrett Reed: At the end of the day as a dad, I would rather hand off than sell. So that would be my preference. That doesn't mean that that's what they're going to do. But I wanted them to understand if there ever was a time come and they were tapped to say, we'd like to look at you first instead of going to somebody out. I wanted them to actually understand what that kid standing behind the fryer for eight hours is feeling, right? What does it feel like when you got an angry customer screaming at you at the drive through? What does it feel like when there's a happy customer?

What is that emotion? That was important to me. So whether or not they ever follow in my footsteps, I don't know, but they'll be prepared to if that time ever comes. The idea was to know what the family business is. My daughter, I think she's going to head off to college and I don't know, be an attorney, do something else. But one day she'll be able to say, I get it, right? She can show up and understand what they do. And Preston has a huge affinity for the brand. I'm sure he'll hang around and do something. But I just wanted him to know, what dad does.

It's hard to say, Hey, I want you to become a developer. Right, okay, yeah, that's okay, dad. You put projects together. It's easy to say, I want you to go sit in this kitchen. I want you to put this headset on. I want you to talk to these guests. It's more relatable to a 14-year-old, 15-year-old, 16-year-old.

[50:56] Chris Hatch: I worked age 14 to 19 at a Japanese quick service restaurant. And to this day, I cannot eat teriyaki sauce. Something about making that teriyaki sauce at the restaurant that just really, I just can't even now, I mean, this is years later, right? But it's so good and it's so important. I think it is so many life lessons, right? That were taught to me and same thing. I was encouraged to go work there. And it taught me a lot. Taught me to be respectful and nice to people that are making minimum wage. And the food service industry is awful. It's tough. It's tough job. It's a grind. So be appreciative, right?

[51:38] Garrett Reed: It is. Yeah. Yeah. And there's a lot of great people, a lot of great people that work, that prepare our food. And if you really look at it, fast food in general, I mean, if you just take QSRs, not fast casual or sit down, it's amazing how many meals get served in the United States every day by those people. And I don't think we appreciate them enough, but that's where a lot of meals come from.

[52:07] Chris Hatch: If you were sitting down with your 20 year old self and you had the knowledge that's in your head today, what would you tell 20 year old version of you?

[52:18] Garrett Reed: Buy Bitcoin when it first comes out. Yeah, exactly. I'm just going to give you the cheat code. That's what I would say. Write it up there. Don't worry about anything. Buy some Bitcoin. What I would tell myself is...

[52:24] Chris Hatch: It's like the sports almanac from Back to the Future.

[52:40] Garrett Reed: I'd probably tell myself something that I tell my kids. And that is you can't unhit a golf shot. I wish I understood that when I was younger. I used to take Preston out when he was really young. We'd go play golf and I always said you can't unhit a golf shot once you hit that ball. The ball has been hit. If you want to sit there and think about it and complain about it and do all that, does you no good. Soon as you hit it, you need to think about what your next shot is. That's been done. Learn your lesson, take a look at it and move forward to the next shot.

But I wish I would have known that earlier because I think we as human beings dwell on mistakes we make instead of just learning quickly from them and just getting up and hitting the next shot. So it'd be something like that after buy Bitcoin.

[53:37] Chris Hatch: At the top of the Layne's logo, there's a 15, then a colon and a 1. What does that mean?

[53:40] Garrett Reed: That's one of the four pillars we have in the restaurant. It stands for 15:1. So the concept behind it comes from a study that Yelp did years ago. And it was quite surprising to I think a lot of people in the food industry of the reviews done on Yelp. Of every 15 reviews on specifically restaurant companies, only one of those reviews was actually about the food. 14 of them were actually about the service. So what we like to say is our food is fantastic. We have great food. We take care of that. The people on the front lines have to take care of the service.

So your service must be 15 times better than the food you're serving. So that's the concept behind 15:1. And so it actually is where we have 15:1 pins, awards, people that go above and beyond. So 15:1 is one of our rallying cries at the store level. Is your service 15 times better than our food? High bar.

[54:46] Chris Hatch: For those that are listening that haven't been to Layne's and they're going to go check it out, what should they order? What's your go-to?

[54:54] Garrett Reed: Okay, so I've got my favorite. The spicy tenders, so we do regular tenders and spicy tenders. Spicy tenders have become my favorite. I would order the club sandwich. It is cheese, brisket, beef, bacon, three tenders, Layne's sauce. I order the spicy club, but hands down the club sandwich is on Texas toast. It's just, you've got to get 15 napkins before you sit down and eat this thing. But it's, I always just tell people, this is a five napkin sandwich. You just make sure you get five napkins. But the club sandwich is phenomenal. Crazy story about the club sandwich was Mike created the club sandwich. Like most chicken finger places, when he first opened the restaurant, it was chicken fingers, french fries, sauce, coleslaw, and toast.

That was it. They didn't have anything else. And then slowly over time, he got tired of just eating chicken fingers. And so he went and got some bacon and created this club sandwich. But in College Station, up until when I bought the concept, it was never on the menu. It was a hidden menu item. So I asked Mike the exact same question you asked me. I go, Mike, what do you eat? I mean, you've been running this thing for years. And he goes, Oh, I love the club sandwich. I'm like, the what? I go, there's no club sandwich. What are you talking about? He goes, oh, I try not to tell people about it, it takes too long to make.

And I go, but do people already know? He goes, yeah, the secret's out. They've been doing it for years. Nevertheless, he makes me this club sandwich. I bite into this thing and I go, no, this is going front and center on the menu. The club sandwich is unbelievable. So that's my favorite thing on the menu. Milkshakes are pretty good too, but club sandwich and a salted caramel milkshake would be my go-to.

[56:45] Chris Hatch: There you go. Well, if you haven't been to Layne's, go check one out if you're listening. And Garrett, thanks for joining us on the Dirt Dog Pod today.

[56:52] Garrett Reed: Love being on the Dirt Dog Pod. You guys are doing great things. I appreciate you taking time and having me.