Dan Reese, President of Milkshake Factory

Guest: Dan Reese, President, Milkshake Factory

Host: Chris Hatch

Listen on Spotify

Summary

Chris Hatch talks with Dan Reese, president of Milkshake Factory, the Pittsburgh brand that grew out of a chocolate business founded by Greek immigrants in 1914. Dan tells the story of the fourth generation leaving the Bush White House to revive the family shop, landing a Pentagon chocolate contract and a Costco deal, and how a reluctant first location in PNC Bank's new headquarters showed the brand was onto something. He also covers his own path from Heinz and 3G Capital to entrepreneurship, why Milkshake Factory chose franchising (its first franchised store opened in Pleasant Grove, Utah), how it protects its ingredients while scaling, and what makes a good site for a dessert concept.

Key Takeaways

• "Don't confuse trends with volume." Plant your flag in a proven category with lasting demand, then out-execute everyone in it.

• Downtown and urban retail depends on vibrancy all week. A block can make all the difference, so ask a lot of questions about who is there at night and on weekends.

• Milkshake Factory looks for street visibility, good access, and restaurant co-tenancy, especially sit-down restaurants that don't sell dessert. College campuses, hockey rinks, theaters and high schools also work well.

• Be wary of a "killer deal" at $18 a foot. Real estate pricing is reasonably efficient, so pay up for good locations and keep the square footage tight (about 1,350 to 1,750 square feet) to make the P&L work.

• A tighter menu means more throughput. At the Penguins' arena, sales went up each time the menu shrank, all the way down to one shake.

• Franchise once you've actually figured the business out. Dan calls franchisors that sell "passive income" predatory and sets honest expectations with every franchisee.

• Regional dairy partners and broadline distributors let the brand keep its proprietary recipes while it grows in clusters around major metros.

Transcript

[01:45] Chris Hatch: Welcome back to the Dirt Dog Pod. We're really pleased today to have a great guest. We have Dan Reese, who is president of the Milkshake Factory. Welcome to the pod, Dan.

[02:01] Dan Reese: Thanks Chris, appreciate having me on.

[02:03] Chris Hatch: Yeah, we're thrilled to have you here. You are our first pure dessert concept. And so, for all of our listeners who like to really delicious treats there are several that have been pretty amped up and pretty excited about what it is you offer.

[02:19] Dan Reese: Yeah, absolutely. I mean, we're kind of doing the classics. We're proudly not trendy. So we can get into all the details of our products, but it's basically world-class milkshakes, and our founders are fourth-generation chocolatiers. So we make a lot of really delicious chocolate in-house as well. So we can get into all the details, but in short, it's a pretty diverse menu of world-class milkshakes and we make our own vanillan ice cream in-house, et cetera. And then some pretty nice chocolate as well.

[02:46] Chris Hatch: So Dan, tell us about the concept because unique to a lot of retail concept, I just feel like so many of the concepts that we work with these days are 10 years to 40 years old or less than 10 years old, and you're not. Tell us a little bit about the story of how it came to be and where we are today.

[03:07] Dan Reese: Yeah, sure. So technically the company was founded in 1914. So, 110-plus years in. Classic immigration story: four generations ago, they immigrated from Greece. They didn't have a dollar to their name. And the only thing that they knew how to do was make candy and chocolate. So they founded a little kind of chocolate shop in a, at the time, a suburb of Pittsburgh and made a living, right? Just really admirable grit. Just making it happen. So that's how it started, right? Just out of pure necessity. It was the only thing they knew how to do. And then over the course of generations the business took different twists and turns of chocolate and, they had a fundraising arm, but all just really hyper local family chocolate business, right?

I mean, actually, most metros around the country have one, of varying sizes. So, that business kind of took on different twists and turns and it was always pretty small. All the way up until about 2010. And that's when the fourth generation got involved. And we can get into that whole story, but they actually all worked in the George W. Bush administration in the Office of Presidential Advance. So they planned President Bush's travel all over the world. So they traveled to 80 countries on Air Force One, Hurricane Katrina, 9-11 Ground Zero. I mean, they have stories you wouldn't believe. So they did that and then, most people don't really think about this, but when, the president's time is up, the whole administration is out.

It's not just the president and vice president, right? So, they were technically out of a job. And at that point they were still very young, and they said maybe we'll come back to the family chocolate business. And it's funny because they left the literal Oval Office in the White House to come back to the family chocolate business in Pittsburgh. Was a bunch of little ladies hand-making chocolate in the basement of an old movie theater in some little old town. Real scrappy stuff. Their conference room table was a cardboard box turned upside down, not exaggerating. So, it was not coming back to the big behemoth family business and cashing in.

I mean, I honestly to this day don't know how they paid themselves. I truly do not. You know, maybe a couple hundred grand in revenue, maybe, but to their credit they kind of tweaked some things and focused on products and simplified, and got into Saks Fifth Avenue and Dean & DeLuca, and grew the business to maybe a couple million. And then their big break was, the Pentagon. Most people don't realize, it's the most secure office building in the world. If you and I are working at the Pentagon, we can't just go hop out to Chipotle and come back. Like everything is at the Pentagon. Right.

So there's a Walgreens in there. I mean, it's like a, effectively like a shopping mall. So there was a chocolate shop contract, right? Whoever runs the Pentagon says, "Hey, we need a chocolate shop," and then they bid that out. So the Edwards family bid on the chocolate shop contract at the Pentagon, won it, made all the chocolate in Pittsburgh, trucked it to the Pentagon and built a seven-figure chocolate shop. Little salted caramels and strawberries at Valentine's Day, all the stuff you'd see at your neighborhood chocolate shop, inside the Pentagon.

[06:19] Chris Hatch: And when was it, about what year was this?

[06:25] Dan Reese: 2008-ish, give or take. So they ran that business for five-ish years.

[06:32] Chris Hatch: So basically, any time there was a conflict from 2008, 2013, and employees of the Pentagon were stressed and they needed a stress relief and they were going to get a bite of chocolate, they were coming to the shop.

[06:44] Dan Reese: 100%. 100%. So yeah, you're solving the nation's military crisis. Let's take a break and go get a chocolate-covered strawberry or whatever. So, very successful business to their credit, and they had it for a while. The next big break, if you will, was, there was a nice write-up, I believe in the Washington Post, ex-White House staffers have chocolate shop in Pentagon that cute little story. And then the Costco buyer in the Northeast saw it. So Costco buys autonomously via region and the Costco buyer said, huh, that's interesting. You know, I'm from Pittsburgh. They're from Pittsburgh. This is kind of cool. I got to meet these people.

So, the Edwards family had never sold anything to Costco or consumer products or anything, no idea what they were walking into. Now Costco is like the behemoth in consumer products. So it's kind of funny in hindsight that they walked into that meeting and what do you guys do best? It's grandfather's caramel, blah, blah, blah. They co-created an item called Snappers, which is a pretzel caramel chocolate cluster. And they were approved for, I believe, 81 clubs of Costco on the spot, which is hilarious in hindsight because there's literally little old ladies making chocolate by hand on trays. And now they have to fill four tractor trailer loads of product in three months.

True again, back to true entrepreneurial grit. I mean, the math doesn't work. You're like, okay, we can run this facility around the clock for three months and we'll fill. You know, 7% of the order or something, right? I mean, no shot. So, they hand welded production lines and there's a great story. And if you miss that order with Costco, one strike and you're out. You're done. Right. So it is as high stakes as it gets. Costco is a great partner, but they can be ruthless too. Mistakes are not tolerated. So that truck came to pick up the order and that last bag made it on the truck with like I think three minutes to spare.

Right. It was like one of those cooking shows. So they got into Costco the product grew like wildfire. And that's kind of when I came on. Again, I'm not part of the founding family to be clear, but we can get into that whole story. And then I brought a whole team with me and we grew that chocolate business from essentially nothing to about 50 million in revenue. So that was that whole run. And then Milkshake Factory, back to your original question, was, the third generation. Our founder, Dana is fourth generation. It was her mom's little chocolate shop in Pittsburgh. And again, the same little chocolate products.

And if it wasn't a holiday like Easter or Valentine's Day, a little bit of a tough business to be in. And Dana's college project was, Hey, what if we started scooping milkshakes in the summer? I mean, we're not selling any chocolate. There's really no downside, right? So they started scooping shakes. They're fourth-generation chocolatiers. Of course the shakes were great. Then they came to realize like, wait a minute, maybe milkshakes are a better business. So it used to be all chocolate and no shakes. And now that mix has shifted to mostly shakes and we still do chocolate, as I mentioned. And then they rebranded it to Milkshake Factory.

And it just was one store, real mom and pop, red tin ceiling, like super old school, really unsophisticated. I mean, the menu was way too big and the pricing was wrong and you name it, but the product was great. And it was kind of this cult following. That was that one little retail shop put kids through college and the whole deal. But we were busy growing the Costco business and Milkshake Factory was, to be honest, a little bit of an afterthought. And then in 2015 is when PNC Bank came to us, they built out their new global headquarters, downtown Pittsburgh LEED-certified building the whole deal.

And they wanted something kind of cool and local on their ground level retail, not just another Starbucks or whatever. So again, it's kind of funny in hindsight, we turned down PNC probably 10 times where we were like, Hey, thank you. We appreciate it. You want to bring this little mom-and-pop business into your fancy new headquarters? We're like, I mean, thank you, but like we were not ready and we're too busy over here. And then eventually the deal kept getting better and better. And as tortured entrepreneurs, we're not the best at saying no. So, so we did that and that's when we got serious about the branding and hired architects.

And I'm a branding guy, so we can get into that in a minute. But when we saw that line wrapped around the corner, I was like, wait a minute. People like Milkshake Factory, we might be onto something here. And then we've since opened up 10 more stores around Pittsburgh and have gotten into franchising and all that. So that's kind of the impetus story of almost a century of a very kind of humble local family chocolate business that a couple of dominoes fell the right way. And, here we are.

[11:17] Chris Hatch: Well, what a wild thing to think about that the company was founded in 1914. And then, let's see, if I followed your dates correctly, what, in 2008, administration switched out to the Obama administration, right? So what is that, like 90, 94 years the company was in existence? And then it was like, okay, let's go do something different, right? What a big pivot, yeah.

[11:40] Dan Reese: Yeah, pretty much. Yeah. And I think with like a lot of family businesses the next generation kind of comes in and puts their fingerprint on it. And, the business, I would say, took more drastic turns to put it politely than maybe some family businesses, but it was so small. It almost kind of had to, it was like, Hey, are we going to get serious and try to really grow this thing or not? So, so yeah, I've been a part of it for, the last 10 years or so. And yeah, it's been a pretty wild ride.

[12:11] Chris Hatch: Is there any correlation to the fact that Hershey's chocolate is based out of Hershey, Pennsylvania? Is there any kind of correlation there? Like where there are chocolatiers that went into that part of Pennsylvania and settled?

[12:24] Dan Reese: Yeah, a hundred percent. There's a couple other, I think there's four more like, regional slash local family chocolate businesses that are all in Pittsburgh. Same thing. And almost all of them are Greek immigrants where, like you said people came over and settled wherever for whatever reason. And, so yeah, there is definitely, I would say a mini concentration of some chocolate activity that goes way back a hundred plus years.

[12:55] Chris Hatch: Wild. So, okay, so the family has this afterthought of Gen 3 creates the chocolate shop. They start scooping the shakes. You guys get the first one open under the PNC Bank building, which is epic, by the way. Can't tell you how many of those spaces that our brokerage office has worked on that are retail underneath things and how infrequently it works out. So to hear a success story and a booming success story is awesome, right? Good for you. Good for you. What do you think? You know, I guess some of that is you didn't really understand how it was to open a traditional brick and mortar store versus opening one under an office building. But now that you have, what is it like opening one underneath versus opening one that's just out in the suburb somewhere?

[13:40] Dan Reese: Yeah, it's different, right? And people always ask, who's your target consumer? You're like, well, ask me which location it is, right? I mean, the good news is we have a pretty broad consumer base of people liking milkshakes and chocolate. So the good news about that downtown Pittsburgh location is we kind of caught it at the right time where Pittsburgh itself was going through a pretty big renaissance of investment People think, oh, are they making steel there? And it's this old Rust Belt town. Like there's a lot of really high tech stuff. A lot of innovation in medical and tech, et cetera, obviously financial services. So that whole downtown area was really kind of on the up and up where there's a lot of activity.

We were by the convention center. We're across the street from a Capital Grille. Just a lot of foot traffic. So yeah, the office building's great and people will come down and get shakes and that's awesome. But it's certainly not an isolated thing where we really can capitalize on that entire downtown Pittsburgh market, Obviously our business does well in the evenings, weekends, et cetera. So we can kind of fill that day part with the office crowd. And then at nights, weekends, we'll hit more of the people going out, sporting events, tourists, et cetera. So it's worked out well for us, but it's a very different makeup than typical suburban store, like you said.

[14:57] Chris Hatch: Yeah, we had a situation in downtown Salt Lake where we had an ice cream retailer called Last Course that opened and it was a decent area where they had opened, but I think what they were missing is some of the vibrancy of what you're talking about. You got to have that cross shopper, right?

[15:13] Dan Reese: No, for sure. I spent a lot of time, I used to live in Chicago and people go into the loop of downtown Chicago and you go there on Tuesday at 10 AM and you're like, oh my gosh, like these places have to be printing money and then go there Friday at seven and you're like, how was anyone ever in business? Right. So for us, that's not a winning formula. So, when I'm talking to my franchisees and they talk about downtown, my answer is it depends. Right. And we have to ask a lot of questions on the makeup and vibrancy of that downtown, because some downtowns are amazing.

And then as you know, like this block of downtown versus that block of downtown, one block over can make all the difference in the world when it comes to some of those downtown districts.

[15:54] Chris Hatch: Yeah, and I think there's a lot of urban planning people. There's a lot of city people that spend a lot of time trying to figure out how to integrate and mix uses together. And, for me, at least in my limited experience of it just seems like it's rocket science. It's way more complicated than trying to do retail in the burbs. So, okay, so what a cool brand and let's jump back into the brand here in just a moment, but let's focus on you for a minute. Where did you grow up? Where did you attend school?

[16:26] Dan Reese: Yeah, so where I'm from is a loaded question. Moved a lot. I moved every three years my whole life. I'll give you the quick version. So born in Pittsburgh, actually, and then lived in Minneapolis, and then back to Pittsburgh, and then went to high school in a little beach town on Lake Michigan in a place called St. Joseph, Michigan. Beautiful place, by the way. Then I went to undergrad at Michigan State. I was a supply chain major there. That was kind of their flagship program. Did supply chain consulting for a couple of years right out of undergrad, got to travel the world. And I was like hyper focused supply chain guy at age 23 or something.

And that was cool, but I was like, it's a big world out there. Let's take a step back and see what else is there. So ended up working for a private equity portfolio company, Culligan International, a big water company in their strategy group. So I got to do M&A and marketing and new product development. All sorts of stuff that kind of broadened my horizons a bit. And then I got my MBA full time from Duke University down in Durham, North Carolina. So, so did that. It was kind of a very specialized and then took a couple of steps back to generalist. And I really wanted to learn how to run a business.

That was the whole point. So I interned at Heinz and then after Duke, I went back full time at Heinz. And, at the time Heinz was a publicly traded company in their brand management group. That's where you technically a marketing role, but you run the whole P&L. So, I did the Superbowl commercials, but also when something goes wrong in the factory, the CEO calls me, right? So you actually got to own the P&L and run the business, which was pretty cool. And then did that for a couple of years. And then I believe it was 2013 is when 3G Capital came in. So I don't know if you're familiar, but, fairly invasive Brazilian private equity firm that comes in and flips the company on its head a little bit, to put it politely.

So, a lot of people ran for the hills, a lot of layoffs, but I was kind of the kind of guy they liked where I was kind of young and hungry and they would promote people quickly and then not have to pay them as much. So that was me. So I ended up pretty quickly working my way up through that organization, ended up being the youngest global partner of Heinz and 3G Capital. And that's when I got exposure to all the 3G guys and Buffett was a part of that deal. And what most people don't realize is that Heinz and 3G Capital experiment was actually working.

We were just a private company and no one knew it. I don't know. It's a whole saga. There was a failed takeover attempt of Unilever, which is pretty comical in hindsight. And then a successful merger using the term very loosely, with Kraft Foods in 2015 and to form what is now known as Kraft Heinz, which is a Fortune 150 company. So, I was boots on the ground, integrating the two companies. It was a lot. Kraft was way bigger than Heinz, like I said, it was pretty obvious to me, it wasn't going to work. It was just too much too soon. And then also we took the company back public, right?

So all of the eyes of Wall Street in 2015 were on us of, is this crazy 3G Capital, Kraft Heinz experiment going to work? Anyone out there who's worked for publicly traded companies, in some instances, it's just a lot about quarterly earnings and Q1 and Q2. When all of Wall Street was looking at us, that was a hyper short-term environment. And, I just, I'm a much more long-term guy, like long-term games. I want to build something of substance and think in terms of decades and not quarters. So I wasn't really having a whole lot of fun anymore. I have a lot of friends there. I wish everyone well and all that stuff.

But I was the first partner in the history of that group ever to walk away. So I walked away, didn't make a dime. And that's when I found the Edwards family. Just as they were getting going in Costco. And it was funny because I had a big fancy executive job at the Fortune 150 company and I'm going to come in and let's grow this chocolate business. And like, it's so funny because if you go from big company to small, like real small, like true entrepreneurship, like you have no appreciation for how much is figured out at a big company. Like Heinz ketchup, like you could, like a house plant could run Heinz ketchup and you'd be down 5%.

And you could be the best operator in the world and you'd be up five. Like it's on rails. People have been doing it for a century. And then you come to the small business and you're like, oh my God, they don't have a price list. Like it's chaos. And like, oh wait, what do you mean we don't have cash to hit payroll? Like problems that you never even would possibly think about at a big company. I was, I learned a lot. I'll put it that way.

[20:49] Chris Hatch: Yeah, I was going to, yeah, I was going to point out. I mean, like, I feel like you were on one end of the spectrum over here and you literally, I mean, you're still in food, so it's not completely unrelated, but you definitely have gone to the other end of the spectrum a hundred percent here. Yeah.

[21:03] Dan Reese: Yes, very overtly, in a way that was maybe a bit of shock, which is good for me though. I learned a bunch and when you're at the small company, I mean, there's no PowerPoint, there's no meetings, there's no board meetings. It's like, we figure it out or we die. Like that's it, that's all there is, right? Which is kind of liberating in a way, like, guys, we've got to get through it, right? So.

[21:30] Chris Hatch: Yeah, so let's go back to this end of the spectrum for just a minute. So I assume in some of that Buffett merger, et cetera, I mean, are you interacting with Warren? Or his people?

[21:41] Dan Reese: Yeah, we chat on Mondays. Just kidding. No, I do not. I do not keep up with Warren. I don't think Warren would know my name. I was in rooms and involved and he was part of that deal and actually did not do very well on that deal to be very honest. But, a lot of the more senior guys at 3G I worked much closer with than Warren. So Warren was there. So I'm not lying, but I would be stretching the truth if I said that I've got Warren on speed dial.

[22:08] Chris Hatch: Yeah, well, 3G is, I mean, obviously an impressive company and huge and has an incredible track record behind it. But, okay, so you go from this, you're working for these extremely large, some of the largest corporations on earth, right? And then you go and you wake up and it's morning one and you're driving over to the, are you still in the movie theater? Is that where the office is?

[22:30] Dan Reese: No, we then had just moved into a 50,000 square foot chocolate manufacturing facility that used to be a printing place. So basically a massive factory that was not yet a factory in a real scrappy little office off to the side. So we were out of the movie theater moving up in the world, but it wasn't exactly glamorous.

[22:47] Chris Hatch: Okay. All right. So you're looking at yourself in the mirror, psyching yourself up that morning and you're saying, here we go. I I'm going to go work for a fourth generation chocolatier, right? Yeah.

[22:59] Dan Reese: Yep, pretty much. And that's where, again, I was going to come in and I was just going to make all the right decisions and we're just going to be like off and running. And, we did make a lot of the right decisions. But I definitely got smacked in the face a bit of just how little was figured out. Right. And even the sales guy they had on at the time was like, wow. We have problems here. It was like, this is crazy. And they had some distribution nationally and it's hard to put that toothpaste back in the tube. So yeah, we did a packaging change, I think in my first 20 days on the job.

So, I got deep into the R&D game, right? Trying to learn about moisture transfer of caramel and pretzels. Like, there was no other choice, right? And it's funny because there's a reason why most people don't hot-deposit caramel on pretzels, like all the folks at Hershey are like, look at these clowns. Like they don't even know what they're doing because the problem is the core product of the entire business was pretzel and caramel. And moisture wants to find equilibrium. Right. So the moisture from the caramel goes into the pretzel and you've got hard caramel and soggy pretzels. Minor detail. So yeah, it took us 37 iterations of that recipe to figure it out.

So, again, just like, this is not what I'm cut out to do and they're like, yep, no one cares, get in the game. And again, I kind of like that. And if I have it my way, I'll never go back to a big company. So the day you need a badge to get in the building, that means it's probably too big for me.

[24:38] Chris Hatch: Yeah, I like that. It's funny. We're not the biggest office in the world. We have like, I think, 52 people here at the moment at our office. But somebody did walk in the other day and inform me we were out of coffee, to which I went, wait, that's right. Got to, we'll get right on that for you. No problem, right? Like, sure.

[24:55] Dan Reese: Yeah, exactly. No, totally. Yeah, I mean, literally, yeah, I think back to my first day, the front desk phone is ringing and I'm like, hello. Yeah, it's pretty funny.

[25:05] Chris Hatch: Yeah, right. Exactly. Yeah. At least coffee is solvable. I can walk or drive over to Whole Foods and we can figure that out in about five minutes. Yeah, that's not going to take too long. You know, it's interesting to me of all the categories out there in retail, it does seem like dessert is one of those categories where I think retail is kind of cyclical anyways by nature, but dessert appears to be one of those categories to me that's even more cyclical than lots of others. And so one of the fascinating parts to me about your concept and what it is you're doing is, is you have been around for so long, right?

And, when I was a young rookie tenant rep broker, and working for landlords representing retail strip centers, I can't tell you how many times I would get a phone call and it was a dentist and it was, hey, I want to open a yogurt shop. We were just in Southern California on vacation and we went to the yogurt shop every day. And this is like circa 2005 to 2015. Just thousands of yogurt shops open in America. But I look at that and I look and compare that to the staying power. What do you think it is that gives you, on the chocolate side and then now as you're working into this Milkshake Factory concept and doing more of that, what do you think it is that's going to give you that staying power, the continued staying power that you already have?

[26:23] Dan Reese: Yeah, I think it's like fundamentals. It's tried and true stuff. Like we are proudly not trendy, right? Like we are probably not going to be on the fastest-growing, year-over-year cover of Franchise Times or whatever. And I'm totally fine with that. Right. And I think yogurt is obviously an easy one where like people have not been eating frozen yogurt for a century. Right. And I think that like, if you do the classics well, right. And I think so many people make the mistake where they confuse trends for volume, right? Like, get into this hot new trend. And you're like, yeah, that is up for X, but it's still 1% of the market or whatever.

So I always advise people in any market: go execute a chicken concept really well, go do pizza really well. Don't do some weird niche, whatever place, right? Like go to where the volume is and then execute really well, be super disciplined. Plant your flag in something and do it, again, like Raising Cane's, I give all the credit to them in the world. They're going to own chicken fingers. You can't get a fish sandwich there. I mean, look at their track record, right? So we have obviously planted our flag on milkshakes, which is a bit of a niche market where you can get a milkshake anywhere, right?

Almost any restaurant, most QSRs have them. I mean, the demand for milkshakes is there, but you come to realize no one has really planted their flag to own milkshakes in the market. Right. So again, that's kind of the classic piece and then all the chocolate piece as well. You know, we're not doing crazy zany stuff on the chocolate and we make our own chocolate. It's barks. It's stuff around the holidays. You know, look at like a Rocky Mountain Chocolate Factory or Kilwins. I give those businesses tons of credit, right? They've been around for half a century, if not longer. Right. And they're probably not the sexiest brand in the world in terms of year on year growth.

And I don't know, maybe they are. But like they've been around. Right. And I think that's so commendable. And that's how we think about this business, all our franchisees, and they're signing, as you know, 10, 20 year leases. So that's the time horizon we think about. It's not about necessarily tomorrow. So that matters too. It's really all about going to where the volume is, planting your flag on somewhere that's not trendy, that has a proven stable long-term demand. But also, we don't want to be a dinosaur. We have the best dairy free shakes on the planet. I've never seen anyone that comes remotely close, right?

So, okay, dairy-free is becoming a trend. Dairy-free wasn't a huge deal 30 years ago. It's becoming a bigger deal now. Anyone that tries our dairy-free shakes is totally blown away. They can't believe they're dairy-free. They can't even tell the difference, right? So, there's things that we're going to innovate with in our business to make sure time doesn't pass us by, but we're not going to chase every little thing. I always think about noise versus substance, right? There's a lot of noise out there specifically in franchising: hottest this, biggest that, fastest-growing this. And we're just trying to build something of substance, right? Like a really rock solid foundation. And then we grow responsibly. That's kind of the game.

[29:28] Chris Hatch: Yeah. So you've got the first stand open and you branch out. You've got the second corporate stand open. At what point in time did you say, let's franchise this concept? Let's go and trust independent operators to carry forth our mission.

[29:44] Dan Reese: Yeah, so the high-level timeline, the mom's retrofitted chocolate shop that turned into Milkshake Factory. That was it up until 2016, technically. We opened PNC in 2016. And that's when it was like, again, the operation was a mess and whatever. The consumer side was like, okay, hey, we're onto something here, right? And that's kind of where I had led a lot of big brands. And I was like, I've never seen a consumer reaction to a brand like that in my whole career. So that was 2016. Then we opened up store number three in 2018. And then we got to store, we got to six stores around Pittsburgh, urban, suburban.

We have a college store at University of Pittsburgh. College kids love milkshakes. That probably will shock no one. So yeah, that store is phenomenally successful. Our little trick is we take Panther Funds. So, people like you will load your son's Panther Funds thinking that he's going to go buy something at the cafeteria. Then he'll spend it at Milkshake Factory. But, so yeah, that's very successful. Then, COVID happened, obviously that was tough on everybody in this industry, in kind of a weird way. It made us better in terms of looking inwards and looking at efficiency and in labor model and all that stuff, got through COVID and then opened up, two more stores around Pittsburgh.

And then we had 10, technically 11, we have a licensed location in the arena where the Pittsburgh Penguins play. We can talk about that if you'd like. So we got to 11 stores in Pittsburgh. And we're not Starbucks. We're not on every street corner. Like that's about the upper limit to what a market like Pittsburgh can have. And then, so that was 2022. And then we were faced with a three-pronged decision. Do you own 10 stores in Pittsburgh? Great business. There is absolutely nothing wrong with that at all. Like that's a fantastic business to own and run. Or do you grow? Like so many of us, myself included, like really believe in it.

And we were like, we have to see what we can do with this thing, right? Again, maybe back to the tortured entrepreneur comment. But then at that point, if you say, we're going to grow outside of Pittsburgh, do you grow via corporate development or do you grow via franchise? And we are not franchise people, right? Like I admittedly was a little dismissive of franchising. I didn't even know what it meant. I thought it meant, yeah, you just go buy a McDonald's and that was it. I didn't even know this whole world existed. And then if you do the economics of corporate development, it can work, but it's a pretty capital-intensive model.

So to grow quickly requires a tremendous amount of capital. And then if you're raising capital, the valuation isn't there, you end up selling the majority of your company to go double your footprint or something. And it kind of starts to feel a little upside down. So we spent most of 2022 educating ourselves on franchising. I'm like, okay, let's not be dismissive. Let's at least just learn. Let's kick the tires. Then what we came to realize was like, wait a minute, we have the perfect business for this. It's super simple. It's super scalable. No one's doing what we're doing. We've built, we've been doing this for a decade.

I always cringe when I see some startup and they're franchising. It's like, no, no, no, you haven't figured anything out yet. Like go figure stuff out and then franchise, because that's what the franchisees are paying for, right? So that's when we kind of realized almost, I don't want to say by accident, but it was never the intent to franchise this business. But we came to realize it was by far the best way to grow it and grow it fairly quickly. We formed our franchise entity in 2023 and started awarding units about a year and a half ago. And yeah, we've been off to a very, good start.

[33:01] Chris Hatch: And franchise store one opened in my backyard, right? In Pleasant Grove, Utah. Yeah.

[33:05] Dan Reese: Yes. That's right. Yeah. Yeah, we love the fine folks of Utah, as the dessert capital of the country. So it's a market we're really excited about. We actually sold out Metro Salt Lake City in our first month. So it was, I got a lot of inquiries about Salt Lake and you blinked and it was gone. So, so yeah, super excited about that whole area. And actually the first franchisee is my old buddy from Kraft Heinz, where he had got bounced around to different corporate jobs. And he kind of wanted to do something on his own. And he went to grad school in Pittsburgh and knew of Milkshake Factory. So it was one of those perfect confluence of variables and timing. And he actually is our first franchisee out in Pleasant Grove.

[33:48] Chris Hatch: Yeah, love that story. Love that part of the story. And it is a huge dessert customer here, right? Based in Utah. Well, so now that you've gone with the franchise model and you're looking to grow and you're doing some growth, how are you handling distribution? Are you making ice cream in Pittsburgh and then are you shipping that out or how does that work?

[34:22] Dan Reese: Yeah, that's the hardest part. We knew, because we are extremely picky about our ingredients. You can't make a world-class, I mean, like any food business, right? Like, wow, why are the milkshakes so good? It's because the ingredients are so good, right? So we're making our own vanillan ice cream in-house. You know, we partnered with the head of the Penn State University Creamery, who's probably the world's foremost ice cream expert. I know people roll their eyes when I say that, it's actually true. He's like the sommelier of ice cream. So we partnered with him for six months to make this vanillan ice cream.

[34:49] Chris Hatch: Hold on, time out. When I hit high school career day, nobody told me I could be a sommelier of ice cream. I feel a little robbed. I just want to point that out. Nobody ever told me I could do that.

[34:57] Dan Reese: Yeah, you missed out, man. You missed out. Well, hey you're still a young guy. Don't give up. You don't give up. I can put you in touch with him if you'd like a little mentorship. But yeah, it is funny when you're with him like any friend that's really into whatever. You give me six vanillan ice creams. I'm like, they're all pretty good. I kind of like this one. And he'll tell you, he'll talk for five minutes on each one. And you're like, wow, I wish I was that sophisticated. So he was, it was a very impressive thing. And then I won't get all the nerdy science, but the ice cream that you get from the grocery store doesn't actually blend that well in a milkshake.

And if you go to your local scoop shop, it also doesn't blend that well in a milkshake, especially when it comes to efficiently. So our vanillan ice cream is world-class and it's world-class on its own, but we don't sell it on its own, right? It's designed to be blended very quickly in milkshakes. So the ice cream obviously is everything. And then our entire menu, we call it the illusion of complexity. Most places are scooping all these different kinds of ice cream and this is how it used to be at the Mom and Pop shop. And now our entire menu is off of the vanillan ice cream.

Right. So most people don't realize that strawberry ice cream, it all starts as vanilla and then you add stuff to it to make it strawberry. So we actually do that in real time on the line when you order a strawberry shake. All of our syrups are family recipes. Our vanilla syrup is jet black because there's so much vanilla bean in it. Our strawberry syrup is more like a puree. So point being we make our own whipped cream in house. I mean, I could keep going. So like, this is not just we're going to go buy off the US Foods product list, right? That's not going to work in our business.

So when you've got custom ingredients and you're scaling nationally and also the cost structure has to work. It's a very, very, very hard problem to solve, especially initially, right? It's chicken and egg. We're going to be big, but we're not. The distributors say, cool, I need cases through my DC. And you say, well, I can give you a couple now, but more later, right? So, we found some great partners to help us with that. And it's not all shipping dairy from Pittsburgh. It's really a kind of a regional dairy model, where you're producing our recipe of ice cream. That's like our most valued IP. And then we partner with these regional dairy vendors to produce it.

And then you bring in some of local dairy, cause there are some different elements of local dairy flavor where like the folks in Texas, like their dairy is a little different than the dairy in Pittsburgh and a little different from the dairy in Utah. And people grew up with that. So there are some regional taste preferences as well that do matter. So it's a little bit of hybrid of regional and national when it comes to distribution.

[37:31] Chris Hatch: Because I just want to point out, Salt Lake is not really that close to Pittsburgh. That's a couple of day truck drive. There's some distance there. So you're actually producing that ice cream. You're manufacturing it closer to Utah with those first stores, and then kind of regionally.

[37:48] Dan Reese: Correct. And then we have a couple of different broadline distributors that are more geographical based. So we're not shipping cups from Pittsburgh out to Salt Lake, right? So there's certain items that can be standardized, right? It's cups, it's straws, it's a lot of the stuff that isn't as proprietary. That's how we can kind of plug into some of those broadliners. And then inevitably there'll be consolidation as we grow and whatnot. But we knew that was going to be the hardest problem to solve when we started this journey and we were right. But I'm really proud of the team though, I will say, because like working for the big food company, like it's just so easy to cut corners.

No one will notice. It'll be fine. No one will notice if you tweak the recipe, it'll be so much cheaper and better. Like, and then you're looking at the P&L or whatever. And we've held firm. It is not negotiable. We will not change our ice cream recipe. We will not use different syrups, et cetera. And you know, our poor VP of operations who's incredible. He's been with us for a decade. I'm like, I know I am ruining your life, but the answer is no. So that's been a big mountain to climb.

[38:50] Chris Hatch: Yeah, what an interesting thing to think about as you scale that national growth. As you look, over, let's just call it, '25 and '26, kind of the next couple of years, how does the country start to shape up? Do you end up with stores that are kind of scattered all throughout the United States? Have you been a little bit more geographically select, like where you're branching out from Pittsburgh and now Utah? What's the market going to look like over the next few years for you?

[39:16] Dan Reese: Yeah, so really, we're trying to be aggressive with growth, but also very responsible, not just blindfolded, chucking darts at the map, right? So we're not selling in California, Oregon, Washington, a lot of the far flung areas, smaller states, it's really big metro areas is where we're focusing. Then where we, so on the West Coast, it's really just Metro Salt Lake, Metro Phoenix, have some momentum around Metro Denver. And then we're building out Texas pretty aggressively. And then the Southeast, the Atlanta, Florida, we're being pretty aggressive, the Carolinas, et cetera. But, lot of the in-between, you have that regional supply chain that really the game is that's where you want to fill in density.

So just because you have a store in Atlanta in a store in Dallas doesn't mean that you can pick the midpoint and you're in Louisiana or wherever that is. That's not how that works. So, and then really just trying to fill in density where we already have it. So, even a big market like Chicago, I've got a lot of people interested. It's not on the table currently, right? But we are being disciplined and making sure that we're filling in density back to my getting cases through the DC conversation and filling density in these areas. So we kind of have clustered up density as well in the Midwest and Northeast, but it's all really around major metros and not.

You know, we're a premium brand. Not the cheapest product out there. You know, we're not Dairy Queen. We're not going to be in every off every exit in America. It's just not where we are. So we try to focus on kind of more affluent kind of Metro type cities, suburbs, et cetera.

[40:58] Chris Hatch: So if you walk into a typical store layout, I assume do you have kind of a counter and is any of your ice cream or toppings on display? And then do you have a few blenders and some back of house? What does it look like? What's the typical size? How does the layout work?

[41:12] Dan Reese: Yeah, so our sweet spot is around 1350 to about 1750 square feet. We actually, I'm actually a franchisee of the company as well. We can talk about that. I was dumb enough to open up a store myself in addition to leading the company in my hometown of Ann Arbor, Michigan. So I really put myself through the paces there. Talk about a learning curve. We could put a pin in that and come back to that in a second. So my store is a little bigger, but the it's kind of that pretty standard kind of QSR type size. You would like to have some seating 10, 20 seats but this is not a place where people come and hang out on their laptop for two hours.

People will come in, hang out, they might sit, they might... a milkshake is a pretty transient product. You're not going to spill it in your car with your kids eating an ice cream cone or whatever, right? Like you can carry a milkshake out. So I think some of our warmer markets, we can get away with some smaller square footage. I always love telling our warmer market franchisees, like the dream is if you have a place for your customers, to drink their shake that you're not paying for, that's the holy grail, right? Some of these outdoor mall areas with community areas or seating or whatever, the consumer doesn't care if I'm paying for it or the community is, right?

Here in Michigan, it's eight degrees and snowing sideways, like my store is a little bigger. So that's kind of rough layout. And then when you come in, we make a lot of our chocolate in-house. So we have a chocolate machine. It kind of looks like almost a fountain of sorts. There's some theater aspect where employees are making chocolate right in front of you as you are looking at the milkshake menu. So, everyone comes in to Milkshake Factory for milkshake. Most people don't even know that we have chocolate, at least not initially. So we aggressively sample it. And then you get to watch people making chocolate and we have a whole chocolate bar display of all that chocolate that we're making.

And that's kind of right at the counter that you stand at when you're looking at the menu. And then you work through your order. I'm very proud of our efficiency and we can have a line out the door and we can make you a world-class milkshake in 90 seconds. So that's really the magic. I mean, you can go to your local fancy ice cream parlor. They can probably make you a pretty good shake, but the line will come to a screeching halt, right? And the person in front of you ordered a shake. Everyone groans. Man, it's going to be six minutes. And that doesn't work in our business.

Right. So, and then you can go to the Chick-fil-A drive-through and get an okay milkshake and they'll do it quick. I mean, they're the best at that. Right. So. We're trying to kind of hit the intersection of both of those.

[43:40] Chris Hatch: Yeah, 90 seconds, that's moving. That's cooking. Yeah, for sure. What is it that so I'm a prospective franchisee. You know, I've got you know, let's just say we're in central Florida or something out on a site tour and I'm showing you a half dozen options in the greater Orlando market. What helps you narrow down to figure out what location is going to be the best for the next Milkshake Factory?

[44:03] Dan Reese: Yeah, I mean, it varies a bit. Obviously, I mean, the simplest way to put it is it's where the action is for that community, right? So a couple of big things we look for, obviously street visibility, I mean, as everyone else does, for us especially, because our name works super hard for us, right? You don't need to explain what Milkshake Factory is. Like here in Ann Arbor, Michigan, no one's ever heard of it. And they'll come in and they're like, is this what I think it is? And it's like, it's exactly what you think it is, right? So, we get our sign up. The second you sign that lease, get that sign up.

And like the demand and the buzz that grows like Milkshake Factory, man, that sounds awesome. Then you go to the website and like people are so pumped when we open, like it's almost torturous. They'll look at our sign for four months or whatever it is. So, street visibility is great, right. And of course access points matter and things like that. We also love restaurant co-tenancy, both full service and quick service. We always joke our PNC location that we were talking about, we're right across the street from Capital Grille. We're friends with the folks at Capital Grille. They don't sell any dessert. So everyone comes across the street to us.

Right. So we're part planned: "Hey kids, get in the car, we're going to Milkshake Factory." Then we're part impulse. Right. You come out of a restaurant with your friends and you see it and you're like, that sounds kind of cool. We'll stop in. Right. Great with college campuses. One of our best locations in Pittsburgh is right by the Pittsburgh Penguins practice facility, a big hockey rink. So all the big hockey tournaments come in where the moms and dads are there all weekend in between games. They've got loads of time to kill. We're about a hundred yards away from that. We have a location that's right by a movie theater.

So yeah, high schools are great. So yeah, just kind of wherever there's a lot of activity and that'll mean different things in different communities, but buried in some corner of some strip mall that's way off the main drag, like probably not a winning formula for us. And I always get nervous where... I'm a believer in reasonably efficient markets when it comes to real estate pricing. I know you know more about this than I do, but like I always get nervous when a franchisee comes to me and say, found this killer spot for 18 bucks a foot. What a deal. And I'm like, I don't know.

It's like when you find the house that's $150K and you're like, okay, there's something here. Right. So, we prefer to try to pay up for good real estate. I think it's the best investment you can make. I mean, within reason, right. And if you can keep the square footage reasonably tight. You can make the P&L work. So yeah, a lot of things to think about.

[46:28] Chris Hatch: Yeah, I'm a big believer in the concept of your location as your advertising. So the better the location, the better advertising. You mentioned earlier the Pittsburgh Penguins store that's in the arena, right where the hockey team plays. So does that arena house any other teams or just the hockey team?

[46:48] Dan Reese: Nope, just the Penguins. I mean, they'll have concerts and the NCAA tournament and whatever else, it's really the 41 games of Pittsburgh Penguins is the big draw there.

[46:57] Chris Hatch: So 41 games, so it's activated what, maybe 100 nights a year?

[47:01] Dan Reese: Probably about that. Maybe a hair more, Not every concert or event does well. We'll do well at Disney on Ice and things like that. But like the Metallica concert, like everyone's drinking beer and not milkshakes. So and again, it's a licensed location. So it's really a marketing play for us. We don't own it and we don't really make money on it either. So that's licensed by Aramark and it's also using their employees. So it's an interesting challenge. And, you think about a hockey game. It's really three increments of 20 minutes. It's 20 minutes before the game, first intermission and second intermission. And that's it. And that was like our trial by fire for our operation.

We sell over 700 milkshakes in effectively 60 minutes. And what's interesting with that is we started I'm like, we have this big, beautiful menu with all this variation and it was so hard. How do we pare it down to five? Then you're like, man, five shakes in that environment is actually too complex. Like, all right, let's get it to four. And then sales went up. Wait, let's get it down to three. Sales went up. We sell one shake now. One shake. Like basically the tighter we made the menu, it was all about throughput. Consumers didn't care about choice. It was just all about throughput where, if you're there with your family and it's a 200 person line to get a milkshake at first intermission, you're like, Hey, sorry, bud can't the line's too long.

Right. So the game there was all about throughput and the tighter we got that operation in the tight menu with one shake enabled that. So that was an interesting little case study that we learned for that particular execution.

[48:33] Chris Hatch: What's the one shake?

[48:35] Dan Reese: It's called the Rusty Shake right now. Outside of Pittsburgh, it's the Cookie Brownie Fudge. It was originally the Jake Shake with Jake Guentzel, quick other story on that: one of our prior investors was a co-owner of the Pittsburgh Steelers. He wanted to do a sports sponsorship and I worked with all the sports teams with Heinz and the Penguins ran a pretty good operation on the business side. So we did a partnership with the Penguins pretty costly and I'm trying to figure out how do we actually make money with this thing. And we're a small business, we're not Coors Light, we're not Lexus, right? It's kind of a funny playing field to be on as a small little milkshake shop.

So there was a guy named Jake Guentzel who was a rookie at the time in 2018. His name rhymed with shake and we could afford him. Those are the two boxes he checked. So we signed him with really scrappy little deal.

[49:23] Chris Hatch: There you go.

[49:26] Dan Reese: I'm humiliated to tell you the numbers, so I'm not going to. And then the first time I met him I'm not like a big guy. I'm six one maybe. And I'm like, I'm much bigger than Jake. And I'm like, oh my gosh, this guy's going to die on his first shift. Like, and he looked like he was 16 years old. And I was like, I have made such a mistake. So funny. And then he gets out onto the ice and you're like, oh my God, he just scored and he just scored again and again. And he turned into an NHL all-star 40-goal scorer. And then the Jake Shake turned into this huge cult like a marketer's dream, right?

Like the fans just ran with it go to Penguin's Twitter anytime Jake score, we're all talking about Milkshake Factory. Cause it was half off Jake Shakes anytime he scored. So it really funny memes around, the Milkshake Factory is never going to financially recover from this and whatever else. So, and then when Jake got traded to the Carolina Hurricanes last spring, we had an amazing five year run with Jake. It was the final Jake Shake day. So half off Jake Shakes in Pittsburgh. It was a rainy day in early March. It was 38 degrees and gray. And we set a company sales record for that day.

The entire city came out. It almost felt like a funeral to like pay their respects to Jake and the Jake shake. I mean, we had a guy take two Jake shakes to his grandma's grave. I mean, people are crying. I mean, it was like, actually being serious about that. So it was like kind of a cool thing. I mean, we're just selling milkshakes, but for that little corner of people's lives, whether it was Jake or that ritual of coming to the Milkshake Factory was actually pretty meaningful. So we had a lot of fun with it. Then Jake got traded. So that was a bummer. And then we repurposed it to the Rusty Shake, which is named after Bryan Rust, which was actually Jake's best friend on the team.

So we had a lot of fun with, Jake is out and now Bryan Rust is in. And now when Bryan Rust scores, you get half off Rusty Shake. Having fun with that.

[51:13] Chris Hatch: Did you change the shake, or is it the exact same shake?

[51:17] Dan Reese: Same shake. And the key there is the shake is so, it's really, it's a cookie brownie fudge shake if you go to Pleasant Grove. So it's again, kind of right down the fairway, you can't do a polarizing shake for an execution like that. So it was kind of one of those if it ain't broke type of things. So yeah, we changed the topper out to have Bryan's number instead of Jake and that was about it.

[51:38] Chris Hatch: You know, my role with retailers is building the building, but it is always fascinating watching some of these menus and especially it feels like over the last 20 years, some of these retailers have just expanded and expanded. And then to watch the success that you're seeing with some of these retailers that are narrowing it, like the Raising Cane's of the world, like the In-N-Out of the world, and it's just, it is such a narrow focus. But then they put out tremendous volume and you're like, well, there you go. I mean, there must be something to the simplicity.

[52:10] Dan Reese: Totally. And I think that's where, back to my "chase volume, not trends". Okay. raising Cane's is selling mainly chicken fingers and fries. Like, I don't know the category data on that, but it's not small. Right. So that's where some of these more niche concepts, even if they're trendy and again, some trends stick around, but you got to be a little careful with some of that stuff. Right. Never confuse trends with volume, I always say. And I have so much respect for people that have the discipline. And their business is strong enough to stay disciplined. Dairy Queen was Dairy Queen for ages, and then eventually they started selling burgers.

And again, I'm sure it works for them, and it was maybe the right thing to do for their business. I'm not saying it wasn't. But sometimes that growth becomes somewhat insatiable, it can lead you down a path that you're almost forced to stray outside the norm. I think I saw Taco Bell just launch chicken nuggets. But again, that's where the volume is. So I'm sure it's going to work for them. Hats off, right? To each their own.

[53:10] Chris Hatch: Okay, so you're scaling this chocolate business, because that's still going. You're refining the milkshake business every day, right? Because that's an ongoing living breathing organism. You created the franchise system, you're selling franchisees, you're qualifying franchisees, you're qualifying real estate that the franchisees are coming up with. And then in the middle of all that, you decided what? I don't have enough going on in my life, I would like to also franchise this concept?

[53:38] Dan Reese: Yeah, something like that. One minor point of clarification, we exited the chocolate business in 2021, so that was off of our plates. And that was kind of like back to that decision point of, hey, we exited, do we want to keep the band together and do Milkshake Factory? Or do we want to kind of go our separate ways? And, we decided to kind of keep the band together. So yeah, that is now off our plates, thankfully. Otherwise God help us all. But, the big thing for me was, again, getting back to the whole substance conversation, like I've had the big fancy executive jobs and I can make a killer deck and whatever else, but like I've never really been in it from soup to nuts to finding a location and negotiating a lease and building it out and negotiating the GC and all the fun that comes along with that and hiring a team and figuring out how to manage high schoolers.

So again, I was trying to just come to this from a place of substance of like, so I could look you in the eye, the franchisee or even the candidate. And we're very honest, like we're not salesy people, cards on the table, right? Like this is not passive, this is not easy. And if you're looking for passive, go buy an index fund, right? So like, I think franchisors that sell passive income are predatory. I'll spare you that whole rant. But I think me going through that process, I learned so much, right? And some very humbling moments too. I'm like I've done all this in my career and here I am on Saturday with my kids breaking down boxes at the dumpster because someone's got to do it, right?

So. Sometimes it humbles you because again, back to the entrepreneurship story on your coffee story, like, I guess someone's got to unpack these boxes, and there's no one else here. So it doesn't matter what the pay grade is or what the background is. You're like, I guess we're unpacking boxes girls. Here we are. So I learned so much through that process and you know, it's going well. It's been awesome to see the community embrace it. And we've got 4.9 stars on Google. So like the concept travels. So that's been rewarding. But then even more so, I can just speak with such clarity and substance with candidates and franchisees.

Like if you're a franchisee and let's just say, you just signed a lease, right? So, it's getting real. You're just about to bid out GCs and I'm like, here's what the next six months are going to look like for you, right? And I can set those expectations of there's going to be a couple of pinch points and this is very hard and you're going to feel very stressed. So like just FYI on that, right? Because I think people get into trouble. When reality does not meet expectations. And sometimes people's expectation is that it's smooth sailing and maybe you've had a development project that was totally smooth sailing the whole way.

I think that's probably a rarity in this world. So just trying to prepare people for that. And you can ask me as detailed a question as you want about this business and I can give you an honest answer and I'm proud of that.

[56:24] Chris Hatch: Yeah, I think we're still waiting for that easy development deal to be honest with you.

[56:27] Dan Reese: Okay, if you figure it out, let me know.

[56:33] Chris Hatch: No, that's been really good. Been a real pleasure having you on the pod today. The one last thing I wanted to part with today is I typically ask each of our guests, tell us about a big, terrible mistake you made in business somewhere along in your career. You've had a career with more variety than a lot of our guests. You know, it's just been a different background. Tell us about something that you did wrong and then what you learned from the mistake.

[57:03] Dan Reese: Yeah, I mean, gosh, we could do a whole podcast on things Dan has screwed up. And if any entrepreneur tells you that they don't have an answer to that question, they're lying to you. So, I mean, Again, I have a ton, but one comes to mind in the chocolate company we were growing, we were in Albertsons and Target and, Kroger and big retailers. Then, Costco did really well, but like Walmart was kind of like the white whale. You're like, man, we got to be in Walmart. So, I came from Heinz Ketchup. I used to have like a pretty big seat at the table negotiating with senior people at Walmart with the clout of Heinz ketchup behind me.

Very different dynamic at the startup chocolate company than at Heinz ketchup. So, eventually weaseled our way into Walmart. And of course we got the worst placement in the world. Buried on the bottom. And Walmart wants you to jump through hoops on custom this, custom that. The pricing's horrific. We're barely making any money. And I know this will shock people, but if you're a startup company with two little facings in the bottom corner of a chocolate set at Walmart with no support whatsoever, probably not going to go great. So we were not successful in Walmart with that chocolate business because come to find out the buyer had all these bonuses to drive Hershey and Mars.

And I'm like, how did I get into a fight with Hershey at Walmart with like one little package? I mean, it's so dumb. So in hindsight back to kind of like that discipline growth of like maybe we should have stuck with what we knew as opposed to, that shiny object of Walmart was a fairly expensive and failed mistake that I will happily own.

[58:36] Chris Hatch: I like it. I think that's the theme for the pod today is keep it simple, stay in your lane, focus up, right? And that's probably those years of operational experience shining through.

[58:46] Dan Reese: Yeah, no, for sure. And that's where a lot of times I call it the shiny object, right? You see it and sometimes especially entrepreneurs and you sometimes can't help yourself. But you got to ask yourself some hard questions and, be super disciplined. And if you can pick the right thing and really be focused on that and just out execute. I think there's a lot of success to be had.

[59:10] Chris Hatch: Well, Dan, thank you for joining me on the podcast today.

[59:12] Dan Reese: Yeah, thanks again for having me. It was a blast.

[59:15] Chris Hatch: And for all those of you listening, look up Milkshake Factory. Go find one. Go try it out. Go try the Rusty. You've got to try that.

[59:23] Dan Reese: Yep, only in Pittsburgh. So if you're in Pittsburgh, try the Rusty. Anywhere else, we've got lots of other products.

[59:28] Chris Hatch: And if you've enjoyed this podcast, please give us a five star review and please share it on your favorite platform. Thanks for listening.