Russ Smith, Retired Real Estate Leader at Wendy's

Guest: Russ Smith, retired after 26 years in real estate at Wendy's

Host: Chris Hatch

Listen on Spotify

Summary

Chris Hatch sits down with Russ Smith, a longtime mentor who spent 26 years in real estate with Wendy's before retiring. Russ talks about getting his start as a broker at Grubb & Ellis after a BYU class with Ken Woolley, his time at Mrs. Fields Cookies and First Security Bank, and joining Wendy's in 1997 after the company bought out its Utah franchisee. He describes the respect-driven culture that kept him there, growing from Wasatch Front corporate deals to overseeing growth across the West, the boom years of 240 to 280 openings a year, and the post-recession shift to a lean, franchise-focused team. He and Chris also cover site selection, grading every competitor's bathroom across Boise, why the human vision still beats any model, staying optimistic through lost deals, and a hard lesson about always being forthright.

Key Takeaways

• Real estate is a sharing community. Friendships with peers, brokers and even competitors make you better, as long as you respect proprietary limits.

• Confidence comes with time and hard work. Learn by following the people around you, the way a young hunter learns from family.

• Be over-prepared on site rides. Knowing an obscure fact like a train schedule can win over a tough executive.

• Lead the way Wendy's best operators did: be honest and direct about problems, then end with something that sends people away inspired.

• Do the science, but drive every neighborhood your customers will come from, and know where they shop and how competitors and your own stores interact.

• Walk your competitors' stores. Grading every burger competitor's bathroom in Boise helped decide which Wendy's to remodel first.

• Site models still come down to finding your marker stores. Technology makes it faster, but a person with the right vision makes the call.

• You'll lose deals. Don't fall in love with them, stay a natural optimist and move on to the next win.

• Always be forthright. Short-term success is never worth being less than honest with the people you work with.

Transcript

[01:45] Chris Hatch: Well, with that soft intro, I want to introduce Russ Smith, who had a storied career with Wendy's and has now been retired for a few years. We appreciate you coming on the Dirt Dog Pod today.

[01:58] Russ Smith: I'm glad to be here. It's kind of fun.

[02:01] Chris Hatch: Yeah. Pretty cool. You're a really fun guest for me to have on, because you individually have taught me a lot. First off, you've known me for almost my entire life, really, right?

[02:13] Russ Smith: Yeah, probably. Definitely since you were a high school kid.

[02:19] Chris Hatch: I've never told you, but I've always looked at you as one of my mentors, one of the people who taught me how to do things. So I really appreciate you coming on and sharing some of your knowledge today.

[02:34] Russ Smith: My pleasure. And I would never have thought of myself as a mentor of yours either. In fact, you've taught me a lot. But you make me think... when I was contemplating coming on your program, without really trying to, I started thinking about all of the people in my career I'd say were definitely mentors. "I learned a lot from that person, and here's the thing I picked up," even if it was a little thing. I think that's one of the more rewarding and interesting things: you're in a community of people who like to share. You get a group of real estate people in the same room, or at a bar or whatever, and pretty soon you're all sharing awesome war stories about the business and having a lot of fun with it. It's really an interesting business in that, as hard as it is, there's an amazing amount of sharing and an amazing amount of friendship. Guys like Crosby and Todd and Kath and Clark, people I've known for so long, are dear friends in addition to being great colleagues. That's one of the best things about the career.

We talked about this whole long career with Wendy's. It's not super common for people to stay with one retail brand for as long as I did, which was 26 years. So I think it probably merits some discussion. When I went to work for Wendy's, of course, it had a reputation as a quality company. You have Dave Thomas as the founder, whose guiding principles include things like "do the right thing" and "give back." And of course, we've changed the lingo to sound a little nicer; we say "profit means growth." Dave's original words were "profit is not a dirty word." So with all of the nice stuff, you still have to make a profit, too. I knew some of that, but I only really started understanding it as I got into the company and started seeing how people were treated, especially people who needed to be called to order or, in some cases, asked to leave. It was always, always done with respect. I remember, over time, some voices being raised here or there, but almost never from the higher echelons of the company. Very kind, good people. And that carried through. The whole attitude tends to be, "We've got a lot of really hard work to do, and we're going to do it with respect for each other."

[05:53] Chris Hatch: A lot to dive into there. Let's start with the camaraderie piece. What's interesting is that, of all the various retail segments, the burger business is competitive.

[06:07] Russ Smith: Super competitive.

[06:08] Chris Hatch: So it's interesting to hear you say that about the sharing. You referenced some team members and some brokers you'd worked with for a long time. But what's also been true, at least that I've found with you, is that you've been pretty friendly with the competitors.

[06:35] Russ Smith: Yeah, I think that's been true. You do see a bit of... I don't know if it's camaraderie or some kind of connection. Most of us have many friends on the competitors' side. And frequently over the course of a career, not so much in my case, people move from one to the other. Many of the good friends I have at Wendy's previously worked at McDonald's. And one of my really good friends from my early days at Wendy's is working for McDonald's now. It just kind of goes that way. And it's not just Wendy's and McDonald's. A former boss of mine and a good buddy, [Piet Gentini], is now CDO at Chipotle, so we'll have occasional conversations and stuff like that.

Maintaining those friendships and sharing what you can, without violating proprietary rules, is very helpful to both sides. You can help somebody without breaking, or even edging toward breaking, the rules. It's just good to have friends who will help you and whom you can help in various things. That's always been a big plus. The other thing that's been a big benefit to me is that, because I haven't worked at other companies, I don't have those perspectives. So having friends at some of these other companies has been really good, because I can ask questions I otherwise wouldn't have any idea about: how different companies do different things. For me, it's been especially valuable to have friends across the board, be it Chick-fil-A, Sonic, McDonald's. I'm just running through the names in my head, thinking of a few people I've been friends with.

[08:56] Chris Hatch: Have you found the camaraderie we're talking about has changed over time, from when you originally entered the commercial real estate business to now? Or has it been consistent from your standpoint?

[09:12] Russ Smith: That's a really good question. I don't know about speaking for the industry as a whole, but what I can say is this: the more confident I became... and it's been a lot of years, so yes, I've grown in confidence, and I've got a funny story about that in a second... my anxiety about getting the deal, or being the winner, or making sure I beat that guy out, whatever, went down. And as it went down, the thing that went up was my confidence and my ability to be relaxed talking about things with people who would be my competitors, without the feeling of having to beat them. Yes, I want to beat McDonald's. There's no question about the competition element. But the edge has come off quite a bit the more experience I've gotten, and I think that mainly comes from confidence. You do it this long, and if you work hard at it, you will be good. You get good at it.

Getting an education is very important; I'm not knocking that, I did it myself. But it reminds me of that old story of a Native American dad teaching his son: "To learn how to be an effective hunter, here's all the stuff you've got to learn how to do. And the way you're going to learn it is by following your uncles and your dad and your mom and your aunts. You'll figure it all out by following their example." I think real estate is a lot like that. Being around your associates is really how you get in on knowing stuff and getting smart about it.

The funny story was this. Years ago, we were sitting in a meeting where we were introducing one of our cool programs at Wendy's, a program where we do all of the real estate for the franchisee. We go get them the site, take care of it all, even sign the lease and build it for them, and then it's turnkey. I know a lot of companies do that anyway, but Wendy's did not, so it was a new program for us. I remember our CDO was up giving a speech to a room filled with a hundred or so franchisees and a bunch of other real estate people. And she said, "Well, how many of you consider yourselves real estate experts? Come on, by show of hands." She was going to make a point, right? That none of them did. And I was the only guy in the room who raised my hand, with other real estate guys in the room. It's like, "Well, I am an expert. It is what I do for a living." When I first got started in the business, I'm not so sure I would have had the confidence. I would have just sat there like everybody else. So that comes with paying attention and following the lead of others, learning from others, mostly. Learning from your experience is good and bad, because not all experiences are good, that's for sure. You've got to keep plugging, keep at it, because a bad experience doesn't mean that's the way it's always going to be.

[13:02] Chris Hatch: 26 years with Wendy's would have put you starting in the mid-'90s?

[13:06] Russ Smith: Late '90s, yeah.

[13:07] Chris Hatch: Late '90s, okay. And what did you do prior to that?

[13:12] Russ Smith: I worked for a number of years for Mrs. Fields Cookies, which was mostly mall and street deals, mostly mall. Before that, I had a run with a developer, the [Crowe Brothers] development company out of Kansas City; some of the old guys will remember them. And I worked for First Security Bank for a short period of time, which I didn't particularly love, but that short time at the bank taught me so much about how deals get done, the intricacy of funding and how difficult that is. It was very worthwhile. Like I said, I didn't stay there too long, but it was really educational for me.

And believe it or not, right out of business school, my first job was as a raw, good old dirt dog, just doing deals. I couldn't find what I wanted to do in the real estate business. I got the idea that I wanted to do real estate in a real estate class taught by Ken Woolley. A lot of people know Ken, including you.

[14:17] Chris Hatch: Oh, yes.

[14:17] Russ Smith: I remember sitting in that class thinking, "I want to do something. I want to build a building like that architectural delight in Houston." The idea started coming together, and I didn't even know what to say. It was like, "How do I become a real estate person?" So, long story short, my first job was as a real estate broker for Grubb & Ellis, when they were new in Utah, doing investment real estate deals. That's how I got my start.

[14:53] Chris Hatch: Great background. And I love the dirt dog start. It's fantastic.

[14:57] Russ Smith: And I hope it's helped the brokers I've worked with, in the sense that I have a real aversion to letting them get the shaft in any way. I've never wanted to see anybody get shortchanged. That might be partly because I was there.

[15:18] Chris Hatch: I was going to say, when I used to broker with you, in my experience you always went above and beyond, which isn't always the case, right? So I think that's a good perspective to have. It's a good way to start.

[15:38] Russ Smith: Yeah, I think it was.

[15:41] Chris Hatch: That Ken Woolley class had to be amazing.

[15:44] Russ Smith: It was super cool. Maybe not everyone knows Ken, but he's done so many cool things. He was an adjunct professor of some kind in the BYU graduate school program. I remember him talking about doing affordable housing in Magna, Utah. There was this whole conversation about affordable housing: why aren't you building the luxury homes, where you can make incrementally more money? And it's like, "No, I'm building affordable housing and I'm selling it like crazy. It's just turning over." His philosophy was that not only was he doing a good thing for the community, but he was turning them over so fast that he said, "I'm making plenty of money." And I think Taggart was involved with him at that time too, who's a Wendy's franchisee, along with Ken.

But I think the most memorable thing about that class was a friend of his who came in, who'd done a lot of industrial development in Houston. He didn't talk a lot about the industrial development, though. He talked about development generally in the city of Houston, which is one of the coolest cities architecturally in the country. A lot of people don't know that, but when you actually dig into it and study it, it has some of the coolest buildings. I was just captivated. It was like, "Gosh, maybe I should have been an architect." But by the end of that term, it was more like, "No, you should be in real estate." It was all about, "I've got to figure out a way to be in real estate."

[17:40] Chris Hatch: Okay, so you bounce around a couple of different concepts, and then it's the late '90s. At that point it was Phil [Arlt], right? The Utah franchisee.

[17:53] Russ Smith: Yeah.

[17:54] Chris Hatch: He was the Utah Wendy's franchisee. And then somewhere in there, corporate said, "We need to establish this outpost in Utah, and we need to hire a real estate person here."

[18:06] Russ Smith: Exactly what happened. Phil was bought out in late '96, and I came on in early '97, I think. And he had some monster sales volumes.

[18:17] Chris Hatch: Like the Sugar House unit, the downtown Salt Lake City unit, right?

[18:21] Russ Smith: Monster volumes. Just astronomical, very successful. I never knew Phil. I did go to his funeral, as part of the company's support for Phil and his family. But his daughter worked for me for a number of years when we maintained a company presence and had an office in Salt Lake, and she was great. So by extension, I'm sure Phil was an awesome guy, and he did a fantastic job with Wendy's. The one closest to the office here was put in by Phil and had massive volume from the beginning, and Sugar House, and 4th South and 5th East, and some of the others that are still there and still cranking out really good volumes. What the company saw was a population that could easily support at least twice as many Wendy's restaurants. So they saw an opportunity, decided to try to buy Phil out, and they did. That's where I got my start with Wendy's: the goal of doubling the size of the market.

[19:37] Chris Hatch: And when you looked at the country back then, headquarters was obviously in Columbus. Was there a regional office in Denver or Phoenix or somewhere?

[19:50] Russ Smith: We had a divisional office in Denver and a regional office in Phoenix. I don't remember exactly when I came on, but I think the division headquarters at that time was in Denver, and then we had a regional headquarters in Phoenix. That was when Wendy's was divided into three or four super regions. There's been a lot of evolution since then. But we had a senior vice president and divisional presidents. The divisional president was out of Denver, and the senior VP was out of Phoenix. And this is an interesting segue into how we did some site selection. Those two individuals were part of every site ride we did. Then of course my boss, who we called the development director, which I became later, and then the local operators. It was a clown car full of really smart people crammed into a Suburban to go see sites we'd been working our guts out on for months. And you know how that is. You work your fingers to the bone, and then in 15 seconds it can go right down the drain. That can be a real challenge.

The one thing I learned most from that, and this is a credit to the senior vice president over us at the time: people considered him a pretty tough guy, but for some reason I really got in good with him. I think it was because of a site where there was a train track. It was down on New Bingham Highway, west of Bangerter, on 9000 South or so. My boss said, "You should know everything you can about this. Like, how often does a train come by? Because that could impair traffic." And I found out it was a once-a-day train. It comes from someplace out west into Murray and comes back late at night. Not a big deal, but I knew it. And sure enough, we're driving, and the senior vice president says, real casual-like, "So what's the train schedule for this track?" Boom, I had it for him right there on the spot. I think that won him over, because it was a pretty esoteric piece of data.

[22:23] Chris Hatch: That's pretty good.

[22:25] Russ Smith: But it's that thing of being super prepared. And obviously you're always trying for the best possible sites you can get, which is a whole different topic, because Wendy's is not Chipotle and Wendy's isn't Chick-fil-A. We're paying the same rents but not doing the same volumes. One of the biggest things we've got to do at Wendy's is increase volumes, keep pushing volumes, because the real estate market is going to reward whoever's going to pay, right?

[22:57] Chris Hatch: So you start in the remote outpost, with a region and a division office pretty close by, in terms of the West. When did you start to notice that culture you just referred to, and where do you think it came from?

[23:14] Russ Smith: I started noticing it in the first six months, observing how people interacted with each other. A very good friend of mine, [Jim Bistini], was at that time a multi-unit operator. I don't remember what we called it, but basically a district manager, a six- or seven-unit manager. His office was across from mine, and I remember listening to him have conversations with his GMs. Sometimes he would kind of get after them. It was pretty blunt, but blunt in an honest way, not in a condemning way, not in a punishing way. And he would always circle back by the end of the conversation with some kind of empowering suggestion, so they'd hang up feeling like, "I'm going to go get this. This is great," when they'd started the conversation with, "There are some problems here we've got to fix." A lot of managers would have called the guy up, read him the riot act and said, "You've got to quit screwing up this or that, or you're going to be gone." There are so many ways people can handle that.

And Jim wasn't the only one. I watched these guys operate, and that's how they acted. I loved that it wasn't just leveling with people, telling them the truth and giving them the facts, not letting them think everything was great when it wasn't. It was that they would somehow finish with something really encouraging and send people away inspired instead of beaten down. I noticed that very early on at Wendy's, and I saw it over and over again. It wasn't always perfect, and not everybody I interacted with had it down. But most of the people who lasted more than two or three years had it down.

[25:30] Chris Hatch: What was it like working with Dave?

[25:33] Russ Smith: I didn't know Dave. I met him. It was really interesting. I was on a big call, I think it was all of North America and international, when my great boss Abigail was in charge and had us all in one place. I think it was my 20th or 25th anniversary, and when it's that far along, they'll usually say, "Say a few words, Russ, and tell us a story about Dave," or whatever. The only story I could really tell about Dave, which I think is fascinating, is that the humble, down-to-earth, kind of goofy guy on TV was really Dave. The only difference between the guy on TV and the real Dave was that the real Dave's grammar was worse.

[26:27] Chris Hatch: Really?

[26:28] Russ Smith: Yeah. He was just a real down-home Midwest kid. Nothing flashy or fancy, just a straight-up good guy. And I really think that's where it started: with Dave. The values he cared about stayed with the company, and people continued to care about those values.

[26:49] Chris Hatch: So you start in the late '90s, you're in this infectious culture, and corporate has just bought the Utah stores back and is running them corporately. You get to work. Are you doing corporate growth primarily, or franchise growth?

[27:08] Russ Smith: I started out on corporate growth only, and my entire territory was the Wasatch Front, just doing corporate deals.

[27:17] Chris Hatch: Just inside the state.

[27:19] Russ Smith: Just inside the state. And as that happened, I became acquainted with franchisees who were either based here or had restaurants nearby, like [Walker Oil], which started out with all those small-town Wendy's combined with gas stations throughout Utah. I got to know all those kinds of franchisees, out of Idaho and places like that: Jim Taggart and others nearby, and in Wyoming, [Kenny Drake] and guys like that. That went well, and after a few years I got to the stage where I was thinking, "Okay, I've done the proverbial thing and worked myself out of a job. What's going to happen next? I need to start thinking about things." At about the same time, things had gone well, so I was fortunate to be given other markets for company growth and much more expanded franchise opportunities. We just continued to go like mad, as fast as we could, building as many as we could.

There were some really great years before 2008, 2009. At one point, I think we had 35 or more real estate directors in the country, and we were cranking out somewhere in the neighborhood of 240 to 280 new restaurants a year.

[28:54] Chris Hatch: Boy, that's a ton of growth.

[28:56] Russ Smith: It's a ton. And then we hit the recession, and we went to, I think, six or eight total people in real estate. I can't remember exactly.

[29:06] Chris Hatch: Coast to coast?

[29:08] Russ Smith: Yes. That's lease administration, that's everybody, all in. My boss and I were the only two real estate people in the West at all, and mostly we were helping franchisees with deals they still had in the works. I think we maybe got two or three company deals done, maybe in Dallas. And then we started gradually rebuilding. Ever since then, it's been a much leaner organization and much more franchise-focused. Because with Emil Brolick, we brought in the idea that we needed to rebrand. We were old and tired-looking, and we had to find a way to get that done. The only way to really do that logically was to get franchisees to do it, which worked out great. And that was another great phase. I'm sorry, this is turning into talking too much about me, but it's been so fun. It was another great phase because I got to know some really amazing, cool people who became new franchisees. I liked the old guys a lot too, of course, but it was super fun to see some of these big players come in, who really understood the restaurant business, and buy large numbers of Wendy's restaurants, and to see some of the challenges that come with that.

[30:39] Chris Hatch: Cruising through a room full of franchisees is still one of the most entertaining things I do in my career. It's so hard to explain to people outside the industry, but it's literally a room full of Napoleons. Everybody is captain of their own ship and crew. And it's fascinating, because think about it: each individual store has, what, 30 to 40 employees?

[31:08] Russ Smith: About 15 to 40. Hopefully closer to 40; you're right.

[31:12] Chris Hatch: For sure. So you start adding up the numbers, and once you hit 10 units, that's 250 to 400 humans you're responsible for. Plus, here in the West, each of them has like 2.4 people per household. All of a sudden you're responsible for the livelihood of a thousand people. And it's kind of entertaining, some of the emotions that invokes in some of those folks.

[31:44] Russ Smith: It's an amazing type of person. I came to respect the community a tremendous amount, and several of the individuals involved even more. Just such solid, good people. You can tell they care about the thousands of people they're responsible for. They care about the quality of the workplace. They care about everything going on, making sure their people are cared for. That's something to be said. And I think the culture helps with that too. The Wendy's culture generally attracted people with high morals.

[32:22] Chris Hatch: One of the things you kind of breezed over there is that the real estate department shrank down to nine people.

[32:30] Russ Smith: I think it's about that now, something like that.

[32:34] Chris Hatch: About that now. And one of the interesting things to watch is that corporate will come up with a great idea. Maybe it's, "Hey, look, we're going to do spicy nuggets for X," or "a Son of Baconator is going to cost Y." Then they're trying to implement that, and there are really talented operational people doing that. But at the end of the day, in the role you played for so long, you were kind of the sounding board for the franchisee, right? You were more or less the interface between corporate and them.

[33:17] Russ Smith: A lot of that, yeah. And that was another interesting experience I had, again with my boss, Abigail. We were talking about operations, and we all know you can have a pretty significant impact on volume by who you have running the restaurant. It's a known fact. And I said something offhand like, "Well, I don't know that much about operations." She put up her finger and said, "Russ, yes, you do. You've been in Wendy's restaurants for the last two decades. You know a lot about Wendy's operations." That's a good thing to remember when you're out there working. You know a lot about what's going on, and you can be a sounding board. The final decisions about what marketing decides to do, or how they implement this or that policy, may not belong to the real estate people. But we do have impact, and people in the real estate business should always remember that.

It goes back to one of my early mentors. Bob Moore told me one day, when I was a raw rookie, probably in my first month: "Russ, people want to hear from you. People want you to call them." And you're right, they do. That goes for marketing and operations and everything like that, too. Done in the right way, they want to hear your opinion. I think that's true.

[34:56] Chris Hatch: It's such a fun part of our business, the face-to-face nature.

[35:01] Russ Smith: It is. It's what makes it. It's the most rewarding part. And there'll be people who say to you, "Hey, your associates aren't your friends. Don't talk to me about my boat; let's focus on the business deal." You're missing out on a big part of life if you don't live with the people you're working with and incorporate them into your life, because it makes it a lot more rewarding and a lot more fun. You definitely want to have fun.

[35:36] Chris Hatch: Well, especially if you're going to stick at it for 26 years with one brand.

[35:43] Russ Smith: That's right.

[35:44] Chris Hatch: Why Wendy's?

[35:45] Russ Smith: I think for me, on this whole question of why I stayed, I probably alluded to it as I went along. One was that I had really great people to work with: my peers, my bosses and, later, in a management role, the people who worked for me. It was always a positive experience. It was always uplifting. That doesn't mean every day was "hip, hip, hooray, everything's so fun." There were obviously some rough times. And frankly, there were a dozen times throughout those 26 years when I did keep my eye open for something else. But I always kept coming back, and the big reason I always stuck with Wendy's was the internal culture and the people I was with. I'd get to a point of, "I don't really agree with somebody on this. But you know what? Let me give it a little time, see if I can figure it out, talk to them about it again, work through it and see how it goes." And usually with that attitude, anything that wasn't so great, I figured out a way to work through and be happy about. So I think it was really the culture.

And then there was always enough change going on. If you don't like what's happening now, just wait. That was always true at Wendy's. There was enough change that, other than the internal culture, it felt like you were at a different company in different years, based partly on leadership and stuff like that. And that was a good thing. It was like, "Great, let's see what's around the next corner." Those are probably the main things. And in the later years, it became especially rewarding, because I had such a great group of friends. I wouldn't have wanted to leave them, just on that basis.

[37:58] Chris Hatch: The burger space is crowded, especially compared to some of the others. Take Chinese food, for example, where you have Panda and maybe a couple of competitors. In burgers, you've got like 30, 40, 50 retailers all doing round hamburgers, and then you have Wendy's doing square hamburgers. Any idea why they've stuck with square hamburgers all these years?

[38:24] Russ Smith: Well, I think you just described it. It was Dave's idea: "Don't cut corners." It's like, okay. I think you nailed it: it's different, so let's keep it different. But the thing I don't think Wendy's has emphasized enough is fresh, never frozen. You've got to go to the gourmet guys now to get that. The big players can't do it. And frankly, it's hard. It's harder on operators to deal with a fresh product. But in my mind it's certainly worth it, because there's a difference.

[39:08] Chris Hatch: It's interesting. I have celiac, I don't know if you know this. I got celiac eight years ago. And a lucky number of type 1 diabetics like myself, about a third of us, get both. I'm the lucky winner: I've got type 1 diabetes, and I got celiac eight years ago. When I removed the bun from my fast food options, and from food options in general, what was interesting is how quickly you can taste the quality of the beef on a hamburger. With the bun, it's very difficult to tell whether you have a really good quality piece of beef or not. It's a remarkable difference when you go no bun.

[39:58] Russ Smith: It is a big difference. The other guys do some things really well, better than Wendy's. But they don't win on hamburger. That's a big difference.

[40:14] Chris Hatch: So do you know how many stores you opened in your 26 years with Wendy's? Do you have any idea of the count on that?

[40:23] Russ Smith: A few years ago, I added them up, because I was feeling disgruntled and thought I might look for another job, and I figured somebody was going to ask me that. I think I did around 100 by my own hands, and touched hundreds over time, especially in the last years at Wendy's, when I was seeing everything we were doing in the West. That's when it would have gotten into the hundreds. And I think that's where the experience factor really kicked in. I've talked to other people with that kind of experience, too. You do all the scientific things; you can't skip them. You can't just say, "My gut is going to be right."

[41:09] Chris Hatch: This is as you're dialing in on a new site.

[41:12] Russ Smith: Yeah. But my gut is usually right. Once you do it for long enough, you know what the right sites are. And if a site has a couple of demerits, you can figure out whether they're demerits that would hurt the store long-term, or something that can be overcome, and how. Once you zero in with all of your science, and there's some pretty amazing science we've been able to evolve over the last 25 years, there's still an art to it that real estate professionals need to hone and shape, because it's still really important. You can't skip it.

[41:58] Chris Hatch: So you've got the sales forecasting system going, the science you're referring to. When you wheel up on a site in a new trade area you don't totally know, though, what are you doing in your head, or physically, to determine what makes one site better than the next?

[42:22] Russ Smith: Great question. One thing I can say is that most people can tell the difference between an A-plus hard corner and a third-off-the-corner site with tricky access, one being good and one not so good. But obviously, you want to go a lot further than that. One of the things we always did was drive the neighborhoods where our customers are. Depending on the site, that may take a long time. You want to see every neighborhood that's going to be drawn to your new restaurant. See what these people are doing. Make sure you know where they go grocery shopping and get their daily needs. Make sure you understand where the Costco is and whether it's going to help you or hurt you. All of those patterns. With the mobility data you can buy now, you can see some of that scientifically, but unless you drive it, I don't think you can really feel it.

So it's more than just testing all the ins and outs of a site with access and visibility and all the obvious things. It's also really understanding the neighborhood and the customer you're going to be drawing on, and how it plays with the competitors, and with competing with yourself, because that can make a big difference. Sometimes you think in terms of a distance or a population base, when in fact it's really more about which street it's on. Details like that, you want to be able to drive and really understand. That's why driving a trade area continues to be valuable, even with all the cool stuff we can do now.

[44:11] Chris Hatch: One of the exercises you and I did, which I thought was really fascinating and which helped me a lot in my career to understand site selection, one store versus the next, and how a store might comp against its peers: our friends Jim and Ken bought the Boise market, and you and I spent, I think, four days in a minivan. Does that sound right?

[44:34] Russ Smith: It was three or four.

[44:36] Chris Hatch: I remember I was the youngest guy, so I volunteered to take the back. That seemed appropriate, right? Because there were five of us. And the idea was that there were a lot of older-model units, and they were trying to decide which ones to bring up to the new model.

[45:02] Russ Smith: Image activation. That was the program.

[45:04] Chris Hatch: Which was a pretty healthy spend, right?

[45:07] Russ Smith: The franchisees had to invest quite a bit of money. So what we were trying to figure out was which ones were the smartest places to spend the money first.

[45:17] Chris Hatch: What I can't believe to this day is that you and I went into every single bathroom: not just every Wendy's bathroom, but every Burger King bathroom, every Jack in the Box bathroom, every Sonic bathroom, every McDonald's bathroom. We went into every single bathroom of every burger competitor in Boise over four days.

[45:34] Russ Smith: Yeah, we did.

[45:35] Chris Hatch: And gave each one a grade on a checklist with multiple grades, right? Just a wild experience. And one of the fun facts that lives rent-free in our heads, that other people maybe don't know about us, is that we know where the cleanest bathrooms in Boise are.

[45:52] Russ Smith: I can say that about pretty good chunks of Denver, Vegas, Salt Lake, Dallas, Phoenix and Seattle, because we were doing that all across the region. It was more fun to do as a group, for sure, because you get back in the car and make a game out of it. That's actually a really good point to bring up, because you should always be doing that. You've got to have a really good feel for what you're up against, not just to decide where to put your remodel, but whether you should put in a new unit. You need to know what's happening with your competitors.

[46:34] Chris Hatch: I've shared that story with so many people who are new to the business, young in the business, people trying to learn and grow. "Hey, look, I'm marketing this space," or "I represent this tenant," or "I have this building and I'm thinking about retenanting it." Great. What does the competitive landscape look like? There's a really easy answer: get in your car, drive there and go look at every one of your competitors.

[47:02] Russ Smith: Yeah, that's it. No one's providing that for you that I know of. You can look at volumes, I guess, but volumes are tricky.

[47:11] Chris Hatch: Over that 35-year career span, you've seen a ton of technological advancement, and you spent a lot of that time in the fast food business. I don't know if anything's ever going to replace that part of it, right? You still have to touch and feel.

[47:28] Russ Smith: I don't think they will. And I can go back to the early days at the cookie company to tell you one of the reasons why. Randy Fields was a software development genius; that's where his genius was. The whole concept of POS, getting data directly from the stores into the corporate office and being able to parse through it quickly. We were looking at stuff like that. And one of the things we launched into was some of the early multiple regression analyses. We were looking at all kinds of data points, and they compared them to successful, unsuccessful and middling stores, all those kinds of things, and created the model. The standard thing we're all very familiar with. That was in 1994, and it's not that different today. It's still pretty much looking for your markers. My great broker friends Brian [Glazier] and Lindsey [Schluter] down in Dallas... Brian always used to call it that: "Find my marker stores." Which ones are most like the one we're looking at? "This site is most like A, B, C and D." Most of our modeling is based on that type of thing. There have been experiments with all kinds of other variables, obviously, like the general manager and things like that. But when you look at the science behind it, it's just faster and cooler now. It's not any different.

So what is the long-range consistent factor, going back to the beginning of time? It's one person being able to see the vision. The correct vision, I might add, not a hallucination, but the correct vision of what this could be. I don't think that ever goes away. With all the new stuff coming in and all the cool things we do... which, by the way, I'm a huge fan of. I'm a big map nerd. I love all the electronic stuff. I hated the old days of rubbing on arrows and all that stuff on your paper maps. I'm a big fan of everything we're doing nowadays. It's modern, but it doesn't take over the job. It just can't. People are always going to need real estate experts like yourselves to help them make decisions. And I think the future for the young people coming up is every bit as bright as when we were rubbing labels on paper maps, if not brighter. Because frankly, decisions are getting harder in some ways. How many more hamburger competitors can you have, right? Maybe you identified something with the Chinese sector there. Maybe we should think of a new fast food Chinese idea.

[50:46] Chris Hatch: Just start on day one and go head to head against Andrew Cherng. Good luck.

[50:51] Russ Smith: Good luck. Right.

[50:52] Chris Hatch: Crazy. It is funny, though, when you think about some of those spaces and how crowded they've been. But that is one of the less crowded ones. So, if you could hop in a time machine and talk to late-'80s, early-'90s Russ, early in your career, what piece of wisdom or two would you impart to young CRE professional Russ?

[52:28] Russ Smith: Well, I think one of the main things to keep in mind... and I'll give a shout-out to my boy Crosby on this one, because he said, "You should bring up football." He said, "I wish I had when I was talking to Chris."

[52:48] Chris Hatch: By the way, Crosby is going to owe you five bucks and a Snickers here, because you've mentioned his name. I'm going on record that he owes you lunch next time he sees you.

[53:00] Russ Smith: I think that's true. He's already paid for so many things. I probably still owe him, for all kinds of reasons. But anyway, it's like... I started out with that Ohio State football hat on. You're going to lose to Michigan, unfortunately, several years in a row if you're Ohio State, but you can't let that be the end of it. You're going to lose some in the real estate business; it's a given. I don't know a single person who has won them all. And there'll be deals you let yourself fall in love with, which is another thing I'd suggest: don't fall in love with deals. But sometimes you just can't help it. And then they die. Something bad happens. It doesn't get approved, or somebody messes up the deal somehow, maybe even maliciously. Things can happen. Take it like Ohio State losing to Michigan. You've got to bounce back, look forward to the next thing and continue to be what all real estate people are, which is ridiculous optimists. "It's going to be okay. You're going to figure it out. You're going to make it."

[54:25] Being a natural optimist is one of the prerequisites. So that's something to keep in mind: don't ever let it defeat you. Just use it as an opportunity to move on to the next win. That's my football reference. You're going to lose some, but you keep going, because the wins will come if you stick with it. That's probably one of the biggest things, and I had people give me that advice. My career evolved. I didn't stay in brokerage like some of my very successful friends did at that time. Some of them stayed in it their whole career and retired happy, never having done anything but work at a brokerage, which is fantastic. For me, other things came along. I had an opportunity to go work for that developer, and I thought that was a great idea. I was developing in my mind the idea of being a developer; I wanted to be the next [Crowe Brothers] or whatever. That evolved over time too. Finally I got to the point where I found myself being an expert in retail, and that's where I really found my home. And I didn't get there in year one. That took some time. So whatever it is you're doing, do it with optimism, keep plowing forward, keep your goals, but assume you can be flexible. Things usually work out.

[55:55] Chris Hatch: You've always been one of the most optimistic guys I know. I love that trait about you.

[56:01] Russ Smith: Sometimes people wonder, but it is true. I'm very optimistic.

[56:05] Chris Hatch: You and I had the pleasure of dealing with a couple of franchisees who always seemed to pick the seventh or eighth pad off the corner because they could buy it. I remember multiple times during that period when I'd present a site, and you and I both knew it was the site. And of course our client didn't like it, because they couldn't buy it, or it didn't fit their personal preference. And I remember you were always so optimistic, and I was just like, "We've spent so much time already."

[56:40] Russ Smith: It's hard. Especially for you, because you'd spent even more time than I had. I know exactly what you're talking about. Tough.

[56:49] Chris Hatch: Good advice. Now tell us about something you did wrong. I think a lot of people don't like to normalize being wrong, but tell us something you did wrong and what you learned from it.

[57:07] Russ Smith: There are a few things, but this one is actually a little hard to admit. It was at the bank, which was more or less a short, 18-month learning session for me. I never considered it a career. One of the other loan officers had brought in a client who was working on a particular type of product. He and I had a conversation and kind of agreed that he'd be the product specialist for that particular product, and I'd be the guy for other types of products. We formed a loose association on that basis. And I was desperate for deals. Like I said, I didn't enjoy it very much, so needless to say, I wasn't very good at it. Yet I wanted to have success. A guy came to me who was in that other loan officer's product, and I worked him a little longer than was appropriate, based on the conversation I'd had with my buddy. I wouldn't say I was outright deceptive or tried to lie to him or trick him, but I was less than forthcoming. And here I am, almost 40 years later, regretting that.

Always be honest. Always be forthright. Sometimes honest and forthright means you just keep your mouth shut, because that's what's needed. But don't ever let yourself think your short-term success can supersede complete honesty with anyone. By the keep-your-mouth-shut part, I mean, for instance, if the paper is interviewing you and wants you to say salacious things about a developer or a city or something like that, don't fall for that trick. You're allowed not to speak sometimes. But I'm talking about relationships. When my buddy called me out on it, it was a real lesson. From that day forward, it was: I'm never going to even come close to being deceptive, never even approach the idea of not being forthright with the people I'm working with. And I tell you what, that's probably served me better than anything. Sometimes I have to say things I don't really want to share, but I know it's right to. That's been a real payoff. It always works out. It's always better. It was kind of a hard pill to swallow at the time, but I sure made it work for me. I sure made it something I learned from.

[58:58] Chris Hatch: What a great share. Thank you for that. Well, Russ, you've been a big part of my life for my entire life. I appreciate you. Thank you for coming on the Dirt Dog Pod and sharing some great stories with us.

[59:01] Russ Smith: Thank you. And I think the Dirt Dog Pod is a really cool thing. Keep it going.

[59:02] Chris Hatch: Absolutely. Thanks.