Michel Falcon has an extensive career as an entrepreneur and expertise in company culture, customer experience, and employee performance. As for how he entered the restaurant business? A three-month consulting gig turned into a six-month gig, which turned into a partnership at a hospitality company in Toronto. In 2019, Falcon looked to open his own space, pulling from his Peruvian heritage. He began the process of opening what would become Brasa Peruvian Kitchen. And while the pandemic delayed opening quite a bit, it gave Falcon time to think hard about the kind of restaurant he wanted to create. He joined us on the Pre-Shift Podcast to tell us about how he got started, and the importance of core values, and how he operationalizes them at Brasa.
"Well, it's everything. There's a lot of platitudes that are said in businesses, not just in restaurants, all industries, is that we're people-focused. And I'll politely say, show me your P&L and I'll tell you what matters to you most. What do you reserve your budgets for - to invest in growth in people? During the pandemic, before we opened our first location in July 2021, throughout 2020, it gave me time to pause and think of what type of company we're trying to build, and it was... This is not an exaggeration. Our core values and our mission statement took me one year to write, and we landed on this, or I landed on this, our mission statement word for word or verbatim, and I expect all of our team members to be able to recite it word for word, is to build a company that the world needs more of. One where, everyday, people are empowered to make great money, achieve career growth and help close the income inequality gap.
The fast casual restaurant space, I don't like saying it, but some brands and entrepreneurs just see individuals as a disposable resource when really, they are the oxygen that's being pumped into the business and the brand. So it really just starts from having a mission that people feel like they can be a part of. And I get it sounds like a platitude. It sounds like it's just PR, fluffy stuff, but it's true and honest and it's the foundation of our company. From there, we are quite strict with performance. We give a lot. We pay way more than what the government tells us we have to pay with minimum wage. In Canada, our minimum wage is $15.65. We start at $20 and language really matters with our culture and putting people first.
So we don't call it a minimum wage. Those two words are, they shouldn't be in the same sentence together. We start with starting income. Language matters when you're impacting your company culture, and it just starts from there. And we have some great case studies. Natalie and Vanessa, they joined us as part-time team members earning $20 an hour. Now in less than a year, they're now earning $70,000 in salaried roles. So, think of the mission, right? To take everyday people, help them achieve career growth, make more money and so forth, and that's why people stay. Our employee turnover last year was only 17% - one seven - in an industry that has 100 to 200% year-over-year turnover. So I'm confident in our approach."
Falcon stresses the importance of taking your time to write your core values. And while most don't have the luxury of time that the pandemic afforded him, it is still wise to take as much time as you can to get it right.
"It's like, all right, Forbes magazine told me I need core values. All right, this, this, all right, we're done, right? A 30-minute exercise, and that's the foundation of your company. Look, did it need to take a year? Probably not. I just had a lot of time to sit and think, right? The whole world had a long time to sit and think. So the exact process was this - it involved zero technology. It involved a pen and paper, and I allowed myself to kind of daydream and be like, what really matters to me? To me, because as the founder and CEO, I have to build something that I, too, feel comfortable in being the shepherd or the leader of. So what really mattered to me. And I would just scribble notes down, pages and pages of notes, and then I would just start refining it, refining it, refining it.
I put it away for two weeks, then came back to it. Do these things still matter to me? And then I worked with a copywriter to help refine the language that we used. I did look for other companies for inspiration, companies I admire. What are their core values? I don't recommend ripping off and duplicating. For example, I think 75% of companies have operational excellence as one of their core values, which is fine. We want to be operationally sound. That's why I worked with a copywriter saying, "Hey, that matters to me, but is there another set of words that we can pound our chest and rally behind?" So that's what it was like. And it was like... And forgive me, this is the fluffy part perhaps, but it was in nature. I needed to go and get away from the sounds and traffic of Toronto, from my office, from my laptop, and I would just walk and write notes and just say, 'What really matters to you, Michel? Not just now what's going to... What do you know about yourself that's going to matter to you 10 years from now?'"
During that refinement process, a lot of time is spent honing in on your values, deciding what makes the cut, and making even tougher choices about what doesn't make the cut. But just because something isn't explicitly written as a core value doesn't make it any less important to your business.
"I heard Howard Schultz say this on a podcast with Alec Baldwin one time: only the paranoid survive. And it was one of those things that you listen to a podcast and you're like, 'Wait, what did he just say? Play that back.' And it's true. I don't know if this is the healthiest thing for me, but I am so concerned every day of what our employees feel like, or their sentiment toward the workplace. I'm so concerned that our customers are going to come back, and in a month, or a year or three years, say 'Their food's not as good as it used to be'. So rather than drive that paranoia, I build systems and processes in place to ensure we keep our fingers on the pulse of the sentiment toward the brand from everybody, employees, suppliers, our investors, our customers, and anybody that interacts with the brand."
Brasa's core values are apparent in all facets of the business - in the employee handbook, on the walls of their restaurants, in the break room. But they make their first appearance in the application and hiring process.
"Well, think about your values as a person. You have them, whether you have them written on your wall or not. You know what kind of moves you as an individual? So in practice, visualization is important. So this is in our new team member handbooks. This is on the walls of each of our retail stores in non-guest facing areas. That's for us in our team rooms because we want our team members to not be able to escape them. These are what drive the company, and my expectation is everybody knows what they are. And of course, including myself and our senior leadership team, we hire and off-board according to these values. So with the hiring part, during our company culture interview, which is the first step of the process, we will ask two questions per core value that we have, and we're trying to probe whether this individual will live within those values.
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Hiring is a guess at the end of the day, you're trying to make the best guess possible, but what you can't sacrifice, and you need to have such strong integrity around, are the values of who you welcome into your workplace. Very similar to...I spoke to Laura Grant, she's our People Operations Manager, and I said, 'You're similar to the bouncer at a nightclub. You're protecting the party. We can't just let anybody in here. We have to make sure that they're aligned with the values of our company. Or they're going to be contributors to it, not take away from it.' From there, in our weekly and monthly performance reviews, we have to bring the core values to the table and coach people according to whether they've been living within them or not. And then we point to them. So for example, let's say I misstep or I do something that is off-putting to somebody on our team. They too can point to our core value and say, 'Hey, Michel, when you did this, that went against this core value.'
So you really have to connect the dots in how that impacts the performance of the company or the performance of the individual. Aside from that, I missed a step. In our job descriptions, we ask candidates (and people looked at me like I had three heads when I said I was doing this), we ask candidates to watch 30 minutes of a video before they even apply. So there are links, hyperlinks within our job description that share, 'What is this company culture about? What are the values of the company?' And I'm in the videos, and within the longest video that we have, it's approximately 20 minutes, we're just talking about the values. And I quite literally say, 'If this does not sound like a workplace that you would be excited about, please don't apply.' So we're acting like it's almost repellent to some people, but for the people that get excited about it, they're eager to fill out the application, attend the interviews and so forth."
Once an employee is hired, retention is already prioritized during the onboarding process, which sets the tone for the company culture.
"It really starts with onboarding. And I break down onboarding as three phases. The first is the technical part. So what is your emergency contact number? How are we going to pay you? Kind of the administrative part of it. The second is the educational part. We're going to teach you how to do your job, all right? Do your role within the company. But the third part, and this is something that I developed in 2016 and I'm still using it, and quite literally thousands of companies have used this interview question to improve their onboarding, Subway, McDonald's, like big, big brands hired me to speak at their conference and I told them this and they've been using it for great success and I'm going to role play with you. So you got to do this with me.
Pretend I'm interviewing you. You haven't been hired yet. And that will lead to the last part of the onboarding experience, which is the emotional part. So let's say you sat down with an interview with me or somebody on my team. One of the interview questions that we ask is, 'What is an indulgence that you can't live without that costs less than $20?' An indulgence you can't live without. So I'll lead, right? For me, if pepperoni pizza ceases to exist...there would be a big issue in my life. So that's an indulgence I can't live without, right? So how would you answer that?"
I mean. probably good coffee.
"So that's not enough. Let me dig deeper. Do you drink dark roast? Medium roast type of roast?"
Typically, go for the darker roast.
"Dark roast. Me too. What region of the world do you like to get your coffee from?"
South America, usually.
"Okay, great. So off we continue with the interview process, but our People Operations Manager is making note of your answer. You probably don't know why we asked you that. It's kind of a weird question. And off we go. Probably don't even think about it again. You're hired. You show up to day one, right? Day one, somebody on our team is there before you are. How often do we hire somebody, and they show up and nobody was expecting them? The company's disorganized. How are you going to welcome somebody like that? Imagine hosting a party and not being ready to receive people.
That's a bad party. That's a bad experience. People aren't going to want to come back to your party. People aren't going to spread word of mouth about your party, but this is yet something that we do to our employees and expect them to be engaged in high performers. So our team members will show up on time to receive you and then bring you into our training facility. And then you sit down and in front of you are your workbooks, but then also this gift bag with a handwritten card from me that says, 'Thank you for joining our team. We're very fortunate to have you. Thank you for joining us.' And a really hard, nice message because language matters, right? So thank you for joining us.
And then there is your South American... Your bag of South American dark roast coffee. Now, why do we do that? Okay, so look on the surface, it's like, 'Oh, that's nice.' You might go home and your spouse or your friend might say, 'Hey, where'd you get that?' Perhaps, 'Oh, this company gave it to me.' That's awesome. You're also like, 'Oh, that's why you asked me that interview question.' But here's where the rubber meets the road.
I am going to ask you to deliver experiences to our guests that they've never seen before. Shame on me if I don't do it to you first so that you know what that looks and feels like. How did that make you feel? Now, go do that for our guests, right? How often have we asked for a personalized customer experience? Personalize the customer experience. Imagine if I just gave you light roast coffee from whichever region. That's not personalized. Notice how I didn't just stop at coffee. I dug deeper and deeper and deeper because now I just showed you what personalization meant. Here's the last part of it. Remember, I've done all this for $20 only. So it's not about big budgets, it's about thought and care.
I just did something to you that you've never seen before in the workplace. You're about to go learn how to do your role. In my world, it's like knife skills and how to make our dressings and so forth. I need your engagement to be very high soon because that means knowledge retention will be very high. So you become a higher-performing team member right away, all because I cared to do something that was better than the minimum for 20 bucks. I wrote this in my book, and I speak about it on stage and look, it's still working. I'm not a proponent of doing things, I don't like doing things for longer than a year, but I'm like, 'I can't turn the faucet off on this thing. It still works.' Until the entire world reads my book, and everybody knows (which is never going to happen) what that question is about, then I'll stop. But until then, I'll keep pounding that drum."
Now, the answers aren't always as straightforward with things like hard-to-find candy or an incident where a choice word omission led to an embarrassing gift.
"Do you remember Nerds?"
The little candy?
"Yeah, we had to buy those on eBay. We didn't know where to get them. I was like, I thought it was a joke. I thought this person was like a plant and they knew this question and they were trying to really disrupt my life. Nerds blue ones too.
Well, when's the last time you bought Nerds, right? I was like seven, about 30 years ago. I didn't even know they still manufactured them. But here's the worst one I've heard. And this was shame on us. If you're going to do this, you have to ask the question correctly. I had a manager ask one time, 'What is something you can't live without that costs less than $20?' They forgot the word indulgence. So I walk into this training room to say hi to everybody on their first day. And I see this woman, you could barely see her because she was in front of a 24 pack of toilet paper. So I'm looking around, everybody has their nice things, but this one manager asked the question incorrectly, and I apologized profusely. And then I had a conversation with the manager saying, 'You got to ask the question right because this is weird'."
With the tone set, staff retention continues beyond onboarding with Brasa's core promise to employees being a fair and living wage.
"You just set the bar really high. You got to continue to do things like this along the way. And it could be as simple as this. Our entire company is on Slack, even part-time team members, all the way to myself and just acknowledging individuals that have done great work, whether it's a great review or whatever it might be. It's that constant attention to making sure that individuals who are often forgotten in this industry, and it's regrettable that I have to say it, individuals that are often stepped on, exploited even. I'll tell you, I will never start a company that pays minimum wage."
Now, of course, that's easier said than done, but Falcon knew what he wanted to do and was able to build his restaurant business model to support it from the very beginning.
"I grew up in a household, me and my sister, my mom, and my dad in Vancouver. My parents are the best human beings. They're angelic. They're the salt of the earth. And we grew up where finances weren't great, and I saw the stress that it caused. I don't want to be a reason that people are stressed out financially, just because I've seen it, and it's not a great way to live your life. So I don't want to be the reason somebody can't sleep that night who has a hard time paying their bills. So it's a conscience thing. My fiance said one time, 'Things would be a lot easier for you if you didn't have a conscience.' I was like, 'I know. I know, but I'm very thankful I was raised the way that I was.' Any leadership that I may have, I can directly relate to my mom and my dad and how they raised me.
But the second part I'll tell you is, it pays to pay more generally. And this isn't just something that I don't have data with. In 2020, I read a book that I will, in 10 years from now, I will say this book fundament- there was a paradigm shift for me. It's called No Rules Rules. There are two co-authors, one of which is Reed Hastings, the co-founder of Netflix, and I'm forgetting the professor's name right now, but No Rules Rules is the book. And they talked about this lesson called Talent Density in Netflix. Essentially, it's pay people more, have less people. And I said, 'Wow, I wonder if this would work within fast casual restaurants.' And it does. We are paying top of market without collecting tips from our customers. That's a whole different podcast if you want to have me back on.
And our labor percentage is anywhere between 15 and 17%. And that is not without straining our team. I've always told our management team, don't celebrate low labor. If your team is tired, you're going to lose them. The guest experience will be poor. Do not celebrate low labor. One of our stores right now is producing 33% net profit, not EBITDA, net profit. Where the industry standard, the bullseye is 20%, and we're paying more robust benefits. I was told by our benefit provider that we have more robust benefits than Starbucks, learning and development opportunities. So everything on paper looks like this person's not making money. We are, because it pays to pay more.
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Now, what you said, I will preface this. We are a new brand. I had a blank canvas. One of the things that people neglect to do is, typically when they set their menu pricing, what they'll do is, 'Okay, what is food cost? What is the market charge? What's the price elasticity of this product? What's my margin? There's the price to the customer.' They forget to include the most important part. 'What do I want to pay my people?' That's got to be the first thing.
So what I did during the pandemic, remember I had tons of time to think, I said, 'I'm going to start with this wage. What is food cost? What is packaging? What is the market going to allow me to charge? Where's my margin? And that's the price.' So I get it. For incumbent brands, you can't just go and increase your wages by 20, 25%. That model would be quite challenging. So I am very thankful that the pandemic was a blessing and a curse. It's a blessing because I'm going to look back and say, 'Wow, I'm happy that I created this model when I could think clearly and have a blank canvas'."
And with that high wage comes high performance and high retention for Brasa's business. Now, four locations strong.
"People like their wage. They like their wage, they like who they work with. So with us, look, I will be the first to tell you. We've had some people leave and say, in other words, 'It's really hard to work here', not because we're rude or anything, because talent density only works if each person is equal to a person and a half. Whereas in some companies, you can just come in and do the bare minimum and move slowly. No, we're akin to a championship winning sports team. I like to compare us to the Cirque du Soleil. That's actually the best example because with the Cirque du Soleil, if one person decides not to bring their A game, the whole show is ruined, right? And that's exactly 12:30 lunchtime for us. If you don't want to bring your A game, well, you're going to mess our throughput rate, mess up our throughput rate that day.
But also, what I love about the comparison to the Cirque du Soleil is there's no LeBron James of Cirque du Soleil. Everybody's nameless. Everybody comes to work and gets the job done. That's why I love the comparison. Often, it's like, 'We're like a family'. Families are dysfunctional. We retain Johnny because he's literally our family member, even though you can't fire a family member. So I don't love that comparison. I grew up playing sports in my life, so I do like that example. But the Cirque du Soleil is the example that I really like. But going back to your question, we pay people well. They're surrounded by individuals who are extremely kind and who are very diligent and hardworking because it sucks when you go to work and you're like, 'Oh, great, I have to work with Joe. Joe doesn't move very fast. I mean I'm going to have to work just as hard, or I'm going to have to work even harder.'
Back on the kindness thing, if you ever go to Peru, most people come back saying, the food's phenomenal. Everybody's nice there. That's actually one of the filters in how we recruit. We literally ask in the typeform in the application, 'Has anybody ever called you kind before?' People that say no probably aren't going to get an interview because kindness really matters to me. It's hospitable and it's an element of hospitality. And that's what we're trying to do is, how do you take the five-star Nobu guest experience and bring it into fast casual? It's as simple as greeting a customer and saying, 'Thank you for choosing us today. Welcome to Peru. How's your day going?' Just little language like that. It's actually phenomenal how much language really matters in company cultures and performance.
This doesn't happen, but 'Next! Next customer!' that's not happening anymore. Or 'What can I get you?' That's like, sorry for coming into your restaurant and trying to order food because I think this is what I'm supposed to do here. Can I get a little bit of gratitude? Are you happy? I hammer this home to the team. Every single customer, we have to be so gracious. We are so fortunate that even one person cares about what we're doing here. And if we have more and more of them, that gives us more money to be able to give you higher wages. So if you're down for higher wages, be a part of the company that's growing, I need you to do your part, right?
So the retention piece. If I told you this, the thing that has not occupied my time is recruitment and retention. It's the least of my worries today. However, only the paranoid survive. So I still concern myself with it every single day because I'm paranoid of what Zufisha thinks or Paola thinks of our workplace. Because as soon as I stop, as soon as I lose the integrity of what we're trying to do for our people, that's the day our business will start crumbling."
Falcon has also made leaps when it comes to wage transparency, making the bold move to publish wages of all the roles at the company. From himself to entry-level and everywhere in between, with their permission and anonymity, of course.
"It's something I've quite literally wanted to do since 2009. Well, what took you so long? I wasn't the CEO of a company until then, until Brasa. To where I could do whatever the heck I wanted without any encumbrances, without any business partners saying, 'No, no, blah, blah.' Saying I'm doing it. So here's why. I want to build a company that I would have wanted to be a part of as an employee. If we're going to call ourselves transparent organizations...you'll read it everywhere, companies saying 'We're very transparent. Just not about this though. And if you talk about wages, you're fired.' All right. That's pretty bizarre that you're not letting us talk about something that quite literally helps us make a decision on whether we are going to work here. You're not going to let us talk about the thing that secures our livelihood.
And then I looked at sports teams. If me and you were on a professional sports team, I would know how much you earned. It's merit-based. This person scores 50 goals a season. They're probably worth more to the organization than the individual that bounces between the minor leagues and professionals, right? That's just fair. I also wanted this to be motivational. One of our team members who earns $21 an hour is like, 'Wow, my manager earns $70,000. I would like that one day.' It was met with so much resistance from people outside of our organization, mostly like my peers saying, 'Good luck.'
But some of them said, 'But let us know how it goes because maybe I'll do it if it doesn't blow up in your face.' And part of it too, it's a recruitment tool as well. We're doing things differently. 'Wow, this company is interesting. This is radical thinking.' If I want our team members all throughout the organization to do things that are radical, to improve the workplace, improve the guest experience, I need to lead by example. We got a lot of PR from it, which is a positive outcome. It's not the main reason I did it, but I knew that if we want to be known as a company that puts people first, we gotta be willing to do things that support that. We had some cynics, you can go on our Instagram post where we announced it online, and there's some cynical people there, just a few.
I think one person said, 'Yeah, the CEO makes $0 in salary, but he's going to get a $5 million bonus check at the end of the year.' But like, hey, if I'm getting that, somebody please tell me where I collect that check. Please. Because I didn't know this. The majority of people who commented, reached out to me were very supportive.
I think we acquired more customers because of it also. Because I genuinely believe that customers are attracted to companies that have a conscience. And there's been no internal conflict because the document not only shares the person's name, what store they work at, when did they join us, what's their role; the most important column on this document is the team member journey. What have they done in their past or with the company that has earned them the wage or salary that they have? So for example, let's say you joined us and you got promoted from X to Y. An individual would be able to read this document and say, 'Oh, that's why he got promoted.' That's fair. He got certified in this, or he got five positive Google reviews in a month. So we document that because we need to connect the dots for people.
And we had some team members that work in our stores see what our brand marketing manager earns and said, 'Hey, maybe there's a role for me in this company in marketing one day.' So to date, there's been nothing negative other than a couple of people on Instagram that wanted to try to chop me down.
We told [staff] what we were going to do well in advance and why we were going to do it. And then our People Operations Manager said, 'Please reach out to me if there's any questions, comments, or concerns.' We saw legal counsel as well, are we legally allowed to do this? We let people know on our careers page, now that we do this, it's in their employment agreements as well. So you have to be comfortable joining a company like this. But when something's different, it can feel unsafe. So this might feel unsafe to somebody, but we walk them through it in why we do it, and it's good nature, right? But it does require a bit of an explanation of why we're doing it. But to answer your question, no, there's been no conflict amongst team members at all because we promote with meritocracy. If you're the highest performer, you're going to get the most amount, undeniably get the higher wage or salary, because that's how it works.
It's not based on tenure alone, there's an element to tenure, of course, in getting a higher compensation. I don't care if you're... How you identify, I don't care. I don't care at all. I was actually asked one time on stage, I was speaking at a JP Morgan Chase conference, and somebody during Q&A asked me, 'How do you manage diversity and inclusion conversations with your team, and how have you built the company for this?' And I said, 'I haven't built the company around this.' Maybe it's because I grew up humble beginnings household, South American family. I don't discriminate. The majority of our management team are females because why? Not because I was trying to hit some sort of diversity metric, but because they outperformed males, that's it. Full stop. So going back to the pay transparency, I felt good about it. It's just something in my gut and my bones. I knew I had wanted to do forever, as I told you, since 2009. But we did it methodically."
And for Falcon and Brasa, it is only the beginning, but a dedication to creating a great employee and customer experience in addition to fantastic food, is proving a winning formula.
"On May 15th, we will be doing a pop-up in a very prominent location in Manhattan from May 15th to October. It's in Hudson Yards in Manhattan, below the vessel right at the bottom of the vessel. We've been invited to do a pop-up there. New York has always been the market that I wanted to go to after Toronto. We're currently looking for a 10-year lease, multiple 10-year leases. But the owners of the property, Related is the name of the company, picked us to be able to do a pop-up. So it's going to be great brand exposure. Yeah, well, really excited for it. Very excited for it. We're going with a leaner menu. We're going with our three Peruvian Superfood smoothies and our tuna ceviche bowl, which will knock you out. I'm so proud of that dish. It's a great way, and we'll see where that takes us from there. I'm confident if we have the highest level of integrity of our product and our customer experience, that we'll grow through some positive PR and media and gain some attention for ourselves. But USA, here we come."
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