What restaurant investors *really* want with Garrett Mills, Partner at Uncommon Brands

On the latest episode of The Pre-Shift, D.J. sits down with Jeremy Terman, 7shifts’ Director of Mid-Market Sales, to interview Garrett Mills, Partner at Uncommon Brands. 

And this episode is dedicated to operators looking for capital—or looking to scale. What makes a brand appealing to investors? What are the most common barriers to growth? And how do you evaluate a best-in-class tech stack? 

Garrett tells all in exactly 31 minutes. 

Listen to the episode

Meet Garrett Mills, NFL player turned restaurant investor

While Garrett is now a partner at Uncommon Brands, you may recognize him from his NFL days.

After attending the University of Tulsa on a football scholarship, Garrett was drafted by the New England Patriots in 2006. And over his six-year NFL career, he also played for the Vikings and the Eagles.

Garrett shares, “ Like most good football stories, it comes to an end, eventually. I chose to jump into graduate school to figure out what I say is ‘What I wanted to be when I grew up.’” He attended Kellogg for his MBA and then immediately jumped into finance, taking a job at Goldman Sachs.

Garrett then transitioned into the hospitality world, after expressing his interest to leave Goldman to a friend: “ He took a chance on me and offered me a job to come back home to Tulsa, where I was from, to join him in business and join his restaurant group—which at the time, was a 25-year-old company.”

“I certainly took a chance,  jumping from what I knew into the world of restaurants—really for the first time in terms of my career.”

Meet Uncommon Brands: “More than just capital providers”

Today, Uncommon Brands is a private equity group that owns multiple restaurant brands. Currently, their portfolio includes Fuego Tortilla, a multi-unit Tex-Mex concept. 

Garrett explains, “ We’re targeting concepts and brands that really lack any above-store infrastructure or team. Maybe there are one or two people, but we’re not targeting brands that have a built-out HR department or a built-out training department.”

He adds, “ We certainly have built Uncommon Brands to be more than just capital providers. And in order to do that, you have to hire people that have been there, done that.” So, while the team currently sits at 10 people, many have previous experience at fast-growing concepts. 

How investors evaluate a restaurant brand

When it comes to seeking out restaurant brands, Garrett explains that he first looks at qualitative data. And it all comes down to three factors:

1. Average unit volume (AUV)
2. Store-level cash flow (EBITDA)
3. Cost to open new stores

He says, “ Really, the relationship of those three gives you three different ratios that we use in our evaluation: sales to investment ratio, store-level margin, and then, cash on cash returns—the three that we call the trifecta.”

 

 

“ To have strong cash on cash returns—let’s say that’s targeting 30% or higher—you have to have great sales-to-investment ratio and good store-level margin, or you can have great store-level margin and good sales-to-investment ratio.” 

Without getting too far in the weeds, he offers the comparison of Wingstop and Dutch Bros:

• Wingstop: “ Wingstop has an unbelievable sales investment ratio, when it comes to new stores, and good, but not great, unit-level margin.” 
• Dutch Bros: “ Dutch Bros, on the other hand, has an unbelievable unit-level margin and good, but not great, sales-to-investment ratio.”

“ I think the juxtaposition of those two concepts, both being hot commodities in our business, goes to show that there’s no kind of one right way to approach business when it comes to the financial model.”

From there, there’s also the qualitative evaluation of a restaurant brand. Garrett explains that it’s important to ask and answer questions, such as:

• What’s the founder and the team like?
• Why has the brand grown? Or why hasn’t it?
• Is the brand a regional hit? 
• Can it break out of its current footprint?

“ Those aren’t always maybe quantifiable from a financial analysis standpoint, but they’re part of the story and certainly part of our evaluation when we consider new brands.”

The importance of building a strong restaurant team

Garrett also finds similarities between his sports background and the restaurant world. When asked about why it’s important to build a strong team, he says, “ It’s almost like asking why it’s important to have good players if you want to win games.” 

“ Ultimately, at the end of the day, our employees are what drives the experience for our guests. The success or failure of our brand—or any given brand—is based on our ability to create an experience worth coming back for again and again.” 

The biggest challenge for founders looking to scale

Garrett says, “​​ In terms of what kind of challenges our founders face, as you break out of that one to two-unit concept to become a multi-unit threat, I think it comes down to many founders’ hesitation to give up control.”

“ Running one restaurant is very different than running three, and it’s obviously way different than than running ten. And I think the evolution of that depends on a founder’s ability to find people they trust and really tweak the business model to be more GM-driven.”

He says it’s not just about building out the team but also leaning into leaders with trust. But he also acknowledges that it can be difficult: “ It’s no easy task to own something and build something to a certain extent—and then step back from it and pass that on to a unit-level leader that takes on a lot of the roles that a founder’s used to doing.”

He adds that in a perfect world, founders will have these traits inherently, but more realistically, “ there can be great leaders and great concepts where that kind of transition isn’t necessarily natural.” Instead, his team at Uncommon Brands tries to encourage founders to let go and delegate, highlighting it as a key to growth.

Curating the best-in-class tech stack

When it comes to assessing restaurant technology, Garrett says it comes down to two questions:

• How is the technology improving the experience of the customer?
• How is the technology providing information that helps operators make better day-to-day decisions?

“ Thinking more about the latter there, I think it’s imperative nowadays for even young brands to have tools in place that help manage food and labor—being two of the most important [factors].

But while technology partners can provide information on food and labor costs, Garrett explains that it’s also making decisions and changes based on this information: “Just getting the percentage is one thing, but really being able to dive deep into the numbers, and understand why your food cost was what it was, is ultimately what’s most valuable in making decisions moving forward.”

“ On the labor side, obviously, it’s the same thing. It’s thinking about sales forecasting. It’s thinking about scheduling. It’s thinking about what scheduling should be, given the sales forecast. And then, ultimately, figuring out if you deviated from the plan, why did you deviate?”

He shouts out two of his top restaurant tech tools: MarginEdge for food costs and 7shifts for labor management. Specifically, “7shifts has been crucial in terms of really getting the information we need to make good decisions as it relates to labor.”

Opportunities for AI tech tools for restaurants

And when asked about how Uncommon Brands incorporates AI tools, Garrett says the opportunity lies in the time savings for employees, especially managers. “I think one of the biggest opportunities in AI or the advancements of technology is trying to make the jobs of GMs easier—specifically, thinking about the more administrative day-to-day tasks.”

He offers labor management as an example: “If they’re behind a computer, spending too many hours managing labor, that means they’re not interfacing with employees or customers. At the end of the day, if we can be more efficient in the time they spend at the computer, then it gives us more time to be out in the restaurant.” 

More specifically, he says AI can help cut to the chase and answer questions on why labor costs ran too high, instead of clicking through the POS or scheduling software. And the tradeoff leads to more time on the floor, enhancing the guest experience. 

Garrett says that he evaluates AI tools no differently than other technology tools. He explains that there’s no perfect tool out there, so instead of looking for 100% accuracy on reporting, he says, “What’s the biggest bang for our buck? What gives us most of answer, the best answer, the fastest answer?” And by using that information to make better decisions quicker, he can move on to the next problem sooner.

Does it make sense to mandate tech stacks with different brands?

While Garrett does have his preferred tech stack, he also shares, “ We’ve heard some stories of hospitality groups that have tried that approach to unify all brands across the same tech stack. And I think there are instances where that hasn’t been successful or maybe the right decision.”

He explains that both brands under the holding company are using the same POS and food cost management system. But, “ as we look for more partnerships, I have the view of ‘if it isn’t broke, don’t fix it.’”

 ”Another mistake private equity makes, oftentimes, is trying to scale too quickly and too often.” He explains that it would be favorable for their next brand to use the same POS system because it provides consistency. But at the same time, “if that hypothetical third brand has a POS that’s been successful, and the switching costs are just too high, then I prefer to continue to operate that brand, using a system that works—and not kind of force our own preferred partners into a situation that doesn’t need to be forced.”

Off-premise: The big restaurant opportunity

When asked about upcoming trends in the restaurant space, Garrett’s answer is simple: off-premise. “It’s no secret that coming out of the pandemic, off-premise continues to expand. A recent study showed that 75% of restaurant meals are now eaten off-premise, whether it be drive-thru, takeout, pickup, or delivery.” 

And because of this, he’s also on the lookout for this factor when evaluating new partnerships, including quick service and fast casual restaurants. “That’s an area that we are certainly leaning into—that we see as a trend that’s not going away.”

He adds that while third-party delivery has become a big driver for restaurants, first-party delivery shouldn’t be overlooked—because there’s a lot of value in owning your own data. “For now, the days of first-party delivery (being you have your own drivers) seem to be dead. It won’t surprise me one bit if it comes full circle and we start to see some big brands lean into that world of owning your delivery driver.”

Final words of advice & resources

As for some final words of advice for anyone looking to grow their business, Garrett says, “Don’t expect it to be easy—our industry’s hard. That’s not restaurant-specific, but it is true that the restaurant industry is very competitive, very fragmented.”

“ For any entrepreneur, especially in the restaurant space, accepting that it’s going to be a grind and it’s not gonna come easy will set you up for success.” He adds, “ Perseverance is important. Surrounding yourself with people who offer advice, support, knowledge, and capital never hurts. Surrounding yourself with people who have been there, done that, sets you up for success.”

• Visit Uncommon Brands
• Check out Uncommon Brands on LinkedIn