Nick Kokonas - Know What You Are Selling - [Invest Like The Best, REPLAY]
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
This episode features Nick Kokonas, co-founder of renowned restaurants Alinea, Next, and The Aviary, as well as CEO of Tock, a restaurant booking platform. Nick brings a unique perspective as a philosophy major turned derivatives trader who revolutionized the restaurant industry by applying business principles to hospitality. (04:38) The conversation explores his philosophy of "own something, make lots of decisions that have outcomes, try to be right 51% of the time," and how he transformed restaurant operations through innovative strategies like ticketing, dynamic pricing, and prepaid reservations. Nick shares how he navigated COVID-19's impact on the industry and built Tock into a billion-dollar business by focusing on knowing what you're selling and actually selling it.
• Main themes: Business fundamentals applied to hospitality, innovation in restaurant operations, entrepreneurship through first-principles thinking, and building resilient business models during crisis.Speakers
Nick Kokonas
Nick Kokonas is the co-founder of three acclaimed restaurants and bars: Alinea, Next, and The Aviary, as well as co-founder and CEO of Tock, a comprehensive booking system for restaurants. He studied philosophy before becoming a derivatives trader and is now recognized as one of the most innovative minds in the hospitality industry. His unique background combining academic philosophy, financial trading, and restaurant operations has led him to revolutionize how high-end restaurants operate and serve customers.
Key Takeaways
Ownership Creates Wealth and Responsibility
Nick emphasizes the importance of owning something rather than being an employee, drawing from his Greek immigrant family's entrepreneurial mindset. (04:38) He explains that ownership provides two critical advantages: it's a more likely path to wealth creation than climbing corporate ladders, and it gives you control over your fate rather than having it decided by others. This philosophy guided his decision to co-found restaurants and later Tock, rather than pursuing traditional career paths. The principle applies broadly to anyone looking to build long-term wealth and independence.
Know What You're Selling and Actually Sell It
One of the most profound lessons Nick shares is that most businesses, including restaurants, don't clearly define or actively sell their various revenue streams. (50:51) He uses Gramercy Tavern as an example, showing how restaurants actually sell seven different experiences (bar, casual dining, à la carte, tasting menus, private dining, merchandise) but only ask customers to "show up" rather than choosing specific experiences. This creates massive inefficiency and lost revenue. The solution is to clearly categorize and actively sell each revenue stream, allowing customers to make informed choices before arrival.
Dynamic Pricing Should Apply to Time-Slotted Businesses
Nick pioneered the application of dynamic pricing to restaurants, challenging the industry norm of fixed pricing regardless of demand. (23:33) His insight that "Tuesday is not Saturday" led to implementing variable pricing based on demand, similar to airlines or hotels. This concept extends beyond restaurants to any time-slotted business like salons, personal trainers, or legal services. The key is recognizing that peak demand times should cost more, creating better resource allocation and increased revenue during off-peak periods.
Eliminate No-Shows Through Deposits and Ticketing
Nick solved the chronic restaurant problem of no-shows by treating dining like entertainment and requiring deposits or prepayment. (25:25) He observed that Alinea was losing over $1 million annually from no-shows and people lying about party sizes. By implementing a ticketing system similar to concerts or theater, he eliminated these losses while ensuring committed customers. When Next restaurant launched with this model, they sold $562,000 in tickets on the first day, proving the concept worked. This approach also creates better cash flow and allows for more accurate planning.
Prepay Vendors to Dramatically Reduce Food Costs
Nick discovered that prepaying food vendors instead of using standard net payment terms can cut costs by up to 50%. (58:01) When he offered to prepay a meat vendor for four months of beef purchases, the price dropped from $34 to $18 per pound because it eliminated the vendor's risk of waste from unsold aged products. This strategy works because restaurants traditionally operate on tight cash flow, but deposits and prepayments from ticketing systems provide the capital needed to secure these discounts. The approach reduces waste, improves margins, and creates more sustainable vendor relationships.
Statistics & Facts
- Nick's restaurant group was losing over $1 million annually from no-shows and people lying about party sizes before implementing the ticketing system. (26:02)
- When Next restaurant launched its ticketing system, they sold $562,000 in tickets on the first day, proving the prepaid restaurant model worked. (28:47)
- Tock reached a $1 billion GMV (Gross Merchandise Value) run rate by the end of 2020, growing from serving high-end restaurants to over 3,000 establishments during COVID-19. (67:57)
