The F Word with Elliot Nelson, McNellie's Group

A young, college grad seeks to create a business that combines some of his favorite things- beer, food and travel- and ends up revitalizing a whole section of downtown Tulsa in the process. Starting with McNellie's Pub, Elliot Nelson has created a restaurant empire that includes nine unique concepts in three major cities. But the growth of the McNellie's Group almost ended prematurely, as the company faced financial hardship early on. Listen as Elliot talks about how he got out of trouble and set himself on a path for incredible success.

[TRANSCRIPT]

Elliot: I had a wife at home and two kids under the age of three, and it looked like I was about to lose everything.

Lauren: This week on The F Word.

Elliot: I sat down with my attorney, and I said, "Okay, I need you to walk me through bankruptcy because we're out of cash, I don't know how I'm going to pull this off."

Lauren: Elliot Nelson, the founder and CEO of the McNellie's Group.

Elliot: There were some things along the way that I'm actually not that proud of.

Lauren: El Guapo, Dilly Diner, Fassler Hall, Yokozuna, McNellie's, The Tavern, The Colony, Bull In The Alley, Dust Bowl, Elgin Park, all incredible Tulsa restaurants that fall under the umbrella of the McNellie's Group. Joining us today is the founder and CEO of the McNellie's Group, Elliot Nelson. And I'm so excited about this episode because, well, so many Tulsans know that Elliot is a huge reason for the revitalization of downtown. Practically the creation of the entire Blue Dome District. Many don't know that McNellie's went through a really rough patch early on and almost didn't survive. So we're going to talk about that and some other failures he's overcome today. Elliot, thanks for coming in to share your story.

Elliot: Thanks for having me.

Lauren: I want to paint the picture a little bit of the beginning. For you this journey started in college. You were studying abroad in Ireland and you were introduced to really great beer, specifically Guinness. And you came back to Tulsa, which is your hometown, and you could not find a pub with good beer on tap here. And you were missing it and you needed your fix so you just created your own.

Elliot: Yeah. Following my junior year I did my semester abroad. And I came home and really just felt like there wasn't a good pub in Tulsa that at least looked liked the ones I'd been spending a lot of time in. And so it wasn't immediately that I thought, oh I should build a pub. I actually thought I was going to go to law school. I was an English major. And so the next summer, summer before my senior year of college, I interned at a legal aid clinic and then for a small single practitioner lawyer and saw what those people did every day and thought man, I can't do this for the rest of my life.

Lauren: You were like, there's no way.

Elliot: And so then I signed up for an entrepreneurship class and the guy the first day of class said "Okay, write down your five favorite things in life." And mine were like beer, food, travel. So he said, "All right, your project this semester is to take your five things and write a business plan for how you would make money doing one of those things." And so I kind of thought about it for a while and said you know, I think the bars back home are pretty bad. I'm going to write a business plan for a bar or a pub. And so I came home that fall break, working on the project and as I worked on it I was like man, I think this might actually be a good idea. So that spring, you know all my friends are getting jobs as bond traders or consultants or whatever they're doing. You know, moving to Chicago and London and New York and all these places and people started asking me what I was going to do. And I said, "I'm going to move home and open a pub." And so it just kind of took on a life of its own. So I moved back. It was June of 2001 I guess I got back. And so we opened March of '04, so it took a while. But-

Lauren: It usually does take longer than you think.

Elliot: Yeah, that's right.

Lauren: So at the point you opened in 2004, you're 25 years old. Did you know what you were getting yourself into? Like you went through an entrepreneurship class, but did you have experience with entrepreneurship besides that?

Elliot: No, not really. I grew up around a family owned business so I had some ideas of what that might look like. But no. Overall, you know, as I worked on the business plan I thought okay, I'm going to do this. Eventually I got a job waiting tables. So I was like, I guess I better figure out how the restaurant works.

Lauren: Smart.

Elliot: Yeah, right. So no, I don't think anything really prepares you for doing that. Especially, you know, I was in charge. I was the general manager and my best friend from high school was our bar manager and we were both 25 and managing a staff of 50 people and neither one of us really knew what we were doing and luckily we had a great kitchen manager who we used to make fun of for how old he is and I believe he's probably my age now. Pete Gwen, who still works for me. And so Pete knew how to run a kitchen, he had a lot of experience and had been around.

Lauren: How'd you find him?

Elliot: You know I actually found him in that job I had waiting tables. My charge to Pete when we opened McNellie's was, “Look, I think this beer and the pub will bring people down here. All I want is a really good hamburger. I don't care about anything else. The menu, the kitchen, it's all yours. Just make sure we have a really good hamburger.” Luckily, Pete was really good and really diligent and obviously more mature than we were. And I remember the first ... we opened March 11th. It must have been April 1st. He came to me, he's like, "Hey, we need to do inventory." I'm like, "We need to do what?" You know, it was a steep learning curve, but luckily we had him. Otherwise I don't know. I don't know what would have happened.

Lauren: So cool to see how mentors kind of come out of the woodwork for a lot of entrepreneurs. I want to talk more about that later for sure. A lot of people know the part of the story where there are a ton of naysayers who said, “Don't open a restaurant in downtown Tulsa, you won't succeed.” And I know that really fueled your fire, right?

Elliot: Still does.

Lauren: You still have those haters saying you won't succeed?

Elliot: Oh absolutely. I mean it's not what it used to be. I always joke with Stava and the GKFF guys, you know, like thank God you guys showed up eight years after we opened our first restaurant to save downtown.

Lauren: Little salty, okay.

Elliot: But, you know, I think until GKFF showed up and started spending all this money, even the BOK Center didn't really give local people that much confidence in what was happening downtown. So yeah, we dealt with a lot that early on. And now of course we're trying to build a big mixed use project Santa Fe Square and that project, trying to introduce a little more retail. I mean we introduced retail at Boxyard which has had its challenges. Trying to get people down here to shop and trying to do it on Santa Fe Square and do some new construction, class A office. Even all those things still have their naysayers. For me-

Lauren: For those that don't know, tell us more about Santa Fe Square.

Elliot: Okay so, Santa Fe Square is these ... It's two continuous city blocks right across the street from McNellie's. Actually my best friend from grade school ended up going to Notre Dame with me, he was the valedictorian of our architecture class. He's a brilliant guy. He just moved back to Tulsa. He's been back maybe three years. But worked at the best classical architecture firm in London. Best one in the world. And was a professor back at Notre Dame for a while. Anyway, 2004 I called John. He was in London at the time. I must have mailed him this ... Maybe I had the ability to scan and email something. I'm trying to remember how this must have happened. But anyway. I said, "John, there this lot across the street from McNellie's and we have this vision for this big project that's multi-story and apartments over retail and all this stuff." And I was like, "I just think downtown, if we're ever going to get there we've got to do something big." So I sent it to him. He gave me my first full on rendering of that site in August 2004. So I've been working on that for a long time. We picked up steam in 2006 and '07. Then the recession hit and I kind of abandoned it. And then 2014, I got a call that somebody was trying to buy that land. So I called the land owner back who I'd developed a good relationship with. I said, "Man, if somebody's going to do that project it's got to be me. I just can't sit here and watch that happen." So we've owned the land for a couple of years now, and the idea is to build a couple hundred apartment units, 100,000 square feet of retail space, another 100 to 200,000 square feet of office space, a parking garage. All of the stuff that kind of the neighborhood needs to create more density. Hotel Indigo is there now already, so it will actually be kind of enveloped by development by the end of it. That's the one for me that ... I feel like that area of downtown's become like a lifelong project.

Lauren: It's your baby.

Elliot: That’s the one that I think is going to be ... I hope really solidify everything else we've done for a long time to come.

Lauren: So it sounds like this cycle of you having a vision, people saying that's not going to work, and you saying, watch me.

Elliot: Right, yeah. I always call it my fuck you reflex. Language is very strong. Can I say that on this-

Lauren: It's fine.

Elliot: I don't know what you guys’ rules are. Yeah, I mean, people telling me I can't do something has a very profound effect on my motivation. That's like the worst thing you can say to me. So, through that process of buying that land and going through development there was this local guy who I know and I'm friends with his son-in-law, just said, "You should stick to flipping hamburgers. You don't know anything about building stuff." I'm just like okay. That was a moment for me. I was like, I'm going to figure this out. There's always somebody telling you you can't do it. But it always keeps me motivated.

Lauren: I love that. What's interesting though however, is you actually almost did fail. You were bailed out about five years after starting McNellie's. You opened El Guapo. Things were not looking good. And you had to have some pretty generous VC money to come bail you out. So tell us more about that.

Elliot: So when we started McNellie's it took about 20 months before we were making money. And the way we bridged that was I just didn't pay myself and my wife bar tended and we lived off her bartending wages. And so we had this kind of early start that was really tough. And then we started to figure it out and started to make money. And then we opened The Colony, The Continental, The Tiny Lounge, and so we had these little bars that we were also kind of figuring out how to make those make money. And then we decided okay, we need more dining options down here. And so decided to do El Guapo's and the original budget was $1.2 million and eventually through a number of different things, ended up costing $2.1 million. So-

Lauren: Wow. How does it raise that much? You're saying a bunch of little things, but what does that look like?

Elliot: We build things a lot different now. In terms of how we bid them and how we finance them. So you know, I think we had some back-of-the-envelope kind of estimates that we thought were good and they weren't. So it ends up costing way too much and then we open and it's packed. And we had the wrong person in a key position and it just ... It melted down. And so I still apologize to anybody who ate there in the first year. It was a mess. The first day we opened was a Friday. There was a line around the block. And at the end of the lunch rush I went back over across the street to McNellie's and I sat in the walk-in cooler because I felt like it was the only place nobody would find me. I mean it was a disaster. And it kept going like that. And February of 2008, I sat down with my attorney and I said, "Okay, I need you to walk me through bankruptcy because we're out of cash, I don't know how I'm going to pull this off." I mean we were weeks away from just being completely insolvent, and I was moving money around everywhere trying to shore it up, it was a mess. And so we started having that discussion, figuring out what that would look like. And then it started to get warm and suddenly El Guapo's was so… Through the winter El Guapo's got really slow. Nobody was in there. I was like, nobody's ever coming back. And then when it got warm in the spring people started coming back. Because it turned out that despite our subpar service and food, all the things we were doing wrong, people love sitting on that roof. So that then changed the trajectory of El Guapo's and at least had enough money coming in that we could stay afloat. And then through all that, we had our McNellie's in Oklahoma City under construction. And it opened in June of 2008, and it made money day one. So when it started making money then suddenly we had this company where we , you know, weren't huge. We were going to do, say $8 million a year in revenue, and we were, even despite El Guapo's losing money, all income combined, still going to make say, $400,000 a year. So it wasn't a complete disaster. But the problem was I had some looming things at El Guapo's on the debt and some other stuff. The notes man called because of the financial crisis. So at that point, I was like man, I need to restructure this whole company and recapitalize. And so I started with some of our existing shareholders, and had managed to raise a little bit. And then I approached Vince LoVoi who was on a board with me at the city of Tulsa. And he's a fellow Notre Dame alumni, so I went to him and said, "Hey, you guys invest in some stuff. I'm trying to raise a half a million bucks to recapitalize this restaurant and pay off this note."

Elliot: He says, "Well, let me talk to my partner." So eventually they came back and said, "Look, we don't want to invest in just your one restaurant, recapitalizing. We'd rather invest in all the stuff and give you some money to grow." So that transaction ended up happening July 1st of 2009. So they invested in us, and with that money we set out on a pretty rapid growth. And so we built Dilly Deli, Yokozuna, Fassler Hall, The Tavern, The Dust Bowl, and McNellie's in Norman.

Lauren: All like that.

Elliot: All in about a 30 month span.

Lauren: That's incredible.

Elliot: So that was like petal to the metal and going quick. And so then once all that was done we kind of had to catch our breath and figure out how to run it all.

Lauren: I am curious. Because that's a ton.

Elliot: Yeah it was a lot.

Lauren: One restaurant is a ton, but to have six, seven, eight, going at once, did it get to the point that it was too much? Like when did you sleep and how did you train that many people?

Elliot: Yeah so I'll tell you. You know we had to kind of build our machine along the way. So we weren't setup to do it and none of us knew how to do it. And so we were all 28, 30, when we were doing that. We didn't know what we were doing. And so we were learning it as we went. And I will tell you that El Guapo's was the moment I broke. So up until El Guapo's, I was the corporate staff. Like it was me. We got up to three bars and two restaurants and I was it, and that was a breaking point for me. So at that point I hired Jim O'Connor, who's still today our COO. And so Jim came on and he was ... If he were here he would tell you the stories of the early years, like asking me about who invested in what and where the accounts were. And it was all in my head. So Jim's first six months on the job was just extracting information out of my head and getting it into a computer. So we hired Jim and then as we grew, then we had to essentially kind of create a new level of management within our company to oversee stuff. And we've continued to kind of grow in that way. And luckily for me, I joined the Oklahoma Restaurant Association board of directors in maybe 2008 or '09, something like that. And there's just a lot of older guys on the board who were really generous with their time and they've been really kind to me. And so when I was at those meetings and we have a board retreat every year, I'd just pump people with questions. I was just trying to get everything I could out of them. And also that group was one of the things that helped me cope with that failure in El Guapo's. Because there were guys there who were insanely successful and just, had these huge companies, and they all had them too. And so that allowed you to kind of get some perspective on, okay like, it's still going to be okay. I'm still going to keep going because this guy has and look what he's doing now. So that growth, it was a lot. And then from 2011 to 2013, we didn't really do anything in terms of building stuff because we were so busy trying to figure out how to manage what we had and how to make it profitable.

Lauren: How did you know that you were at a stopping point as far as building? Like at what point were you like-

Elliot: We were out of cash.

Lauren: Okay.

Elliot: And one of the things that ... We had this huge miscalculation. When they invested in the company, we thought by our math we'd lever everything at say 50 or 60%, but the debt market went away. So all those things we thought that we would ... Say The Tavern was half a million bucks, we thought we'd put 250 into it and borrow 250. That 250 from a bank was nonexistent. So there was this interesting kind of point in time when not a lot of loans were happening at all, but if they were happening they certainly weren't going to restaurants. So we couldn't get debt. In turn that allowed us to build some stuff. Keep our debt loads really low. So once it started to make money and cash flow, the cash flowed quicker and better, but it also cut in half the amount of stuff we thought we'd be able to do. So anyway, yeah, 2011 was it. We were out of cash. The Dust Bowl we actually finally were able to get a loan on. That was just me calling somebody and kind of pitching this idea.

Lauren: At that point-

Elliot: That banker, I still deal with. He's like, "Yeah, my first loan when I went to that new bank was a bowling alley. That went over really well." So we're out of cash, but then as we went we figured out how to run them, how to make money, and then started building out cash on the company balance sheet, which then we've now since used to grow out of our own cash and not raise anymore equity.

Lauren: I'm curious, a lot of people it sounds like are hesitant to take VC money because they believe they'll lose control of the vision or the direction. Did you have that fear at all when you took all that cash or how has that worked for you to keep control?

Elliot: No. I think I was too naive maybe to have that fear. And also, I was too afraid. I had a wife at home and two kids under the age of three and it looked like I was about to lose everything. And so, I don't want to say it was desperation but it certainly was like man, I need to figure this out. Because at that point I needed to ... We had enough balance with the pub here and the pub in Oklahoma City making money that I probably could have figured it out. But by bringing them on it offered the stability to where I could just take a salary finally on a regular basis and that was a big deal to me at that time because my responsibilities in life had changed so drastically. And so-

Lauren: It allowed you to take this deep breath.

Elliot: Right. And so that calculation was probably a little different I think. Obviously early on in the company, you get a lot of advice. Keep as much as you can. So, I still look back ... I mean when we opened McNellie's I think I owned 80% of it. Today I own 25% of it. And it's been a challenge though. Over the years, I wouldn't say I butt heads with those guys a lot, but we've had our disagreements.

Lauren: How do you navigate that when that happens?

Elliot: I mean it's difficult. But you know they've made us better too. So we're more disciplined than we used to be. Certainly our reporting and everything else is at a level that it probably wouldn't have been, ever, if they hadn't come on board. And they've I think pushed me to think in some new directions in how I analyze things and how I approach kind of more sensitive issues. Whether those are HR or PR. They bring a different perspective to things. I will tell you at 10:30 I'm going to sign the documents to buy them out of my company. So-

Lauren: That's huge. Congratulations.

Elliot: So it's been 10 years. And as I look back, I think, on these 10 years, hopefully they're ... I think they, long term, were happy with the investment they made and helped really make a difference in our company and in downtown. And I think for me I look at it the same. Like I think we're a better company because of their investment and obviously it created some opportunities we otherwise wouldn't have had. But we're also I think at a natural breaking point where that tension of me as an entrepreneur and a creator wanting to go do stuff and maybe them not wanting that as much because it includes more risk. I think we're at a natural kind of breaking point on that stuff. And that tension is always there, but while it creates stress and other things, I'm not sure it's always bad. I think that groupthink can be pretty beneficial sometimes.

Lauren: Challenges maybe the unhealthy habits.

Elliot: Yeah. I mean having a board challenging me is probably good for me.

Lauren: So I want to go back to El Guapo for a second. You said it was a money pit, the food sucked, the service sucked. What were the steps you took? Because now I love El Guapo, it's probably my favorite Mexican restaurant in Tulsa. And so what were the steps you took to take it from bad food and bad service to the place that's packed all the time?

Elliot: You know it's still not ... So, there were some things along the way that I'm actually not that proud of. We went from ... So when we first opened ... And this has happened to me several times, where we've been too far ahead of a trend that it just didn't resonate with consumers. So like The Continental, we were doing fresh squeezed juices and craft cocktails and all this stuff. But people were unwilling to pay $12 for a cocktail. We ran up against the market and people were like well, I can get this drink for five bucks down the street. And we're like no you can't, it's a different drink. But the market wasn't ready for it yet. When we did Yokozuna we thought, okay we're going to do this ramen shop, it's going to be awesome. Six months in it just fell flat and we had to start doing sushi. So El Guapo's, we opened, the food was actually really good, but it wasn't efficient. So it was less of a food quality problem than it was a timing issue. So a lot of times it would just take an hour for the food, which is unacceptable. So that was a bigger issue than the quality, but also when we opened we didn't have your basic fajitas and our refried beans were black beans. They were refried black beans with this cotija cheese on them. It was really good but you had all these complaints of, “What are these beans? Why is there parmesan cheese on them?” It's just so depressing. So eventually we dumbed it all down. So we just started and said okay fine. We'll do the plain brown refried beans and we'll cover everything in queso and that worked. It still depresses me a little bit. We actually were looking at one of the original menus like six months ago and I'm like man, some of that food's really good.

Lauren: Have you thought about bringing any of it back?

Elliot: Yeah we've talked about it. It is overdue for a refresh. We need to spruce up that space. And so as we do that we'll probably introduce some of those things back. But it's still a timing issue. And part of the problem is ... This is something I didn't understand about restaurants. That I just didn't have ... I mean I just didn't know enough and I didn't hire the people who did know enough. But we have so many seats there that our kitchen line is not big enough to serve that many seats. So now when you're there if the rooftop's open we have to shut one of the rooms on the second floor because that maxes out the amount of seats we can serve out of the kitchen. And as you elevate that food to a higher level, it takes longer to plate something if you're doing an elevated level of food. So that reduces the number of seats you can serve even more. It's really more a matter of math than anything that constrains it. Which is something we understand now much later in life that I wish we had known then, but so it goes.

Lauren: So it sounds like your process for growth and improvement is really listening to your customers.

Elliot: And that's something we've gotten better and better at over the years. When we did Dilly Deli, when we first opened it, I had this vision, there's this deli in Ann Arbor, Michigan, called Zingerman's, which is considered by most people to be the best deli in America. It's really good. And they do all these antibiotic free meat and local veggies and they make all their own bread and they're amazing. But the sandwiches are 14 bucks. I mean it's expensive to do that. So when we did the Dilly Deli we said all right, we're going to do all organic veggies on the sandwiches. We're going to source as much as we can locally and we're going to use this higher grade of meat. And so you know we come out and we're doing this stuff and we're really proud of it. The sandwiches are like 12 bucks because it's expensive to do that stuff. We were using local bread. And you got on ... I mean this is early years of like ... It wouldn't have even been like social media review. I think it was like a Tulsa Now blog thread. I mean you didn't have Yelp, you didn't have any of that stuff. So I would be online reading the blog thread on the Dilly Deli. And people would be like, "Why would I pay $12 for a chicken sandwich when I can get one at subway for five?" That was it. I mean like, people did not care that we had all this stuff we were so proud of. So again, we dumbed it down. And you have to really be paying attention to those things or it can kill you. And I have a couple of friends that had restaurants that didn't work. I don't think they listened either at all or quick enough.

Lauren: So today you've learned a ton. Your restaurants are incredible quality. The food is amazing. The atmosphere really is beautiful. It's a full dining experience no matter which restaurant you go to and you've done wonderfully with it. I saw in a recent interview with you that you said your benchmark for your restaurants is, would this survive in New York City? Or would this survive in Chicago? For people who are trying to build high quality businesses here in Tulsa, what does that mean for that to be your benchmark? What are the tangible qualities that translate into New York City level quality?

Elliot: Right. If you take say like Bull In The Alley or The Tavern, the level of food that we're putting out in those places, I feel confident we could drop anywhere, and it would be great. And that was always our benchmark for McNellie's too. When we built it, I said okay, if I were getting off work at Wall Street ... Like if I'd actually gone to that law school I thought I would and moved to New York like I thought I would, would I like coming in this place in my suit after I got off work? And that was a big deal for me because I felt like Tulsa didn't have a place where you went in and had a drink after work and it was weird to me because you had downtown and there were a couple bars here. I mean you had Arnie's and Orpha's, and Caz's, and The Bowery, but nobody was walking out of the BOK tower out of their law firm and going to one of those bars. They were going back to Utica Square, Brookside, or Weber. I thought it was weird we didn't have a downtown. So we tried to build it to that standard. And I think for anybody else that's trying to do it, I think you've got to look and say okay, whatever it is you're trying to do, not only is it good enough for Tulsa, but is it good enough to compete anywhere? And if it's good enough to compete anywhere, one, you're usually ahead of a lot of the market here, which is helpful. But I think you open up your expansion possibilities. I mean you do something really good in Tulsa that you think would compete in Dallas or Austin or wherever, at some point maybe you have that expansion opportunity where you already know. You already benchmarked it. You know you can go into another market and do it. I think that's a big part of it is you have to build stuff on a national scale and not only if you want to expand, but also is good for us from an overall economic development standpoint. And I think for me the long goal for me is still not financially driven. It's about taking my hometown and making it a place that people want to move to and live in and we reverse the trend on our population declines. I mean there's a lot of things I look at every day and say, what else do we need to build here as a company that is going to help Tulsa grow and move forward and be a better place to live?

Lauren: You talked about expansion a little bit. And now you're in multiple cities. You have multiple restaurants in Oklahoma City and Little Rock. I'm curious how you keep your quality high from afar? If you're not on the ground hands on with those restaurants every day, how do you keep that McNellie's standard when they're hundreds of miles away.

Elliot: It's really hard. And I'm not always convinced that we do. I mean it's hard to maintain it just here in town down the street. We don't always hit the level I wish we did. So as you get further afield it gets more difficult. What we've done is try to grow people from within and transplant them into those new places so that we have our culture traveling a little bit. Somebody that knows us and knows what we stand for and what we believe in and how we want treat people and what we want to do in a community. And so that's been an important piece for us. And then you got to show up often. And it's hard for me. I don't show up in Little Rock that often, but one of our vice presidents is there every other week. And so it's that consistency of us showing up and being there and making sure other people rotate through. You know sending in the occasional ... If I hear somebody going to Little Rock, I might give them some money and say "Hey, please go there and eat and just give me some feedback. Let me know how it looks and what's happening." So you know it's keeping an eye on it too. But it's hard. It's one of the things that is going to challenge us as we continue to grow because we have some things we're going to do in Tulsa, some new concepts, but overall when you look at our economy and our population, they're really bad. And so we're continually asking, how much can we actually build here in Tulsa? And has this market hit a tipping point where everything we build is just going to cannibalize something else? So that worries me and therefore to grow as a company, which I'm committed to doing for our employees ... One of my stated goals is to build a big enough company that 10 of our employees can retire of off it. And so to get to those levels we got to go to other markets. And that challenge of maintaining quality is something that is the single biggest issue. And I think we're going to do a Bull In The Alley in St. Louis and so that'll be a real test for us. Can we deliver that high of quality, not only food but also service, in a market that's not half a mile from our office? So I don't know. We're committed to trying it. I think we can, but you never know until you try it.

Lauren: I want to pivot a bit. Currently you have a thousand employees across all your locations. And many of your frontline employees even, servers, bartenders, what have you, they're all really loyal. It's their career, they love it, they stay with you for a long time. With that many employees, how do you make sure that they're being cared for well and that they want to stay?

Elliot: I grew up around a family business. My family was in the car business and I bet I started working when I was 14 maybe, washing cars and doing stuff, and worked up there in the summers. But also I was up there with my dad a lot as a kid. And I saw the way my dad treated people. He would walk around the car dealership and no matter if it was the guy washing cars or the guy fixing transmissions or whoever it was, he would stop and he'd talk to them and he'd ask them about their family. And he'd say, "How are you? How was your son's game the other night?" He had 100 employees, but he knew them all on a very personal level. And I saw the way those people worked for my dad and reacted to him. So it's just something I made a priority. And it's hard for me now because I'm so removed. I bet if you talked to most of our frontline people I’m this aloof person that, you know, parachutes in the restaurants and runs out.

Lauren: But you hire managers probably that are that way.

Elliot: We hire managers and so my thing is I emphasize to my direct reports and to new managers when we hire them, be really slow to fire people because you need to get to know your employees, you need to know all their names, you need to know what's going on with them, and if there's something going on in their life that's not so awesome ... Many times in the service industry, we might be the only stable force in their life. They might not have a family they can call to borrow money and they might not even know where to go to the doctor or how to get those resources. And so for me it's this responsibility to those people to say, "Okay, you're here and you're working really hard, and as a result of your hard work we get to keep expanding and growing and doing all this stuff." Our success is built on the hard work of those people who don't get paid a ton of money. So I think we have an obligation to them to say, one, if they have something going on in their life, be patient with them. I think a lot of times, in our industry especially, people are really quick to fire people if they're late for a shift or they no show ... I mean you still got to ask the question, like what's going on? Why have you been late all week? Sometimes somebody's got a sick dog or whatever's going on. But you’ve got to ask and you've got to know and you have to have empathy towards them, because if you don't, I think that what you see in our business is that people won't be invested in their service and they won't be invested in their customers and so our theory is that we're an employee first company. And if we take really good care of our employees, then they will in turn take good care of our customers. So reducing turnover. We give people health insurance. I'm trying to figure out how to pay a paid time off policy for everybody, which is difficult to make the math work. But we're working towards those things so that these aren't just temporary jobs for people, but jobs they want to stay in for a while because they have benefits and because they feel like they're cared about, which they are. I don't know. This industry for so many people and so many employers is just a disposable ... They see it as a disposable job. And it's not that way for me. Especially for our upper level managers. People do this because they're passionate about it, not because it's the best money they can make or it's their only choice. They do it because they love it.

Lauren: Is that costly for you? Does that affect your bottom line?

Elliot: Yeah, I mean it cuts both ways. I think last year ... I'd have to look. But I want to say our insurance costs last year were maybe 700 grand, something like that, employee health insurance. So it's expensive. And that's something that you can pull some levers and avoid, but I just don't ... When the Obamacare stuff happened, so many people were quick to figure out how they didn't have to provide coverage and we made a decision very early on that we were going to dive into it and figure out how we could. So we did that, made that choice. Yes it affects the bottom line, but does it reduce turnover? Probably some. Does it get you more reliable employees because they have access to healthcare? Yeah, I think so. So there are some outputs of that that are really hard to quantify that you hope are an offset against that 700 grand. I mean you could never figure out exactly what those are. But more than anything I just feel it's the right thing to do. Our healthcare system is a disaster and if we have the capacity to help those people that work for us, I think we should.

Lauren: So good. My last question for you. This year you're celebrating 15 years since McNellie's opened. Congratulations. That's a really big milestone. What is the biggest thing in the past 15 years that you feel like you've learned? What would you go back and tell 25 year old Elliot if you could sit down with him, have a beer, and just share your wisdom?

Elliot: Actually, that 25 year old version of me, I miss him. That person had a lot more kind of unbridled optimism and I think if anything, if I could go back in time and tell myself, don't lose that. There's been a lot of things over the years that have happened that have beaten that out of me. So now I battle cynicism. But I think that that person, that 25 year old, really believed he could do anything. And I've lost that a little bit. And it depresses me. I think the times I can tap back into that and channel it, that's the person inside me that does great things. And the person that I've become now or grown into is more cautious and less willing to take those risks because I look at all the ancillary outputs and what could happen and sometimes I just need to ignore that and say you know what, we're just going to do it and see what happens. And worst case scenario, maybe I'm broke but I'm still alive and we'll go do it again.

Lauren: And you said you're working on some cool new things, can you give us some hints as to what you're working on?

Elliot: I don't know if I can.

Lauren: We won't tell anyone.

Elliot: I will tell you, we're going to open a burger place in Mother Road Market. Elizabeth's been holding that one vacant space for me forever. So that'll happen rather quick. We're going to build a little beer bar pub in Utica Square, which I think will be really cool. We're going to take over the Wild Fork and redo it. And we'll keep it the Wild Fork, but refresh that space into something that looks like it was built in this century. We have a big project out south we're working on, which will be ... I don't know. I get a lot of people out south who are like, “Man, there's nothing to do out here.” So we have this piece of land that we're negotiating that it'll be a restaurant, kind of wood fire grill kind of place. But the reason I like the land so much is it has these big, mature trees. So we're just going to build a huge beer garden in a grove of trees called The Grove, which I think will be really cool.

Lauren: Nice. That sounds awesome.

Elliot: And it's 111th and Yale, but people out there need fun stuff to do too. So you have that and then we have Fassler Hall and Bull In The Alley in St. Louis, which should be open next summer. And then we have two or three other things we're negotiating on that are up in the air. One of the things that we've gotten to is that I'm frustrated that we aren't growing and building new concepts. And so I'm excited to get back to that.

Lauren: And it sounds like that spirit is still there.

Elliot: It's still there. But it's been tamped down a lot. But when I engage that part of my brain, that's when I'm happiest, and I feel like that's when I'm the best CEO for our company. So I'm excited to get back to those things, the growth and the creativity, and for us to ... I get frustrated when I feel like McNellie's Group is not two steps ahead of the rest of the market here because I feel like we always should be. And right now we're not. And that drives me crazy. So I'm excited to get back to that and get back to growing and building and doing the things that I think we're really good at.

Lauren: I'm excited to see it. Sounds like it's going to be great. Cool. Thanks so much for coming in to share your story today Elliot.

Elliot: Yeah, thanks for having me. Yeah, it was great.

Lauren: Coming up on the next episode of The F Word.

Stephanie: You start to think, “Am I good enough? Is this going to work? What if we put it up and they tell us to take it down? This is insane. It's Nike.”

Lauren: Stephanie Conduff, the founder of Leche Lounge, talks about the evolution of her business and how her failures led to some impressive national partnerships.

Announcer: The F Word is brought to you by 36 Degrees North, Tulsa's basecamp for entrepreneurs. To learn more about our workspace, community, and resources visit 36n.co.