3

HATTIE (Voiceover): Wahoo's serves clean food piled high and priced low. It's target, the 18 to 24 year old male is the biggest consumer of commercially prepared food in the US, according to the National Restaurant Association. They eat out 5.9 times per week.

CUSTOMER: Love Wahoo's... definitely.
CUSTOMER: It's embarrassing how much we come here, actually.

MINGO: Food is food and it is not rocket science, as much as I'd like to think it is. But, It was for us to package an experience. You know, you come to Wahoo's, sure the food's going to be good, we felt confident in our menu, but we wanted people to walk in and actually experience something. So what we wanted that to be was sort of a get-a-way to where our favorite spots were down in Baja.

ED: The cool factor about our restaurant comes with all the friends we have in the surf industry. They are the ones that give us all the materials. They are the ones that give us surfboards or snowboards or skateboards. So those are the things, they are the ones that are actually cool. We just happen to know the cool people in town and we sort of get to ride their coattails a little bit. (Music)

CUSTOMER: A place to go hang out and get great food.
CUSTOMER: A great hangout place... it's a surf restaurant.
CUSTOMER: Simple, but a lot of food.
CUSTOMER: It's healthy good food.
CUSTOMER: I could eat it every meal.
(Editor's Note: These people are some of the best surfers in the world!)

4

MINGO: Actually, we went through several phases of growth. Initially, it was a simple concept. We have three brothers, we can probably get ourselves up to three stores, and we each run our own store. And again, if you are the sole proprietor you are there on site; it is not too bad a thing to run. You know, you don't have to keep inventory sheets. Our old school methods from dad is that you just keep everything between the ears. And you just put it together. When you show up each morning, that's when your inventory is put together. You just never have any paperwork in place. So, up to about three stores, that worked. You know, once the fourth and fifth stores were coming on line, we realized that we only have so many bodies to get around town. So that was our first phase, I mean, simple things like, as I mentioned, inventory sheets, getting our payroll computerized. These types of steps were just beginning to take place. Where a lot of people probably would have done it from the get go, we took it for granted that we grew up in the biz, we could do this stuff in our sleep, so we just sort of let it go until such point where you just can't physically do that. So it was a good thing that people like Steve came along to help us get to the next level.

HATTIE: The brothers give much of the credit for growth to fourth partner Steve Karfaridis, a new American from Greece.

HATTIE: Steve, you had done the ultimate, the five star, the European cuisine. And we are talking about a joint here.

STEVE: Sure, that was the very essence about what I liked about it. Was the simplicity, the quality and the freshness. I mean, these were the ingredients that you find in high-end restaurants a lot of times. But high-end restaurants have vast inventories, quality control was a big issue. Wing had an idea that "I want to keep it simple, clean, fresh and uncomplicated, but I want to serve high quality product." So, it combined elements of what I really loved and plus it was simple and I said "You know what? This is a dream business."

5

HATTIE: Ed explains how the four make the business work.

ED: Mingo is our CFO, he handles all of the finances and he takes care of all the managing of the corporate. Human resources, anything that is corporate, Mingo takes care of.

MINGO: I am cheap to the core. So cheap, you know, it kills my wife each and every day. Everybody at the office, I mean, I cut every corner that is not needed. Again, you know I am concerned about bottom line.

ED: Steve comes in as operations. He handles any daily questions in the restaurant level. Any thing that happens in the restaurant, Steve has a last say. So that one of the things, there is no confusion. "Wing came by, Ed came by, Mingo came by, and he said this." That would make our management confused. They don't answer to us, they answer to Steve. And Steve is great at it.

STEVE: We created a system of ratios, so to speak, we know that the kitchen needs to have a certain amount of meat they use combined a day based on the sales they have. It gives them an instant score about how they're doing today. And we do that daily, on a daily basis, everybody has a metric by which they live.

ED: Wing handles all our marketing, promotions, fundraisers... so he handles that and that in itself is a complete full-time job.

WING: If you discount yourself, you cheapen the image that you have built all these years. So we have a theory. It's either full-price or it is free. There is nothing in-between. Because, if we are going to give something, we give it with no strings attached. You don't have to buy anything, you don't have to bring anybody together, we give it to you and you come and get it... it's free.

ED: I sort of just handle the development of the restaurant. I find real estate and make sure that it's within Mingo's budget and build it out. Laguna's a small community...

HATTIE: Ed took me to one of his favorite locations overlooking the Pacific Ocean on a busy street in Laguna Beach.

ED: This is old and this is the feel we want to bring in to our new stores. It's that beach feel -- an old feel. You try to be that upscale dive. But this is the feel we are trying to get into the shopping center. It's difficult, I mean, but we try to make a new building look old.

6

HATTIE: Here's Wing doing his thing; he gives tons of food away at events such as this. The U.S. Open of Surfing in Huntington Beach. Held every year just spitting distance from a Wahoo's. Wahoo's customers, the boarding tribe, flock to this where we see young men compete and the legends of surfing gather.

HATTIE: How did you then move out to create, what I would call this wonderful marketing machine that you have around this culture of surfing and snowboarding and skateboarding?

WING: When they opened the very first rock climbing gym in Costa Mesa, I was there with those guys and said, "Hey, we need to do a really cool event here to promote your business and I'm willing to help you." They looked at me and goes "Really?" And I said, "Yeah. I have nothing to do with rock climbing other than every once and a while I like to come and play, but I would be willing to come out here once a year and help you promote your business." And thus promoting their business, we benefited because all of the rock climbers go, "Hey this guy is okay; he is one of us."

HATTIE: What do you say, "If we do this event, I'll bring all the food?"

WING: Pretty much! You say,"I'm willing to give you a day of my life to help you guys promote your business." And as they grow, I grow. You don't do it because you want something; you do it because you can make a difference.

HATTIE: Okay. But, the small business owner is looking at this and saying, "But where am I going to get the time? Where am I going to get the money? Where am I going to get the product to give away to this cause?"

WING: The alternative side would be to try to go out and market your company which is a lot more expensive. If you go out there and they sample your product; that's the cheapest way. Because once they taste it, they see it, they smell it, they touch it, and they connect it to you. Everybody wants to support a local businessman as opposed to a big corporate entity that they are not attached to. So as they see you being a part of the community, they want to interact with you. They want to support you back because you are supporting the community. So, the giving comes back ten fold.

ED: I said, "You know Wing can't tie his shoes, he can't barely get his hair combed out or anything; he is disorganized, but he is a great marketing man." The one thing that he does, he does better than any one alive.

7

STEVE: We sat down and we had decided that we can make this grow, we can open more restaurants. And I had told Wing one day, "You must leave Laguna Beach." He was running Laguna Beach essentially and I was there with him and supporting him and all that. "Get out of the restaurant, go to Bristol, go and do your next thing." And Wing kind of believe that, he can't do that. "If I do that, my customers are not going to come back, I'm going to lose my customers, they are coming in there for me." I said, "Granted, they are coming in there for you, but we can do that with other people so that we can move on." So I said, "Give me a chance to work this place, you move on for a little while, and we will see what happens." We went to work really hard, I mean it was the days when we used to use post-its and write people's names in there and what they looked like so we can get to know our customers. The couples, you know the lady had curly blond hair and the guy was bald and he had a gray mustache.

HATTIE: You worked that hard?

STEVE: Oh, absolutely! Absolutely! I had a panel in the back of the bar there and I had post-its, I just wanted to get to know these customers. It was a new product, new idea, a new concept, everybody was looking for the lard and the oozing Mexican food... HATTIE: the cheese... STEVE: and they were finding something else. But, we needed to explain the concept.

HATTIE: I loved the black beans, rice and tacos prepared the Wahoo's way. No lard, steamed tortillas rather than fried and fresh ingredients including cilantro in the salsa.

HATTIE: How did it happen that the baby became the president?

MINGO: It probably had something to do with family dynamics. I think we went with everybody's strengths. And I think responsibility... detail oriented. My older brothers, they have their gifts; they contribute absolutely to the growth of the company. But, I think the overall operation and managing the whole enchilada if you will, there is a lot of details and a lot of deadlines to be met. Again, we are a bunch of laid back surfers at heart. But some of us can overcome that to meet deadlines, the other ones need a little prodding. So, we formulated a system by where the guy who can hit deadlines can help everybody to get there. And I think that is probably the key to our success is taking everybody's natural abilities and talents and inclinations and then keeping them on track.

STEVE: What I have in my head is that the dishwasher and CEO are the same. That's what I have in my head. Because one cannot function without the other... period.

8

WING: Trying to bring outside managers in -- the people that were there before -- "Wait a second, hey, we've been working there a year, two or three and now all of the sudden somebody else gets to run our store?" So we thought it would be better if we groomed our managers from within and they're able to basically earn their respect from their crew in order to run a store. So they feel much better about the fact that they know all of the components and they are able to really bring the team together. Because an efficient store makes you a lot more money than just a bunch of guys working.

MINGO: We felt that to keep our good people in the company, we had to offer them an upside. And so we sat down and decided to fulfill sort of a promise and a potential for growth. We needed to give them a place to grow to. So we basically created the Wahoo's farm system, like a baseball team. As we would grow them from the inside and as they were ready to go we would sprout off and go open new units. So that was, and of course you know you can never grow without customer demand, that was the customers wanting us to be closer to where they were, closer to where they live. That was the original impetuous to get us to three units. Getting us over three units to where we could manage them ourselves, was really a decision based on keeping our quality people how are contributing to our company. Giving them a place to grow to.

HATTIE: Felcia Sorboni is general manager in La Jolla. So would you say you worked your way up from the bottom?

FELICIA: Absolutely... I was a cashier, 17-years old in high school... .

STEVE: Felicia understood the concept from the get-go. She radiated, she projected that thing that I look for, that quality of enthusiasm and personality. And then you can train for anything.

9

HATTIE: Mingo, Wing, everybody says that you are the operations guy. What are some of the big ideas that people need to understand, that have to be put in place, to grow.

STEVE: The first step was to look at what made it successful when I came into it. What made it successful was the ownership and the way they treated the customer.

The other one was the standardization of everything that happens in the restaurant. From the recipe, from the spice measures, to the temperatures and so forth. I mean the whole process, the product your bringing in, your raw material, your style of service.

And most importantly, the training program. And that was something we worked very hard at. We constantly go back and tell people that you know you really need to take the temperature or taste it and not just look at it.

HATTIE: Wait a minute, what do you mean?

STEVE: We have a line check, for example, in the kitchen. The cooks need to do a taste test, a temperature test, a visual test, a tactile test. You've got to look at a product in every aspect. The back-ups, you know, do we have enough products? And it needs to be taught.

WING: So we have a manual for almost every part of the business and usually we've not only used ourselves as examples we've used employees that have been with us for almost 10 years to actually help us with almost every question and answer that a customer may have or anything that may be part of the operation from day to day.

10

STEVE: We have what we call the "10-second rule" at Wahoo's.

HATTIE: 10-seconds?

STEVE: 10-seconds. 10-seconds is the maximum amount of time a plate of food will wait in the pass-through. 10-seconds is the maximum amount of time a customer will stand in front of the register before somebody approaches them. 10-seconds is the maximum amount of time that the cook will look at a ticket that comes into the line and know exactly what needs to happen. We train everybody this way; we say "Okay everybody quiet for 10-seconds." And people realize that 10-seconds is a lifetime. (Silence) Right... HATTIE: That is a long time.

STEVE: Case in point. Absolutely, and we do that very thing. And we demonstrate, we live what we preach, number one. And lead by example. That's what we transmit to our management and the management transmits to the employees. And that's what you look out there, you look out there and you really see 350 potential general managers. Because everybody is accountable for what they do, but they have clear expectations that way.

HATTIE: All those little details.

STEVE: Right

HATTIE: You wrote them down.

STEVE: Absolutely! We had created a training program that's based on single page modules. Everything that one needs, pretty much, can be put on one page... otherwise don't bother. So, some of them the print is really small so that it can fit on one page... but for the most part we have accomplished that.

HATTIE: What do you think they do different? What is it?

EMPLOYEE: The difference is that they, the procedures are step by step. The way they handle the people, the way they give out priorities to the employees, to the customers.

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STEVE: A lot of times the simple fact that you have the wrong metric in your business can kill you. You're looking at the wrong thing.

HATTIE: Give me an example.

STEVE: An example is that I have colleagues in this business and they are going into their restaurants and the first thing they say, "Did you meet your sales quota today?" And the first thing I say to my district manager is that I don't ever want to hear you talk about sales quotas to your managers.

The first thing I want you to do is to go in and say, "Did you learn two customers names today?" I said, "Don't every worry about sales." I keep saying that over and over again. They say, "But Steve we have... " I say, "Don't worry about your quota. Can you do A, B, C, D, E, F, G and 'H' will be magical. It will automatically appear out of thin air."

People demonstrate that once they get the idea they are focused. And that is what a lot of businesses... they are not focused enough in the things that make them exist. And what makes me exist is knowing the customer, what they like to eat and cleaning the restrooms.

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FELICIA: Steak, Pork, Veggie...

CUSTOMER: Chicken FELICIA: Chicken

HATTIE: You know what happens to me as a customer coming in here? I feel like, the way everyone is dressed very casually and everybody's smiling -- and this is like my fourth one to be in -- it almost seems like there is no organization at all. Do you know what I am saying?

FELICIA: Absolutely. it seems kind of like chaotic... you know. HATTIE: Yes! FELICIA: It's chaos.

HATTIE: But it's not is it?

FELICIA: Not at all. It is a very very strictly run business. Everybody knows what they're doing. (music)

(Back in the studio)

HATTIE: It's delicious. It's healthy. It's noisy. It's friendly. It's chaos. Each location feels like a one of a kind. It feels like the people in charge are just doing this for the fun of it. Customers and staff blend in some sort of free form dance. It's a nimble place. The tables are very close together which sends the non-verbal signal that if you come in to Wahoo's, you're one of us, the boarding tribe. It may look like chaos. But I knew what I was seeing was a fine-tuned program of service and carefully crafted systems that allow the people who run Wahoo's stores to have fun while delivering excellent food quickly with smiles on their faces. Usually chaos can not be duplicated, but these guys are doing it. The irony is, they build the look of chaos into their systems. And to succeed, Wahoo's must capture this in every new location. It's cultivated customer doesn't want pristine, predictable chain food. They want Baja.

HATTIE: you can learn more about starting and growing a business at SmallBusinessSchool.org. And for specifics on the restaurant industry, there's the National Restaurant Association's site, restaurant.org.

13

HATTIE: Mr. and Mrs. Lee fled communist China to Brazil in the late 40's where the boys were born. Then the family immigrated to Southern California in 1975 where they opened a Chinese restaurant on Balboa Island. Years later the parents were ready to retire.

WING: They were getting out of the restaurant business and they asked us if we wanted to take it over. And we were like, we had no desire to put on the white shirt, black pants and the bow tie. So I said, "Hey, maybe we can just take a little bit of money and you guys can lease out your restaurant to the people that are working for you now, they're interested in taking it over anyway and keeping it going (and it is still going today), and we wanted to start something different. And they all thought we were a little bit off. But, I know we wouldn't have the respect from the people that would be working for us because they would look at us as kids.

ED: Wahoo's came along as pretty much our last shot. Mom and Dad said, "If you guys can't do it, it's time to move on and get a real job, get paychecks and come back and pay us back."

STEVE: A few years later... the beautiful surprise came along. We'll take you in and be a part of the family. By then we had spent most of the holidays together, it was like the family... I was adopted by Mr. Lee pretty much.

HATTIE: So are you happy to see your sons so successful? Mr. Lee: (answers in Chinese) ED: (translating from Chinese) He is just happiest that we've been able to follow (our dreams)... and it's more of the hard work ethic that he taught and he's seeing the fruits that we "talk the talk and we can also do the walk." (laughter)

WING: I think the fact that we truly believe in what we do... and in other words... when you love something you're not selling it... because people get it.

HATTIE: Did they pay you you're thirty thousand dollars back?

ED: (Chinese translation of question) PARENTS: yeah, yeah, yeah... (laughter) ED: of course!

HATTIE: Wing was named Entrepreneur of the Year by Ernst and Young and this publication says he is one of the eight chefs who, in the last decade, has changed the way we all eat.

HATTIE: Why are new Americans often so successful?

STEVE: I think it is the work ethic and the knowledge that this place lets you do what you wish.

HATTIE: We are forever championing the small and privately-held companies and Wahoo's is a great slice of restaurant life. While the restaurant industry is the nation's largest private-sector employer, providing 11.3 million jobs, most restaurants, 7 out of 10, employ fewer than 20 people. Small and privately held businesses dominate this industry. While many fail in the restaurant business, Wahoo's succeeds by creating an experience for their own tribe. Usually what appears to be chaos can not be duplicated but these guys are doing it.

We'll see you next time.