The Real Market With Chris Rising – Ep. 53 Kevin Lillis
The Real Market With Chris Rising – Ep. 53 Kevin Lillis
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Chris Rising (00:49): Welcome to The Real Market. I’m excited to have Kevin Lillis with me today. He’s the CEO of Hospitality Alliance. Hospitality Alliance does the oversight of the development of the food hall and beer garden at the AT&T Discovery District headquarters campus in downtown Dallas. He’s been involved in the hospitality business for almost 25 years, started at Rockwood and worked at CBRE, and then was very involved with three motel, The Plaza. So, he’s got a great story. In this world we’re living in right now, talking about food and beverage and restaurants, very interesting conversation. I think you’re really going to enjoy Kevin. Kevin, welcome to the podcast.
Kevin Lillis (01:30): Thanks so much for having me.
Chris Rising (01:32): Well, I’m excited you’re here because we are in it. Here we are, what are we, August of 2020, and the world is still shutdown for most of the country, though in places like Texas, where you’re at, and Georgia, there are probably more openings, and a few of the other states in the South, and there are here out in California. So, what’s it like to be in the hospitality food and beverage business right now in Texas?
Kevin Lillis (01:58): It’s a real challenge. I think, we’re very fortunate that our main operation has a lot of outdoor space, but it’s also, at the same time, heartbreaking seeing so many of our peers and so many of the people that we’ve worked with, with fantastic, iconic restaurants that are closing forever. It’s another thing of we really have no choice but to put ourselves “in harm’s way,” that the way we make revenue is by interacting with guests. So, we really can’t do what we do at home. So that’s one of the challenges as well that it is, we’re out there every day doing what we do.
Chris Rising (02:41): Well, it’s hard to watch because there’s so many iconic, just iconic people that announced closing of restaurants. Do you have any sense of why some of these big names are saying they’re just gone for good and aren’t able to shut down and then lay people off or furlough people and come back? What is it that’s unique about the restaurant business as a whole that would really force people out of business for good?
Kevin Lillis (03:10): I think it’s the fact that the operating margins are, in general, pretty tight. If you’re a successful restaurant, you’re probably somewhere between 8 and 18%. So, you slam the brakes on the revenue, but it’s really hard to slam the brakes on that 80 to 90% of expenses. So, if the revenue disappears, you can burn through your entire account within a number of weeks, and that’s where we saw, right off the bat, people like Tom Colicchio and Danny Meyer were immediately going to the eject button because I think even though they’re successful operators with a lot of fantastic operations, they’re still ones that are operating likely in that 15-ish percent profit margin. So, it’s just so hard to turn those expenses off as the revenue stops.
Chris Rising (04:11): Yeah. That does make sense. Well, you’ve had some great success with what you’re doing at AT&T’s headquarters, with the food hall and beer garden at the AT&T Discovery District. As you were planning it, did you see tea leaves and things that the industry was changing because, as we talked earlier, before the podcast, you were saying that you guys were open, and you’re open for business, you’re outdoor and things were happening? So did you see something that maybe others hadn’t where the business was headed, maybe it hadn’t gotten there and COVID had pushed it there? What did you see as you were developing that project that has allowed it to succeed in these very limited hours of work and this horrible environment?
Kevin Lillis (04:51): Well, I think all the spaces we design, essentially, are focused to foster the interaction of people, whether regardless of check average. So, within the complex, we’re going to have a rotating chef concept with a much higher check average. Even that one, it’s going to be set up in courses so that everyone’s going to be experiencing the same first course at the same time and so on. Whereas on the food hall side or on the outdoor side, it’s really, again, having a food experience and a drink experience and a design catered towards people interacting. We’ve always been very keen on outdoor spaces, great construction cost since trees and grass generally don’t cost much. It’s hard to have something more attractive than that. It’s something we’ve seen repeatedly of places that just have picnic tables and a nice setting on a nice day will outperform something with beautiful mosaic tile floors and Carrera marble counters. I’d rather be in a picnic table with a nice breeze and some beautiful trees. So it’s something that that was another big focus for us, even coming into this, that really having that outdoor space.
Chris Rising (06:18): Do you think that the days of the high-end, white tablecloth, $10 million of T-eyes going into the look of a restaurant, are those days over you think? Whether it’s-
Kevin Lillis (06:28): I don’t.
Chris Rising (06:29): You don’t think they’re over.
Kevin Lillis (06:30): I don’t. I think they’re going to be strained, but I think they’re going to return. At the end of the day, fine dining is really one of the most achievable and accessible true luxuries, where you have something that, with our five senses that you can experience something that you never have before for a couple of hundred dollars. It’s not like flying to the moon, but you just have a different flavor than you’ve ever experienced before in that kind of a setting. I think it’s always going to be something that people will save up for and people will splurge. I think the new fine dining model is, again, going to be more similar to what I described before, which I think you’ve taken in the case of something like Brooklyn Fair in Brooklyn, where, again, its first course at the same time, second course at the same time. So, you’re breaking those barriers between people and do you think it’s salty? Do you think it’s sweet? Do you think it’s spicy? You’re having what I’m having. So, I think the food hall enables that to happen at an $8 to $12 check average, and I think at the chef table concept that can happen at a $400 check average.
Chris Rising (07:53): So, do you think that the days of the celebrity chef were over, the Chef Gordon, finding the Emeril or someone like that, and making it all about the chef? Do you think the chef is still going to drive things the way they used to, or is it something different? Kevin Lillis (08:09): I don’t think the way they used to. I think it’s because people are so much more conscious of what they’re eating, and the days of the closed kitchen are really behind us. So that’s where I think… I think for a chef that has two, three, four locations, where you’re seeing them front and center at their signature restaurant, and they’re standing there at the past and they’re interacting with guests, I think that chef still can be a big part of the experience. But I think the days of a chef, having 30 plus restaurants, and they’re just doing the recipes and that being something that really adds value, I think, is going to be decreased. I think there has to be some level of presence because I think that authenticity and that transparency and the preparation service of the meals is really what people are craving right now.
Chris Rising (09:12): Well, you’ve been in this business a long time for 25 years. You’ve got an incredible resume. But I haven’t really given you the opportunity to talk a little bit about what Hospitality Alliance does. So, why don’t you tell us exactly what your company is focused on and the services that you provide?
Kevin Lillis (09:30): Sure. So, we’re, in a lot of ways, restaurant people for non-restaurant people, me having come up in real estate and law. So, I think we’re owners, we’re managers of restaurants and bars and lounges, but I think we also fill that gap, where knowing the real estate and the finance world, and knowing the culinary, and food and beverage operations world, we can bridge that gap, and that’s where we do the partnership that we’re doing with AT&T. Worked with MasterCard last year and helping them execute what their vision was. So often, we fill in that gap. We’re running the portfolio for Mack-Cali last year, largest landlord in New Jersey, where we help them develop the vision and then we execute on their behalf because we understand what they need, but we also understand how to do it from a culinary side. So I think we bridge that gap.
Chris Rising (10:38): Now, do you work more as a consultant or do you actually take some of the financial risk in some of these things?
Kevin Lillis (10:44): Almost all of that, at this point, we’re managers, at the very least, if not owners. So sometimes, we take financial risk, but most of it is in sweat equity, where the risk being working for pennies as opposed to writing checks.
Chris Rising (11:04): So, for you to have gotten to a point where you could start your own company and do these kind of things, you had to be in the business a long time. I’ve gone through some of the things you’ve done, everything from The Plaza Hotel to the Dreams Hotel South Beach, which probably was one of the great openings ever imagined. You’ve done a lot. I mean, you even go back… I know that you worked at Rockwood, whom we’re very close with, and obviously CBRE. Tell me, how did your career take this direction? Where did you grow up? Where did you go to college? What led you on this path, where you are now, you’re the CEO of Hospitality Alliance?
Kevin Lillis (11:45): I started working in bars, and I worked at a law firm through college. I thought I wanted to be an attorney. Actually, I went to Providence College. I grew up in Queens, New York. Then I went to high school in Essex County in New Jersey. My parish priest had gone to Providence College. At the time, I was running a youth group for high school kids, so I went to Providence.
Chris Rising (12:11): Wow!
Kevin Lillis (12:13): From there, I started in real estate investment banking. When I came out, because I realized while I was in school that I did not want to be an attorney. That was really not for me. I think while working in real estate and finance, I then started working with a sports marketing and production company with Friday Night Fights, and I became a commentator. I became a partner in the company. We did between 150 and 200 events over 10 years. I think I was learning the business without realizing I was learning the business.
Kevin Lillis (12:45): So that in 2007, 2008, at the time, I was Executive Vice President of real estate development for dream. The recession hit, and our restaurant started going dark. So, I went from being really focused on the real estate side to we weren’t buying or selling anything, we’re just trying not to lose our shirts. I started focusing on our dark restaurant spaces, and I became our head of food and beverage. That’s when we launched Dream Downtown and launched Dream South Beach and launched the Chatwal and Lambs Club with Geoffrey Zakarian. Those were all great successes. That’s when I took a very different direction.
Kevin Lillis (13:25): Yeah. At this point, at about 25 years in, I’ve done half of my years really real estate and finance, and half food and beverage. So that’s where I’m really more of a hybrid, whereas my partner Kelley Jones has over 30 years of really a food and beverage side, where he went to culinary school and came up as a restaurant manager and a front-of-house manager. He worked with Kimpton and Jeffrey Chodorow at China Grill, and Stephen Starr. So, he’s much more of that traditional restaurant ops guru, whereas I’m more of the finance, the design, those kinds of aspects. I think our partnership works. I generally take things to the starting line, and that’s where he picks it up. So, we definitely have symbiotic strengths.
Chris Rising (14:17): So, how big of a company is Hospitality Alliance?
Kevin Lillis (14:23): On the executive side about 15. Including operations, it’s over 500.
Chris Rising (14:29): Wow. That’s a big company. Nobody’s done well since March, but how have you managed… I’m a member of YPO. I don’t know if you were not. But we’ve had a lot of conversations with my colleagues about how we’re managing between March and now, and what the future holds. So, anything that you had to do early on to address shut down?
Kevin Lillis (14:54): For sure. Yeah, we-
Chris Rising (14:55): Yeah. Can you talk a little bit about that?
Kevin Lillis (14:56): We successfully got VPP at a number of our operations. But a number of the other ones that shut down, we really couldn’t do anything with it. So, it’s only the ones that we had the possibility of even being open that we know that we got the VPP for. The ones are like, yeah, which I think is the challenge, I think, with New York and some of the other cities where people have gotten it, but then if they can’t open, how do they use it? We were fortunate for our Dallas operations, even though we had some really, really lean months. It was enough to… It really did what it was intended to do for us and kept our heads above water until we were able to reopen May 1st, and then we started to cash flow. Now, we’ve really started to turn the tide on this thing. We’re starting to do strong numbers now and dig our way out of that.
Chris Rising (15:58): Yeah. How are things in Dallas these days in terms of face mask rules and how has your service changed, given just people trying to be smart about the city?
Kevin Lillis (16:10): It’s so hard now. It’s so hard to do hospitality through a face mask, but that’s what we’re doing. We’re wearing masks entirely. But it’s something that we’re seeing a lot of younger people come out. It’s something that’s just reaffirming that people strong need to connect. People just need to connect. I think it’s something where it’s one thing to be quarantining if you’re married with kids or you’re quarantining with a family at home. It’s quite another if you’re doing it living life. I think those kinds of situations, people just really need to interact with each other. So, while we’re wearing masks, all our staff, there’s certainly people that we’re keeping them in groups of six or less, and we’re keeping them distance between tables, but you can tell that young people really just need to interact with each other.
Chris Rising (17:06): I agree with you. I think we’ve seen that across the country, and we’re hoping that people are being smarter than they were for a period of time. How do you deal with… You’ve got employees who are really on the front line and have to deal with customers and sometimes, especially, when alcohol gets involved, things can be a little nasty. How are you training your employees about if someone doesn’t want to wear a mask in the restaurant or someone acts inappropriately? This is a whole new level of training, I imagine, than you ever expected.
Kevin Lillis (17:40): For sure. We’re just really keeping it out of any subjectivity. We’re keeping it from being a hot topic. So the way I’ve been addressing it, and I’ve been working every Friday and Saturday night myself, closing up the restaurant through this time, just to keep my team from getting shredded. The way we’ve been handling it is basically to make it about the CDC guidelines. So, if you make it about whether the masks work or whether they don’t, then you have a debate. If you make it about, if you just say, “We’re going to lose our license, the guidelines are this, so we need you to do that,” then there’s really less pause for anyone taking any personal offense. So I think that’s where it really helped when those guidelines came out and when even though, Governor Abbott of Texas really stood by them. So, it wasn’t us stuck in between the mask first, the no mask crowd. We’re getting in arguments with people, and we’re the front line of that conversation.
Kevin Lillis (18:46): We just want to serve people food and take care of people and give you a good time. We don’t want to be caught in the… where someone stands on masks or where they stand on vaccines or where they stand on protests, or any of those kinds of things. We’re just trying to take care of people. So that’s really what we’ve been doing is we’ve been trying to defuse those conversations by just sticking to the guidelines of if you don’t do this, we’ll lose our license. That’s not debatable. So, we’re not getting into any conversations on anything else other than like, “Oh, you already had it. Well, I’ll still lose my license. So, please put the mask on. Please stay six feet away.”
Chris Rising (19:23): Yeah. It’s amazing how something as simple as like no shoes, no shirt, no service. All of a sudden, it becomes political and such. But I think it’s important is, and this is where the states I think have to do with what Governor Abbott’s done is you got to give the restaurants the ability… You can’t just say, “We hope so.” If you really believe you should, then tell people they have to. So, I think that’s a big thing.
Kevin Lillis (19:48): Yeah. Don’t leave it up to us. That’s the thing. It’s for us in the restaurants. Up until about six to eight weeks ago, they’re really leaving it up to us. That’s when it was tough for us to hold that line. Guests are getting upset with us because we’re asking them to wear masks. At least, when they made it, what we had to comply with, it got a heck of a lot easier, that we can just point to it on the wall and say, “This is what we need to do.” We have to post this sign as you walk in, “You have to have mask. You have to be six feet away. Please comply or we’ll lose our license.” From my experience over the last couple of months, that’s always diffused it where no one has taken offense. They’re like, whether I agree with it or not, no one wants me to lose my license so you’re not be able to come here next week. So, I appreciate you wearing the mask.
Chris Rising (20:35): Yeah. Well, it’s really good to hear, the frontline stories of what’s going on. Let me ask you this. Let’s change path a little bit. How did you end up in Dallas, Texas for someone who grew up in Queens and went to Providence College? By the way, I was going to ask you, were you there when Pitino was there? Was it Pitino or was it… It was Pitino. That was years ago. It’s like when I was a kid. But it’s-
Kevin Lillis (20:58): Yeah. Those are not my years. My years were Austin Croshere. Austin Croshere, who went down the Pacers for a while.
Chris Rising (21:07): Yeah. I remember that [crosstalk 00:21:09].
Kevin Lillis (21:09): God Shammgod was actually my year. He ended up going to… He was on the Washington Wizards for a minute. Those were really guys, they were really my year.
Chris Rising (21:16): It’s a great school. How did you end up deciding you’re going to raise your family in Dallas, Texas?
Kevin Lillis (21:22): Well, something that, frankly, we were in Metro New York, and we had properties in the West Coast. We have a project in the Seattle. The taxes are so much higher on the East Coast, and our commute was so long. It was something that I think the whole world has transitioned over the last 15 years. It’s even accelerated over the last six months in the sense of as WiFi is advanced and as things like Zoom and and these other conferencing services have advanced, it’s become less critical to be physically present at every project you’re working on, but it’s something that Texas… Dallas, being in the center of the country, within a three-hour flight of anywhere, I’m only two hours ahead of the West Coast and one hour behind the East Coast. So it’s not like when I was there and everyone on the West Coast was three hours behind me. So much easier for travel, much easier for doing business, and no state taxes.
Chris Rising (22:26): Yeah, yeah. I mean Texas is certainly a wonderful place to be. I spent a lot of my career doing deals there. I don’t find August all that great. I know we’re in August now. Sometimes, January gets a little cold. So, California still has my heart. But every time I get my tax bill, I started to question.
Chris Rising (22:51): Having said all that, though, Texas is going through a lot of changes as we speak, and a especially, with Austin and Dallas and Houston, strong millennial generation. Millennials are bigger than the baby boomers, which I have to imagine, there’s taste change. So, we’ve talked a little bit about… We asked about the white tablecloth and all of that. I’ve had people on my podcast talk about the cloud kitchens, talk about how services change with millennials. What are your thoughts on the largest demographic now in our country, and how do you provide service to millennials that may be different than Gen-X or baby boomers?
Kevin Lillis (23:33): Well, I think it’s funnier because I think a lot of baby boomers, and the real estate industry, the finance industry, and my industry point to a lot of things about millennials, but it’s also baby boomers as well in the sense that in the last 30 years, our average life expectancy has gone up about nine years. In the last hundred years, it’s gone up over 30 years. So effectively, the life cycle has dramatically changed. I think even in the last 30 years, where that’s really been shown and behavior is in a longer period post-education of staying single or not having kids. I think it’s shown with after their children are out of the house, prior to retirement or after retirement prior to end years of people’s lives. So, those two gaps are really where those years have been spent. I’m like I’m sealing it now with my parents and my wife’s parents, where they’re reconnecting with their friends from high school and college.
Kevin Lillis (24:44): It’s something that it’s similar to millennials, I think, in that, again, it’s really all about connecting, it’s about shared experiences, it’s about I’m on your plate and you’re on my plate, and we’re sharing this together, and what do you think of this. It’s making dating easy. It’s making socializing easy. It’s making reconnecting with an old friend from high school, 35 years later, easy, where we give you something to talk about. We help the evening flow. You’re having margaritas by the pitcher and you’re having what I’m having.
Kevin Lillis (25:20): I think that’s something that in spending, millennials, I think because the demographic works a lot more from home. When they do go out, they need that interaction even more. I think so, for sure, it’s been something that with more people working from home that are now not going to go out at 5:00. They’re wrapping up their day on their laptop in the living room, and they’re going to get takeout or they’re going to order food. So that’s where we’ve really seen those categories of my business increase 12 to 15% per year. That’s even, obviously, accelerated from there during COVID, but it’s because of that also when they are together, they really need to interact. They don’t have that water cooler atmosphere. If so many people are working from home and don’t have the benefit of so many in-person interactions that we all create as human beings.
Chris Rising (26:24): How do you think millennials are going to respond to the hospitality side of things coming out of this? So, my big thing is we got it… Once kids are in school and business are officially open, I think they’ll regress back to the norm more than before. But I think there’ll be an explosion, of travel, of experience, of wanting to go out. Is that what you see? Or do you think [inaudible 00:26:50]-
Kevin Lillis (26:49): Definitely.
Chris Rising (26:50): Okay. Because some people say to me, “Hey, people work at home. It’d be 5:30, they want to leave. They’ll stay there.” I think the opposite, I think we’re going to have an explosion of stuff.
Kevin Lillis (27:02): Again, I think that, to be candid, I think that’s people that are quarantining in a group, people that are quarantining with a family making predictions about people that are quarantining alone or just with a roommate are going to respond. They’re trying to put… If they have a family of five and they’re having dinner with them every night, they’re figuring what someone who lives alone or lives with a roommate that they see every now and again is going to do. It’s just a completely different rule book, and it’s a completely different craving of what we need as people. I think there’s going to be a situation of wanting to make up for lost time. Again, I’m seeing it every weekend at our restaurants of people outside and in the fresh air and interacting and just needing that.
Chris Rising (27:57): I agree with you. But let’s take another piece of it with the home delivery and cloud kitchens. Have you paid attention at all for what’s happening with this concept, that Travis Kalanick is pushing? I know other people here in Southern California really think the future of a Chili’s or, I don’t know, Cheesecake Factory is that they’ll have their restaurants, but they’ll have a cloud kitchen for food delivery. Do you see that happening?
Kevin Lillis (28:26): I do. We’re doing something in Dallas that it’s the first time we’ve ever done it before and as far as I know, the first time anyone’s done it before where they can… We have runners that anyone can order on an app with no fee. So, we’re really saving from those big Grubhub or Uber Eats kind of fees that really tough on the operator as well as the consumer. Then it’s going boxes that are temperature control. So, it can be cold or hot. Your ice cream cold, your pizza’s hot. You order on your phone or at your desktop, and you have a barcode and you just scan it, and the locker opens, and it’s touchless. It just a scanner to your phone, and now you have your takeout. That’s something that we just installed last week. So, it’s something that we think, we knew because of the concentration of workers downtown, that was always going to be something critical to offer, but even more now.
Chris Rising (29:40): It sounds like you’ve been… Has your team been working from home for the most part, and then when things open up, that they’d gone back to the office? How have you all been doing it?
Kevin Lillis (29:48): Unfortunately, we’ve all really been continuing to go into work for the most part. When it was under quarantine, we were just having daily e-conferences. But when we reopen, we all came back, and we’ve actually been doing team development. The food hall still, at least a month out from being open. So we have a massive space that we meet in every Tuesday, and we do team development there, where we’re helping to develop everybody and teaching seminars and read a company library, where everyone brings in their favorite books from the hospitality industry, and we’re all borrowing and suggesting reading and things like that. So, we haven’t going in since May 1st when we were allowed to reopen.
Chris Rising (30:45): Did you feel your company was set up to be able to work remotely, or do you feel like your business really demands the in-person?
Kevin Lillis (30:53): I think we were. I think we were. I’ve been really proud of our team and how everyone’s really adapted here. Candidly, I think our biggest challenge to growth has been being able to find and hire the people. We’ve been able, through this situation, to really expand our team. Some amazing people came on the market. We’re able to add them, so we’ve grown considerably even over the last six months as a result.
Chris Rising (31:26): Well, that’s good to hear. That’s very good to hear.
Kevin Lillis (31:29): That’s one of the reasons that we started doing so much this development. We have an amazing team, but some of the people were a little bit green, like, “Well, how do we make them less green?” Help them.
Chris Rising (31:41): Yeah. As a founder, you were probably making some early decisions on how you were going to set your company up around technology. Do you all use Microsoft? Do you use Google? What’s the background for Hospitality Alliance in terms of technology?
Kevin Lillis (31:58): We’re all on Google. We’re all on Google, Toast, Avero. Those are our big programs. Everything on the corporate side is Google, where we can do Google Hangout. So, that’s Google’s version of Skype or Zoom. We have our own, the FTP site. So, we upload we have all everything on the shared drive, and everyone’s on Google email address and Google Calendar. Then, we use Toast as our point of sale system, with Avero is our analysis software across the portfolio. That’s for all the operators in the food halls as well so that, whether or not they can interpret all the data, we can. So in all food halls, we buy the POS system, but it links to their bank account, so that we can track across the project, what’s going on at Tuesday lunch versus Friday after work kind of a thing. So, we can see what’s happening with check average. What are those trends? Then help any of the operators in the food hall, so that they can make adjustments based on what we see in the data.
Chris Rising (33:13): That’s really interesting to hear how real-time data has become important to running your business. Do you use anything like Slack, or do you just use G Chat, or do you use Google Currents? Or how do you deal with like that, “We got to solve this problem right now as opposed to an email or maybe a project management?”
Kevin Lillis (33:33): Yeah, Google Chat. Google Chat and frankly text message. We have text messages that are with titled groups of each of our projects. So everyone’s always talking through all of that and making sure everyone’s up to date with everything stuff.
Chris Rising (33:52): It sounds like you’re totally set up to work 365 days a year, like we are too,
Kevin Lillis (33:57): Yeah, for sure.
Chris Rising (34:00): Non-stop, 24/7. But tell me a little bit about your family and tell us a little bit about, like, how do you balance this big business you’re running with the quality family life, with your own personal health. What are things the audience can learn a little bit about life balance?
Kevin Lillis (34:16): I would say, when you want to do a lot of things and you don’t have so many hours to do it, you’d become very deliberate. So, I would say, in general, I don’t do anything without knowing what I’m doing, what I want to get out of it, and what I’m willing to put into it. So, you have to become very efficient, if you want to be able to pull all those things off. I think, like you’re saying, it’s being able to set it up so that I can work anywhere is also critical, so that I’m losing as little time on commuting as possible. So, through this, I’ve been able to work at home. So, I’m at my home office right now. So, I need to have that kind of a setup to be able to pull that off. So, it’s really just very little wasted effort, I would say.
Chris Rising (35:15): Then, how do you have the self disappointed to shut it off and be with your wife and your kids? Or do you have any systems in place? Or are you pretty good at saying, “I’ve done what I’m going to do for the day, and now it’s time to go be dad and husband and friend and son and all those kind of things?”
Kevin Lillis (35:31): I probably struggle with that a little bit, but I try. I try and I try to be… For sure, I set off the time. It’s just a matter of sometimes as I’m watching my son at swim class, I’m still in the back of my head thinking through this problem. My exercise time is often my thinking time as well. That’s where a lot of times I find solutions to problems that I’ve been wrestling with for weeks. I come to it when I went over the course of a long run when I think my brain relaxes enough and stops trying to just pound at home, and you’re like, “Oh, that’s what I need to do.” But it is having that balance, it is just recognizing that it’s my family that I’m doing this for and and making sure I set the time off, just try to make sure I also just put my phone down and stop thinking so much about all the other challenges.
Chris Rising (36:34): Yeah. Well, there’s certainly a lot of challenges all of us who run businesses are dealing with right now. It’s probably an unfair question, but I’m going to ask it anyway. Here we are in August of 2020, we’ve got the next three months of a presidential election. Doesn’t look like we’ll have a vaccine in the relatively near future. Looks like we’re going to have to rely a lot on people’s personal responsibility wearing masks and things like that. Having said all of that, what do you think the future of food halls, of food and beverage, the experience of going out, what do you see over the next 12 months, maybe 12 to 24 months? Do you see us “back to normal?” Or do you think there’ll be a new normal? What’s your prediction over the next year or two?
Kevin Lillis (37:25): I think people are going to keep leaving the “tier-one cities.” I think secondary cities are really going to continue to blow up. I think the transparency on food prep is going to still be really critical. I think places that have outdoor options are still going to greatly outperform ones that don’t. I think that is something that you see the relief on, on people’s faces when they… We have a second floor porch. That’s probably 40 feet off the ground level. Now, people that haven’t been out in months and they go up there and they sit 40 feet away from anybody and they get a breeze, and it’s just a big relief. So I think it’s outdoor spaces are going to be king, rooftops are going to be king.
Kevin Lillis (38:16): I think people are going to wear mask, but it just makes it really tough. It just makes it really tough. But I do think there’s going to continue to be a exit from New York, Chicago, LA. I think some of those cities, especially cities that have a lower state income tax are going to continue to grow.
Chris Rising (38:41): Well, as they grow, they’re all going to, ultimately, over generation deal with the same issues we have to deal with here when you have a large population. But I agree with you, I see it happening. We certainly see it happening.
Kevin Lillis (38:54): I think again, like up until 10, 15 years ago, this is the first time I think I’ve ever seen or probably any of us have ever seen a situation where you’re actually encouraged to not go into work. It is one thing of this push and pull of the old guard wanting everyone in. The younger generation saying, “I can be just as productive as home. Why do I have to go into the office? Why do I have to commute?” I think it’s certainly been a compromise that companies would have to make. But this is the first time where it’s actually socially encouraged to stay home. I think that’s really going to take this move from either 90-minute commute and cost of living is really expensive, and taxes are really expensive into like, “Why am I here?” I’ve heard that many times from friends of mine from New York, where they went to… One of them visited his mother in South Carolina with their kids and be like, “Hey, you guys want to go back?” “No, not really.” So, now he’s going to be putting up a restaurant in South Carolina. I’ve heard that story three four times.
Kevin Lillis (39:57): I think it’s going to continue to be… I think the process… but I think at the same time, it’s not like these people want to move into small town America. I don’t think they want to move rural. They still want urban, they still want to have great restaurants. They still want to have places of gatherings and events. Do they need to do it in New York or LA or San Fran or Chicago where their commute might be longer and their cost of living might be higher, and their taxes might be higher? That’s why I think it is going to be Charlotte, Raleigh, Knoxville, those kinds of cities that, I think, are going to become more and more appealing, but also Dallas, Houston, Denver keep exploding, but Tempe, and Phoenix as well.
Chris Rising (40:46): Well, I went to Duke University, and I go back to Durham, Raleigh, Raleigh, Durham a lot, Durham and Raleigh. I can tell you the traffic sucks. I don’t know of any of these cities. You got to sell those-
Kevin Lillis (40:57): Yeah, you’re right on that one.
Chris Rising (40:58): You got to sell the city.
Kevin Lillis (40:59): On that one, they really have one road in, one road out. That northbound road coming out of Raleigh. They need a little more infrastructure there. They just [crosstalk 00:41:08].
Chris Rising (41:08): Yeah. It will be interesting though, but everything you just said, but you also said that you guys are having your people come in to the office, and you’re doing in-person. So, I’m a little less pessimistic.
Kevin Lillis (41:19): Well, for us, it’s not the office. We’re coming into the restaurant. Nobody’s gone into the office.
Chris Rising (41:25): Right. It’s what I mean. Into a place to work is what I mean. It’s still highlighting that people being around each other, that social aspect is what makes a team and how you get better and how you [crosstalk 00:41:34].
Chris Rising (41:35): It will be interesting because a lot of the people on Twitter I follow and come after me every once in a while and stuff. A lot of them our employees, not entrepreneurs and employers. I think an employee has a different sense of what they think they need to do as a job than the employer does, and the value of coming in and all of that. So, I do think we’re going to have a period of time over the next year or two where this gets figured out. But Apple hasn’t stopped building their big campus in Austin, Texas. Facebook hasn’t stopped building in New York, Google hasn’t stopped building in London. So they, obviously, think that there will be a time when people have to come back into these major cities. We will see.
Chris Rising (42:19): I just go back to until the schools are… I think schools dictate American life as well as the global life that our work hours, when we really look at them, are around when kids have to be in school and when they’re out of school. Until that comes back, I think it’s very hard for us to know what the impact is. Yeah.
Kevin Lillis (42:38): I agree. I agree.
Chris Rising (42:39): So, it’s been a great conversation. We’re getting near the end, but I got to ask you a couple of questions on this subject, which is, not that you’d be an expert, but I think you’d be more of an expert than me. We are likely going to lose the college football season. We’ve got Major League Baseball in a bubble. You’ve got NBA Sports in a bubble. The NFL, we will see if they can play it or not. But I have to imagine, when they open, there’s going to be higher costs in how you deliver the experience.
Kevin Lillis (43:11): For sure.
Chris Rising (43:11): Are you spending any time thinking about what a major event, whether it’s a concert or a professional sports league? What’s that event going to be like post, pre everyone having a vaccine? Maybe there’s a vaccine [inaudible 00:43:28]. But when the NFL or let’s say the Big 10, because they’re the likely ones to cancel, let’s say Michigan has another football game. What’s that experience going to be like in terms of delivering hospitality?
Kevin Lillis (43:39): I think that industry, having been in an event management before, the industry has really had to deal with a lot of really hard things over the last couple of decades with, I think, first as there became so many stations, it became much easier for guests to watch from home. Then as the resolution of the cameras in the home viewing kept increasing the equipment to do it, and the lighting even more than the cameras became massively more expensive, and then now, you can sit at home and watch that game in 4k for borderline free. You can see whereas 15 years ago, maybe you could see two or three games. Now, you can see any of the games, at the very least, 1080, if not 4k. Then we just had the taxation change where it’s no longer a work entertainment expense to take clients or to do it for business development, which I think is another hit on that world.
Kevin Lillis (44:51): So, I think it’s going to be a really scary time for really the in-person aspect. It really is becoming, which each one of these, the economics of what it is to produce a live sporting event changed dramatically. This one’s going to shift it even further.
Chris Rising (45:11): I think that’s very true.
Kevin Lillis (45:15): I think you see the ownerships of some of the networks, some of the regional sports networks, when they’re not associated with the team, that it’s really owning that network is massively more lucrative than owning the team. Then we saw that years ago with the Yankees versus the YES Network because YES Network doesn’t have massive salaries that go along with it. Whereas actually producing the live sports event sure does. They’re about to get even more expensive. So, yeah, it’s going to be a challenge.
Chris Rising (45:48): Yeah. I like that. I like that. Well, Kevin, I really appreciate you being on The Real Market here today. I really enjoy talking about your business, the Hospitality Alliance and the food and beverage business. So, thank you very much.
Kevin Lillis (46:00): Thank you so much for having me. Appreciate it.
Chris Rising (46:02): All right, thanks. For our audience, you can find Kevin on LinkedIn, Kevin Lillis. He’s the CEO of Hospitality Alliance. Please remember to subscribe to The Real Market podcast. You can do it on any of the podcast platforms, Apple, Spotify. Don’t forget to follow us on Twitter, @chrisrising. Thanks so much.