Like so many bar operators, David Kaplan had no prior ownership or management experience. He never oversaw a service, bar or kitchen team. Kaplan was never a bartender. But he wanted to open and own a cocktail bar, and he was determined to be undeterred by his lack of experience.
Kaplan was aware that he could increase his odds of success in this challenging business if he offset inexperience with knowledge. So, he enrolled in the BAR 5-Day Program, billed as the most comprehensive mixology and distilled spirits program in the world. Next, he read every bar and cocktail book he could his hands on to gain a business edge.
Smartly, Kaplan set his ego aside and made an important decision: he would find, recruit and build a bar team that would play a massive role in the brand’s identity. That brand? You may have heard of it: Death & Co.
“I had a mission to open up a well-known cocktail bar. So, it was more than just a cocktail bar. We always wanted great food and great wine and great beer, but we became certainly known for our cocktails and our cocktail program,” says Kaplan. “And having that ambition of not being a bartender meant that I really had to trust and depend on others.”
That trust was a big step, a step that many potential operators would be hesitant to take. However, Kaplan didn’t take it blindly—his decision was a calculated risk.
“It was a very early example of me learning that to succeed, I had to intelligently delegate and work with people who were stronger in the areas that I was not,” says Kaplan.
Driven by that early lesson, Kaplan sought to learn from the team he built. That meant that everyone had a voice.
“It was sort of an early indicator of one of our cultural cornerstones, in that we always wanted to create, or I always wanted to build, an egalitarian and equal working environment where people had a strong voice, had a sense of ownership, and they were getting credit for their contributions,” says Kaplan. “And they had a very heavy sense and true sense of authorship.”
Contribution and information flowed both ways—it wasn’t a one-way channel. Employees provided knowledge, experience and ideas (as did Kaplan and his partners, of course), and ownership and management provided transparency. It can be tempting for operators to view their business as a dictatorship—benevolent, in some cases—but Kaplan felt Death & Co. would be stronger as a democracy.
“We now work in open-book management, so our team knows our numbers and sees our P&Ls. We try to operate with that level of transparency,” says Kaplan. “We have a lot of participatory culture pieces. In New York, we give one percent of our sales to a local non-profit. That non-profit was chosen by our staff, and we volunteered it.”
Of course, Death & Co. came to life in the ear of social media and connectivity. A skilled bar and management team, amazing and consistent food and beverage program, and stellar guest experience were parts of the venue and brand’s success. Social media would prove to be a crucial element of Death & Co.’s equation, an element they included early on. Today, their Instagram profile alone boasts 182,000 followers.
“I sort of said to my partner, ‘Look, this is something I think we need to spend money on. We need to deliver content that's informational, educational, and has the same tone and ethos that we approach everything else with,” says Kaplan. “We need phenomenal content. We need phenomenal photography.”
Kaplan’s approach to social media, Instagram in particular, has paid off. Death & Co.’s massive following translates to global brand awareness.
“In the beginning, and still, our mission was pretty simple, but no one was doing it: we wanted to deliver informational content, which again, no one was doing. They're like, ‘Here's the cocktail. Come in and try our drinks,’” says Kaplan. “Okay well, you're not really giving anyone a reason to follow you. And then we wanted just best in class photography. We wanted the photos to be striking. So, we were trying to deliver as much as possible on both ends: there's the visual appeal and then you learn a whole lot of things without really being top.”
Figuring out social media is a daunting task for anyone. Imagine trying to figure it out in the early days of Instagram. Kaplan and his team learned as they went, learning from their posts and follower interactions.
“That's as simple as our social media strategy was and almost has been since,” says Kaplan. “Now, we try to think about getting almost in magazine-style form where you're thinking about different content verticals: What areas of interest do we have? What might be unique and differentiating about what we do? What would people find intriguing?”
Not every operator will experience the same growth and success as Death & Co. That’s a given. But every operator should see their brand as expandable. Whether the goal is to stick to one concept, open a second unit, expand through multiple units in multiple markets, or take the lessons learned from the original concept and open an entirely new one, an operator should always seek growth. Expansion or sale may never be a future goal but the ability to do so should be the benchmark.
“At least looking at the city of New York as an example, PDT jumps to Hong Kong, Employees Only jumps to Singapore and Sydney, Nomad [to] LA, Vegas,” says Kaplan. “We can't talk about expansion without talking about the various financial ways that you can achieve expansion. And everyone just listed, they all have very different approaches within their structure.”
Some brands form ownership groups and license the brand to individual owners who enjoy the freedom to implement their own business plans. There are brands that form around a partner or partners with the financial strength to allow successful pushes into new markets without the need to raise capital and negotiate every detail. Another path to success and expansion is working with hotels seeking to grow brands, leverage the popularity of visible bar brands rather than develop their own internal bar brands, and inject excitement into their food and beverage programs.
Those are just a few of the types of deals and ownership structures operators can use to grow and expand. But the odds these opportunities will ever be presented are close to a zero-percent chance unless an operator focuses on growing their brand for the future. In the case of Death & Co., brand visibility made the possibility of crowdfunding a reality.
“We certainly weren't short on opportunity to find capital, but all capital comes at a cost, obviously. So, what was the cost that we were willing to pay? Crowdfunding probably comes at the lower cost, if you're able to be successful on that,” says Kaplan. “We have many investors, but we're able to retain a huge amount of control because our investors, although there are many, they're also smaller.”
Crowdfunding wouldn’t have even been an option, this conversation wouldn’t be happening, had Kaplan let his ego sail the Death & Co. ship. There would be no push for capital if the brand hadn’t been grown and reached incredible visibility because it likely would have shuttered years ago. Growth, evolution, is crucial to the lifespan of a brand whether or not expansion is ever a goal.
“It's relatively easy once you create a phenomenal brand to find capital partners who also have operational acumen and want to plug your brand into places. But again, you'd have to be willing to give up control. So, we really felt like, ultimately, this is kind of the best of both worlds,” says Kaplan of crowdfunding. “We're able to get the capital, we're able to remain completely autonomous. We report to our investors, of course, but we operate with transparency with them. But they can't steer the ship in really any way whatsoever.”
There are benefits to crowdfunding beyond adding to a brand’s coffers. That’s an incredible benefit, but there’s more to it than that.
“Where we now have 450 investors, they are our biggest ambassadors,” says Kaplan. “If you believe that you're going to do right by your investors, and you believe financially it's going to be good for them, it's a great opportunity to really be able to amplify and have so many people that are literally invested in your success.”
Not only did Kaplan and his partners build a remarkable bar team and astounding brand, their crowdfunding efforts have built a powerful army of brand ambassadors.
“We now entertain investors all the time. Maybe they invested $1,000, maybe they invested 20 grand. Some of them invested a couple hundred grand. But when they come into the bar or into the restaurant, they're so excited, and they're so excited to share it with their friends and to be a part of this world that you created. And that's really, really cool. That's definitely one of the many benefits that we're now just getting to see, a couple months after the closing. It's pretty special.”
What operators shouldn’t do, however, particularly if their brands are in distress, is view crowdfunding or any other type of capital raising as a life preserver to cling onto. As Kaplan said, all capital comes at a cost. Rushing into a partnership or agreement without clarity of vision can have dire consequences.
“We’ve certainly all made the mistakes. I have as well. I think every business owner and operator has, where you slip out of your own process,” says Kaplan. “And I think when you're talking to investors, it is hugely important that you really force yourself to be diligent and follow process. That you really kick the tires. And even within this crowd-investing world or platform that we were looking at, we of course approached it in the same way that I tried to approach everything.”
Kaplan believes this is one reason healthy business partnerships are so beneficial. So, what about sole proprietors? It’s hugely helpful if they have someone trustworthy they can go to who can act as a sounding board or counsel.
“I think, inevitably, partnerships help. Having two people with varied opinions where you can really balance and bounce off each other,” says Kaplan. “But if people don't have that, if they're single operators, working with someone they trust to ensure that whatever they're creating, pitching, seeking, helping, finding financing, structuring, is in fair and good shape, and they're measuring all the various factors.”
And sometimes, as difficult as it may seem, particularly when an operator is desperate to keep their dream afloat, to keep their family and the families of their employees fed, clothed and sheltered, emotions must be removed from the equation.
“And I think, ultimately, we all have to devoid ourselves from emotion as much as possible in certain scenarios. There are times where you have to close something,” says Kaplan. “We've had to change concepts, change directions. You have to let go of friends at times. You need to do what's best for the business, and sometimes doing what's best for the business is not what's doing best for you. And sometimes it's not what's doing best for the people that are closest with you or your friends that you hired, or whatever it is.”
When feelings can be sidelined, an operator can take the time to sit, clear their mind, and consider what they need, want and are willing to give up in a deal to raise capital.
“It's okay to know what you want. Again, we went this way because I didn't want to give up control. It doesn't mean that I'm a dick, that just means that I think that me and my partners can operate and have a better vision for Death & Co. than some Wall Street finance guys who are worth a couple billion dollars,” says Kaplan. “I don't think I want them weighing in on how we're doing things, because they do something totally different than me. If we do this every day, we wake up every single day and I spend 12 hours of every day thinking about how we can do this better and how can we progress this culture, I have a hard time feeling that someone who doesn't do this at all can really weigh in and contribute meaningfully and own 50 percent of my business.”
David Kaplan, founder and co-owner of Death & Co., will appear with Tanisha Robinson, CEO of BrewDog USA, at the 2019 Nightclub & Bar Show in Las Vegas. On Wednesday, March 27 at 11:00 a.m., Kaplan and Robinson will discuss crowdfunding and other non-traditional means of raising capital during their motivational and informative keynote. Register now so you don’t miss out!