Podcast

Scaling Up [S1.E7]: The future of the flat white with Nick Stone, CEO and Founder of Bluestone Lane

In this episode, we walk the lines between professional sport and a scaling hospitality business. Nick paints a unique picture of the company's mission and the role it plays in creating a unique and aspirational culture in a typically hard-yard labour market that is hospitality.

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Ed (00:49)
Welcome to this bonus episode of Scaling Up Season one. I recently recorded this while on the road recording season two, but it felt like it had such a natural home with the other amazing Australian growth stories that were told in the previous season. Nick Stone is the CEO and founder of Bluestone Lane. This story starts in an underground coffee shop in New York City where an ex AFL player turned investment banker decides he was missing his authentic Australian coffee experience and so he sets up a side hustle to his main banking gig. Fast forward just eight years and Bluestone Lane is at the pointy end of the American Premium coffee scene with over 60 stores across the country. What is evident is Nick’s passion for the mission, his intelligence in how he thinks about the world and applying it to how he’s trying to overcome major scaling challenges in the us.

Nick beautifully articulates what he learned from his time as an elite athlete, his vision for building the Starbucks of the next generation and how he thinks about building teams and culture in the tough American hospitality industry. As you’ll hear, I felt so connected to Nick and his journey and I think this really shines throughout the podcast.

There is a fuller footnote and timestamp at the back end of this episode that I think everyone needs to listen to. But even in the short turnaround between recording and releasing this podcast, the world has changed dramatically and that does need to be mentioned upfront. Even the best laid plans can come undone by the extraordinary and every day of strict government protocols around containing the spread of Covid 19 in the US is another page in the Bluestone book. That though is not going to stop me telling you the incredible and inspirational story of Nick Stone and Bluestone Lane.

Nick Stone, I am pumped up about this. Welcome to Scaling Up. This is just a story that I feel completely compelled to tell and I’m very grateful for the opportunity. And even though I don’t know you particularly well, I just feel very, very connected to across a whole range of touchpoints, your transition out of sport, incredible entrepreneur, and of course coffee.

But I guess the first time I heard or became familiar with Bluestone Lane, I was traveling to New York with my family a couple of years ago, and as you do when you travel, people give you lists of things you need to go see, the Statue of Liberty, you need to go see a show and whatever you do, you have to get your morning coffee at Bluestone Lane. And I can confirm that I did 15 days in a row and I was a very happy customer and I became really intrigued with this brand created by an Aussie guy in New York. And here you are today. So welcome to the show.

Nick (04:18)
Thanks, Ed. Yeah, very auspicious introduction and thank you for your patronage. That’s pretty good LTV there. 15 days in a row hopefully you’re using the app.

Ed (04:30)
Every dollar counts. And what I love talking to you now is this going to capture a moment in time because I’m of the belief that Bluestone Lane is only really in its infancy. It’s by no means a small business and it’s growing rapidly, but I truly believe in your vision that you can be the Starbucks of the next generation. So maybe you can give a little insight into, or maybe even just the elevator pitch of why you started Bluestone Lane.

Nick (05:01)
Sure. So Bluestone Lane launched its first store in Midtown Manhattan in mid 2013 in a subterranean class B office building with no street visibility. We weren’t allowed to put any signage up, we weren’t allowed to have the sandwich bought out the front. So it was purely driven from word of mouth and it really came about out of self necessity. So I moved to the States in late 2010 to study to do part of my MBA and I was just so blown away by how different the coffee culture was. There was such a focus on product and really solving this need for caffeine, but there wasn’t that element of human connection. And I was quite a novice, certainly in hospitality, but also in the coffee industry cause I didn’t really understand what makes up a fantastic coffee experience and product’s just one of the four elements.

And then suddenly I realized that this customer, customer like me, they’re not resonating as strongly with Starbucks and some of the other chains. They’re looking for these independent offerings, they’re looking for premium products, but most importantly they’re looking for this element of service and human connection where people walk in and the Brewster knows your name, face and order, which is an absolute prerequisite to compete in Australia, the land of independence. And I just thought there’s a way here that I can leverage my background in sport, my background in corporate finance and investment banking to build a brand that really resonates and stands for more than just product. And Bluestone Lane started with very humble beginnings, very much not a rag to riches, but certainly we were very, very scrappy and very capital efficient. And now we’ve grown in the last six and a half years to over 50 stores in eight markets.

And in New York I would say that we, we’ve had a very significant impact on not only introducing and scaling the flat white beverage and not only the avocado smash, but certainly I think this notion of a true third or fourth wave coffee where people feel that they have fantastic quality product, fantastic quality service, beautifully designed environments where they have an element of escape. And I think ultimately moving from customer relationship to a local relationship. And at Bluestone we never use the word customer, we only use locals and that’s where it’s reciprocal, where the barista knows you and the barista.

Ed (07:32)
Fantastic. I do want to turn the clock back and discuss your transition out of sport. You did touch on that briefly, but you were a professional athlete and in a sense, having lived the transition myself, I hate the word former athlete, the identity is still with that public perception that you were an athlete, you only ever were an athlete and now you’re a former athlete. And so indulge me because it is something that I do like to talk to people about is their transition out of sport. Did you plan your transition? What were the things that you were looking for for a life after sport? How hard was it? There’s a whole range of things I’d love to dig into here.

Nick (08:16)
Yeah, we can talk about this for a long time. I certainly don’t hold myself in the caliber of sportsmen and of yourself Ed, what you achieve as phenomenal. Honestly, playing AFL football was my childhood dream, but it was only going to form a part of my life. So my parents were really well balanced and they were optimistic about me potentially having an opportunity in the L, but I think they had a very realistic understanding that life is long and even if you have an amazing career in afl, which could be play 10 seasons, you’re going to be finished at 27, 28. And not only do you need to earn income, but I think more importantly you’ve got to have utility outside of sport. And I think in my eyes, I was really excited about the opportunity to prosper in other industries and other facets of life, both professionally and personally.

So when I got drafted, which was back in 1999, I had just finished my English exam on the Friday. I got drafted on the Sunday. So I had two Chinese exams and economics exams. I think geography I did that was meant to be my easy one to boost the boost your enter. But I started training straight away at Collingwood and I was 17 I played at three clubs. I was certainly a journeyman. I think I was had enough sort of athletic qualities and determination and values and I guess skill to stay in the system, but I never achieved what I hoped, which was I think extremely confronting as a young person that’s really trying to learn about how to compete in the big leagues or just how to grow up beyond going to school and having a very ritualistic sort of way to navigating life far more independently.

And I think professional sports forces you very, very quickly in an expedited way to understand how do I take control of my circumstances? What am I going to do to try and compete at the ultimate level where everyone’s a star, you’re not just the star in your junior team. How do I deal with the adversity, the pressure the constant need to improve performance to not only stay in the system but to get an opportunity to compete at the top level and then to compete well? Those skills are hard to describe to I think a lot of people, it’s hard to articulate what it’s like being in an elite performance environment, but it’s an environment where I’m addicted to being part of, I think that life is short and I’m 38 now and I feel I, I’m sort of reflect on it. Where did it go? I’ve probably got half my life left. But what’s amazing is I definitely, and I’ve applied this to everything I’ve done particularly post football, is I just want to make sure that every day I’m improving, I’m surrounded by people that have the same goals and ambitions that they want to improve, that they want to contribute and make a difference. And that was in banking and now it’s in Bluestone Lane and we’ve got a real mission to be something special.

Ed (11:22)
It’s amazing you touched on that high performance mindset and it is very hard to describe to people that haven’t lived that week to week performance and it’s thrown around in business now the whole time. While we have an elite high performing team, I do have the view that people have no concept of the pressure of having to perform week in, week out. But those lessons, as you say, are really transferable to the business world.

Nick (11:49)
And I think also when you’re not a star, when you’re just a regular player in the system, every training session you’re competing. You’re competing to stay on your list. I had a two year contract to start and then I had four one year contracts and I was delisted three times in six years. So I was fired three times in my first six years of my professional career. So from 17th 23. And I think that being part of an elite organization teaches you so much about not only yourself but what others do to get the best out of themselves and the sacrifices and the disciplines they’re prepared to make. And I think that there’s a very large divergence between what real sacrifice is to perform. And I think that’s something that’s commonly misunderstood, that doing your job sufficiently for six months should lead to promotion or should lead to your opportunity to be a CEO.

That just is not how it works. I think to be at the best, you have to perform and train and look after all aspects of your life that you can control to the highest level if you want to really compete at a global level as yourself. But even me, just a national level, it was transformative to how I’ve approached my life post football because some of my darkest moments in my entire life of playing AFL where which it shouldn’t have been, right? You talk about it’s your childhood dream, but so many, I would say more often than not, I was always doubting myself and hoping that, almost sometimes hoping that the board didn’t come to me, which I did enormous amount of reflection post, but that really spurned me to make sure that I’m not going to waste any time. They’re going to be their best. I’m going to try, I’m going to explore, I’m going to challenge and just do it with a level of resolve. That part of me wishes I had back when I was a number of years ago

Ed (13:46)
That’s so well articulated. The thing that surprised me actually with exposure to world class athletes was how much fear they all suffer from. It’s just the best ones deal with it in a more sufficient manner. And I, I’ve seen people who are regarded the best in their generation and they are nervous, they are full of fear and anxiety before they perform and yet they can flick the switch and they can park it and then they can go to perform at the highest level basically on call. And that was a huge eye-opening moment. Cause you put these people on a pedestal, you see them on tv, you see them as world-class performers and you have no idea what goes on behind closed doors.

Nick (14:26)
And that’s the difference when you go often at training or you’re studying all the metrics and you’re looking their speed or their technique or their accuracy in this, oh, well you can’t really split them. They’re both at that top level, but then one can go out and consistently perform no matter the circumstances. And obviously that’s the mental side, but you’re seeing that close and probably with being on the other side where I just didn’t have that innate confidence and didn’t have the ability to park doubt, it was quite, when I look back at it now, obviously it parlayed into the career I’ve had. But that’s the difference. And if you can use it for good and you can use it to reflect on it and then learn from it and then challenge yourself to get out of it, life life opens up for no all opportunities. And I’ve just been very lucky that I’ve had some brilliant mentors, brilliant coaches who have said, Hey Nick, forget about that. You can do this and I’m going to help you along the way. And that probably is really helped where I’m now sitting with you.

Ed (15:33)
You touched on this search for marginal gains and upon reflection I feel as though that’s the greatest lesson that I took out of sport. But the other great thing that I feel like I took out was this obsession to understand the next layer of what makes teams successful as a team and around cultures of teams. What I loved about sport was that it was a complete meritocracy. Your job as a team was to perform week in, week out. And that created this natural diversity that people were picked on their merits regardless of race, religion, education, the pursuit to win was more important than any kind of selection bias. And that is something that I think great cultures are built upon. And I don’t know if you have any sense as to the cultures that you played in and you’ve taken things from some of the teams that you played in and tried to sprinkle them into the Bluestone Lane Culture.

Nick (16:31)
Definitely the sport is the great equalizer. Everyone’s got to play by the same rules and it doesn’t respect your background, your intelligence, your formal qualifications, a family you come from. And certainly I’ve applied that mentality to bluestone. I think in banking it’s still quite homogenous. And I don’t mean that from a lack of diversity by gender I mean that typically when you’re hiring graduates, they’re coming from certain universities studying certain degrees. There’s just not as much as diversity or variety as there is that I found in sport. And Bluestone being a hospitality and lifestyle brand and hospitality is about making people feel fantastic. It’s about working in a team and making people feel wonderful. What’s terrific about hospitality is that it doesn’t really need much iq, it’s all about eq. And that means that you can come from any walk in life and prosper and succeed.

And I don’t think you should be hindered by tenure or experience or what your CV looks like. And because I had literally no hospitality background, I never worked a day. I did one shift in a wedding in Mildura when my brother was running, when he was at uni running. And so I didn’t have any rules. So I could build this based on pure customer centricity with real financial discipline based on my background in analyzing how companies create value. And then this obsession of building a brand and standing for something that can stand the test of time and also scale because brands scale businesses don’t, especially not in consumer and hospitality. Where I was focused, so I’ve, I’ve had multiple stories of porters, which is pretty much the entry level position in cafe, moving to gm, I have hundreds of examples of teammates for the first time getting paid annual leave or getting a salary for the first time or having really good health insurance or making more than $50,000 a year.

That intrinsic reward has been extraordinary and that has also been quite symptomatic of the difference between Australian standard of living and in many cases probably more egalitarian with a stronger social security infrastructure and working in the US where there is mass class diversions. I’m not saying it doesn’t exist in Australia, cause it certainly does, but you see it on a very real level here. And to play a small part and to encourage people to look for more and to invest has been really, really rewarding and something I never thought I’d get before I started Bluestone. That’s for sure.

Ed (19:15)
Let’s come back to a few things there that you touched on, but before we get there, maybe you can give a little bit more color around the founding story and what was it a side hustle that blew up when you started it, you were still working in banking. What was the vision the moment that you started the business?

Nick (19:37)
So I guess I never grew up thinking I was going to be an entrepreneur. I had this fascination with companies and business and my uncle worked in venture capital and he had the opportunity to work overseas. And for me that was just so enticing and enthralling the ability to work in these big cities and learn and work with these big household names. I thought I was always obsessed with that and I think that’s why I always kept my university going. I never stopped. I actually studied at university for 12 years, straight part-time, did three degrees, one undergrad, two postgrad, and I just have a real thirst for knowledge. But I guess I did always have on the side little things going on when I think about I was always someone who liked doing two things at once. So when I played footy, I did university on the side. When I started banking, I did university on the side. When I started Bluestone, I was working full-time banking over the journey. I had a number of different ideas. I remember back in two, oh, it must have been about 2005, we had a superannuation idea targeting for younger members because no one understood what am p were saying. And we thought about the way that Virgin in particular had revolutionized different segments of the market by making it cool and aspirational 10 years

Ed (20:54)
Ahead of the market by the sounds of things you could be running a FinTech in Sydney

Nick (20:58)
Maybe next. And then I remember going to Havard with one of my good mates, Matt Ball, who I played footy at Hawthorn with whose brother played at St. Kilda, Luke. And we talked about basically building boosters in Havard and making these pre-made smooths and bring them to the beach because everyone would congregate on the stones and there was no FMB amenity to then working on this idea about retail coffee and Australian influence coffee culture. And I think I had, I had an unfulfilled need. I kept going back to the fact that there’s two really important things. The first one was like I knew that there must be more people like me that are looking for something more elevated and wasn’t what I call a classic coffee snob. I still don’t really know much about coffee, but I know I’m an experienced junkie and I wanted to walk in and feel like a local.

So that was one I thought there must be people like me who would resonate with this. And then secondly, coming from Australia, I had certainly a very myopic and close view on the success of Starbucks. I had no idea what Starbucks has been able to achieve in 40 something years. So there was a moment in time when I was studying in probably November, 2010 when I discovered by just simple Google search that Starbucks market cap hit 90 billion US. And I nearly fell off my chair. I was like Starbucks worth 90 billion us, which was at that point over a hundred billion Aussie. And they had done it in like 35 years. And Schultz had basically commercialized espresso in the late eighties. I was just mind blown because if you think about Australian coffee culture, it went from tea to espresso around the, no, the mid forties, pre and post World War II when we had mass migration from Italy where obviously you have second largest number of Greeks outside of Athens in Melbourne.

And we went from drinking very colonial commonwealth British to espresso where Americans went from tea and they kicked the British out, got their independence, and then went to pulling coffee from down south where it was lam with sugar and cream and it was coming from Central America and also the Caribbean. And it took them a long, long time to transition from drip to espresso. And Starbucks acted as that catalyst and the focus also on making it more of a premium experience instead of just out of a stand. Because what’s fascinating about coffee, and we can talk along of a definitely student of this game is coffee is it’s available everywhere and it’s predominantly free or very, very inexpensive. So you can get it at home, you can get it in the hotel, you can get it at McDonald’s, you can get it on the deli, you can get it at Starbucks, you can get at Pete’s, you can get it at Tim Horton’s like it’s everywhere.

Everyone sells coffee, every restaurant sells coffee. So the question was like, how come it’s not being done consistently at a premium level like it’s been done in Australia, which is the land of independence, the land where Starbucks failed the land when Duncan hasn’t even tried where Tim Hortons hasn’t tried, where Costa hasn’t tried, all the big guys haven’t even given a go. Now some people might say it’s the population, but it is still the 13th biggest economy in the world and you’ve got two very large cities in Melbourne, Sydney, and if you even benchmarked them in the US, they’re both in the top six biggest on population density. And I think it is that we were ahead of the game and we focused on a broader experience outside of just the coffee product. And that for me was intriguing. And then I thought there’s an opportunity for me here to put something together.

And it started small and I was so obsessed with building a brand and prescriptive focus on what a value proposition is, challenging it frequently. And then this notion of trying to have a brand validated by New York City and also in many cases trying to be the face of Australian hospitality because prior to this Aussie coffee revolution and you go to most tier one cities in the world like people talking about the Aussie Australian Cafe or it’s a Kiwi cafe, we’re sort of in that category. But prior to that, I don’t think Australian hospitality is well known at all. I think that the Australian premium coffee waves had such a big influence in driving that awareness. And then that’s led to things like Melbourne hosting the World Barista Championships this year and then the world’s best 50 restaurants being held two years ago in Melbourne. And there’s only five cities in the world that have been able to hold it. And what was amazing is I caught up with Will Guera, who was the co-owner of 11 Madison the year they won World’s best restaurant, which was the ceremony was in Melbourne. He had no idea, not only never been in Australia, but had no idea that Melbourne had this culinary scene or this Australian culinary scene and he was just mind blown coming back. So I think that part of the equation and playing a role in that has been wonderful.

Ed (26:06)
You talked about, and it’s clearly that you are obsessed with brand and you’re obsessed with quality. What was driving the brand from your point of view? I know you were trying to connect with a demographic that wants to be engaged with brands perhaps more than the generation that preceded them. They want to be engaged with in a really authentic manner. The brand needs to be values driven, often in hospitality, it needs to be about clean or healthy and often it’s about driving, purchasing through technology. It’s a very different proposition. How did you think about your brand with that kind of lens?

Nick (26:47)
Well, the first thing was I wanted to build a brand that was based on human connection, that was service led. I didn’t want to be product led. I thought in coffee, given that it’s a commodity, if you’re product led, you are exposed to suddenly competing in cost leadership and cost leadership is a scale game. I didn’t have enough experience in knowing how to build a cost leadership model and particularly trying to compete against Starbucks that had just blown it out of the park in how successful a scaling had been. So for me, I thought that the real consumer brands that resonate, that have stood the test of time, you got to look at the luxury brands, you got to look at L V M H when Lou Vuitton and Coco Chanel when they started and how long ago these houses of fashion. And I took a lot of inspiration and you think about the luxury watch brands, they’re around for a hundred, 200, 300 years before they’ve been commercialized.

And I thought for us the way we are going to compete is on differentiation through service. And to provide premium service, you need to have a premium proposition, which means every element of your value chain needs to be consistent with premium because you can’t be a true brand if you don’t have that continuity and consistency in everything you do. And if I looked at the Australian coffee culture, I kept going back to the fact that it’s primarily a premium based model, certainly the places that I used to going to. And I just thought there’s such an amazing opportunity here to provide this affordable luxury experience and to bring people together because technology and particularly social media has provided incredible amount of connectivity. Connectivity’s gone exponentially through the roof, but actual human to human contact. I would say that in many cases that’s deteriorated and providing extraordinary externalities that we’re saying regarding mental health, isolation, loneliness, helplessness, suicide.

And I thought so much of this can be undone. And a lot of it’s about recognition. And if I think about what’s great service, great service is recognition. Recognition that you’re in the place, recognition that you are valued, recognition that you are special because everyone loves that feeling when you walk into a bar or you walk into your hairdresser or whatever and they go, ed, great to see you mate. How’s the family? And what was fascinating is when I arrived in the States, people had these relationships with their Manny and Petty with their hairdresser, with their wash and fold. No one washes their clothes in New York, everyone outsources that. There’s too many things to do.

Ed (29:27)
There’s a laundry on every corner

Nick (29:28)
Every corner! in my street alone, there’s three now everyone advocated for their own Johnny, that’s who I go and see. I don’t go anywhere else. And so they had this loyalty and they had this connection, but they did it in coffee and I thought, this is crazy. In Australia it’s the other way

Ed (12:47)
It’s a really interesting insight.

Nick (29:49)
You know your local and you think about Melbourne and Sydney, you are based in the CBD and I was always working at CBD and the name Bluestone Lane Co is homage to the cobblestone laneways in Melbourne in particular Maiden Lane and fun places that used to discover these little hole in the walls. But if you think about it, there could be three next to each other, but everyone has their own. And we would often argue in the team, we’re going to go to S Stoney’s place or we’re going to go to Cookie’s place or we’re going to go to Schroder’s Place. And it’s because we all had that human connection with that particular owner operator or barista. And I just thought there’s such an opportunity here for us to play a role and there’s probably a number of those thematics all coinciding to validate that it’s worth giving it a go.

Ed (30:35)
And what’s been your biggest challenge to scale? Is there any insight? When you started it wasn’t a full-time thing. All of a sudden you are the CEO of a very big business that is employing 800 people and often the people are what is providing friction to hyper growth in a business like yours. How have you thought about not only scaling the business but the challenges of scaling people?

Nick (31:04)
This is the element that’s certainly the most rewarding and also the most challenging. Hospitality is based around human to human connection. I didn’t want to be in the quicker game where I describe quicker as what can I get you where I talk about bluestone, I want to be in the hospitality service led, which is Ed, great to see flat, white to go or something else. There’s a dramatic difference between both of those statements and they both live in that sphere of the provision of food and beverage for a customer. But to do that consistently, to make people feel special, to have locals, not customers, you’re so reliant on your team. And now hospitality is played with typically between 80 to 110% employee turnover. A lot of people see it as a gap job. Also, coffee in the states I don’t think had the most noble perception versus working in high end restaurants or bars.

It was seen as not the employer of LAR Resort, but a place where you’re more likely to get a job than maybe 11 Madison. And I thought that was also quite different from Australia where people working in the best cafes are the most prestigious. And I thought that there’s, there’s got to be a way where I’ve got to focus on providing people with real career opportunities and development opportunities, both in hospitality but probably even more importantly in business and in life, so that they can take these skills which are incredibly transferrable and apply to wherever they’re going next. Whether that’s they’re with Bluestone for a year, six months, two years, three years, hopefully a long time. But that’s been the biggest challenge. People and the way that they develop and engage, it’s the most rewarding but it’s also the most challenging. And what we are in really, really tough conditions for a business like Bluestone, based on the fact that unemployment in the US is at a 50 year low.

So there’s not a lot of people floating around that are looking for jobs or looking to leave it’s full employment. And that’s made even more challenging to hire and retain. But if I think about how I allocate my day, I would say without a doubt, 85% of what I’m doing is related to the way it’s related to a people issue about your top talent and where they’re going to go next, the problems they’re working on and how you can help them or based on the store performance and the brand expression and how that’s been felt through the service level and what we can do to keep the team motivated, improve their skills, improve retention, develop them so that they can move through the system. That’s what hospitality is. In other industries it’s quite different. But I would say that clearly company culture and your people, and we heard this yesterday, we were very fortunate to go to a technology based conference and a lot of those industries have incredible iq, but it’s still about how your human capital assets work together, how productive they are, which is based on eq, which is based on values and norms.
And that’s what we focus relentlessly on because you need, in our game in particular

Ed (34:21)
Two things to dig out of that. One is how are you thinking about incentivizing your staff? They’re all corporate owned stores. How do you encourage them to think owners of the business so that the bananas are perfectly ripe at the front of the cafe? Every coffee is perfect because that is the challenge to do what you’re trying to do at scale.

Nick (34:44)
Yep. That’s going to determine whether we’re going to be able to achieve our potential. And we talk about that a lot. We talk about, because I sincerely believe right now that we don’t really have much competition. We’ve got competition against some small guys. They’ll go one offs, but they’re not Nate markets and they’re never going to get the eight markets. It’s just not probably their ambition, but achieving our potential is based on those finer details and really based on the service proposition. So we spend a lot of time on not only education skill and feedback, but we spend so much on having coaching conversations every single week, tracking metrics, rewarding performance. It’s the things where I think a lot of those levers that are more consistent with high performing organizations. I think the other big thing that we make sure that we give ourselves a good chance to perform and keep people excited is you’ve got to recruit and you’ve got to induct and you’ve got to train well.

Because what we commonly see, and this is consistent with all high performing teams, if someone in the team’s not high performing, it normally creates a lot of friction and it also creates a lot of distraction. And I used to talk about all the time that two productive staff would outperform five if two were productive and three were unproductive. See, a lot of people think, oh, it’s five bodies, you’re going to outwork two. I’m like, no, because the three distract and they add friction because they’re not operating at the same standard as the two and then suddenly the two has to cover and compensate and then it starts damaging everything you’re doing. And we need to make sure that we have the people who align with our values and we have our formal values ride the wave, mate, ship Fair Go and happiness ambassadors.

Ed (36:27)
Very Australian.

Nick (36:29)
Yeah, well it needs to be because that’s part of the DNA, the brand. And they’re also ways to really understand when you talk about startups and building a growth company and we’ve grown over 200% revenue in the last two and a half years, you’re talking about a lot of volatility and ride the waves seem really appropriate. It’s going to be choppy some days you got to pick yourself up, but some days you’re going to be on fire, weather’s perfect, everything’s firing, and you’ve got to surf that baby all the way in and you’ve got to make your money. But we also talk, and I’ve been quoted a few times about this, it’s like, you know, need to have a bit of that no dickhead policy. Now, I probably shouldn’t use that language here, but

Ed (37:07)
Steven Marks used much worse language on this podcast. So don’t feel bad about that.

Nick (37:13)
And I think that’s right. You want to be associated with people in life fullstop. What I want to be that care about other people that want to be a positive contributor to society, that want to be known as a good person and acting with integrity and being dependable. Hospitality is so much about dependability. You don’t have to be the best barista, but what you need to be is you need to be a fantastic human connector and you need to be a team player and you need to be organized and reliable and on time and yeah, that’s just, that’s life. I think dependability is what everyone’s looking for. You don’t have to be the best, but if you are consistent and we know every day you’re going to rock up and deliver that and you’re going to consistently try and improve, I take that any day of the week because probably more than anything that that’s probably me. I was just consistent and committed and regard myself as being dependable would rarely get beaten. I think that’s the sort of mentality I’ve tried to apply to Bluestone, to be a good person and to contribute every day, every time, every moment

Ed (38:20)
You’ve gone from the player to the coach, the mentality that I’m hearing is of a high performing coach and it’s so refreshing. You talked about EQ over IQ when you are recruiting, what are some of the key indicators of success that you feel as though that you can see up front and how do you take the bias out of your recruiting so that you’re not recruiting yourself over and over again?

Nick (38:48)
Well, I think this is an area where we’re still trying to get right. I think you’re going to be constantly learning based on the markets you enter into, the familiarity of the brand where you’re at in your life cycle. But for us, I think it really comes down to how does this person’s core values align with those of the company. I’m not really interested whatsoever in formal technical skills because I have none. I’m a disrupter, I’m a rookie or a novice. I don’t really know how to do anything in hospitality. But one thing I do know is I know what a great customer experience is and I know what underpins a great customer experience, which is having these values that align with fantastic service and being part of a high performing team and knowing your role and executing it consistently and dependably every time when I talk about hiring, I talk about how you fit in with our team, how selfless you are, how organized and disciplined you are.

I don’t ask if you can make a latte in two minutes or that you can dial in perfectly and you can do this very flash latte art with oatmeal in a piccolo. And under this sort of time pressure, I’m interested in people who align with what our culture is based on, which is service, which is based on human connection. Understand that we’re premium. So premium means that you come to work ready to go, you don’t come to work looking like a scruffy rag dole. You wouldn’t get a job working at PR if you hadn’t brushed your hair or brushed your teeth or wore deodorant. That type of expectation. And I think we are very, very transparent. I’m brutally transparent. I think I wasn’t transparent enough early on. No, actually I really was early because we just had no money. So if some one high goes wrong, you fail.

I think it was during that middle period we got a bit of a lu, we probably started thinking that we are really probably better than what we are and that we can scale and go to all these markets. But I think now we’ve realized how vitally important it is and how the highest must be, right? And you have to give your best chance and honestly it’s got to align. And I’m looking for backgrounds in a self-starter, enjoy being part of a team, enjoy learning and have a thirst for knowledge and improvement that have ambitions and are prepared to put in the work to achieve those. I’ve tell all my team that, Hey listen, you got to get my job. Everyone’s got to get my job. That’s what I want. You got to put me out of business, well put my role as a CEO out.

I think that’s the best thing because when there’s someone better to run this company, they have to run it. I will gladly step aside and I keep talking about the way you get there, you got to be unrelenting in your focus on improving and executing role because you know had probably read a lot about Reid Hoffman, one of the best articles I ever read about Reid was he talked about no one owns a good idea, execution’s everything, right? And if you look at bluestone, like millions of people have the idea of bluestone like it’s premium coffee, Australian great coffee, avocado toast, do it in America and scale it in different markets and have this sort of theme and look and feel. Yep, absolutely. Everyone’s got that idea. But the execution is what differentiates those who win and those who probably don’t reach their potential. So they’re the key elements that we are looking for and we want it in a way that’s really respectful and empathetic for other humans, it’s in the game of making people feel happy.

There’s not really anywhere near the pressure like being a surgeon, a pediatric surgeon or a neurosurgeon or a NASA rocket scientist like we are in the game of making people feel valued and feel happy and excited because they’ve made a discretionary decision to come and visit you. And one of the great parts of being in breakfast and coffee is like you don’t know what’s happened to that person. They might not have slept the night before. Their kid might have been screaming the whole night. They might be sick, they might be sick, their partner might be ill, who knows. But you’ve got this chance to turn around their whole morning, their whole afternoon and say, Hey, good to see you mate. Just someone saying that to you makes you feel, hey, oh maybe life’s not too bad. Maybe I can fix what’s going on in my life. Maybe there are people out there that care for me.

Ed (43:06)
That’s exactly how I feel every time I’ve, I’ve walked into the Blue Stone lane in Santa Monica this week, I’ve got

Nick (43:12)
A good scene there and that’s one of the reasons you can probably see it because that’s where I’ve been based so every day. And I certainly accused a lot in the first year of being too demanding and nitpicking and always focused on the negative. And it wasn’t a negative, I was just focused on that we could reach our potential, do better reach our potential, means it’s great every time. And it’s, that’s been a real awakening because one of our ops leads is a young Australian, she’s got enormous talent, but I’m sure many times she said Nick’s just unfair. It’s so unfair having Nick in the region, but now she’s got two of the best performing stores in the whole fleet. And I think that coaching her relentlessly is probably played a small part in that.

Ed (43:58)
So you’ve talked about cultural fit of employees, how about cultural fit of investors? There was a good injection of capital not so long ago from RSE, very high profile investors. What was your diligence on them culturally and maybe give some color?

Nick (44:17)
Yeah, sure. So RSE Ventures are our largest investor. They led our series E round. They participated in a number of bridge financing pre and post that E. They also did a huge amount of secondary to buy out some existing investors. So incredibly committed to Bluestone Lane. But Matt is, Matt’s story is extraordinary. He came from quite a challenging upbringing. He didn’t even finish high school because he found a way to basically sit his LSAT to go into do his Juris doctorate. He’s a true inspiration and been such an incredible supporter. He really didn’t have much relationship with his father. His mother passed away when he began his job as press secretary for Rudy Giuliani. Matt was tasked with overseeing the development of World Trade Center post nine 11. He ended up running the Jets and then Steve brought him across to run the Dolphins.

He’s been a serial entrepreneur in a lot of different businesses, primarily in media and public relations and marketing. He has had a huge part in the success of Gary Vacher and Vayner Media and now a multi sub series guest shark on Shark Tank, the US Shark Tank, which is obviously the inaugural one. And Steve’s background, Steve’s absolutely extraordinary his success because he’s made over a billion dollars in four different businesses. So related, which is the largest private landlord in New York City. They have just launched Hudson and Yards, which is the largest private real estate development in the US history, 40 billion. He also related owns Equinox and Equinox owns SoulCycle. Equinox is the most luxurious gym brand in the world. He also owns the Miami Dolphins NFL team and he owns the stadium and which host the Super Bowl. And he has also has he’s the main investor in rsc.

And RSE has about 30 investments from hospitality, media, sports, CPG or consumer product. I think what was really interesting is when I met Matt, I met RSC a couple of times and I wasn’t really sure on their strategy. They were quite wide and I didn’t think that they would be an amazing partner for us. So I never really followed up a lot of their information requests. But then I finally, about a year later after I took one meeting agreed to meet Matt Higgins. Now I didn’t know who Matt was at all, and I met him downstairs at 90 Water Street where we’ve got a coffee shop and we have two levels above it as our main corporate office. And it was chaos and I was not happy with what was going on. And I meet Matt and I was clearly very frustrated and I hadn’t done any sort of gurgling Wikipedia, so I didn’t know who this guy was.

And I was like, look, we’ve got so much potential. Look at this. If we just changed this element and this, it would be better and this person wouldn’t be waiting and they would feel more special. And then next thing, what was meant to be a 30 minute meeting ended up being a two and a half hour diatribe on what we’re doing well, what we’re not doing well, why we can succeed the market opportunity. And basically we just hit it off. And the way he was thinking about brands and teams and entrepreneurs and leaders really resonated. So they only back companies where the entrepreneurs either leading the company or heavily involved, they don’t like second generation, they like a brand in a particular life cycle. They really like consumer and they like premium and they like lifestyle. And that really fits perfectly with related positioning, Equinox positioning, soul cycle.

So I looked at a lot of those brands and we used them as peers. We said, look, the way people feel about Equinox and how much the propensity to spend in the LTV is very similar to what we want to achieve. SoulCycle was ahead of its time in this class fitness revolution focused on human connection from the communal change rooms through to the obsession with seeing the same person in the same class class fitness alone. You could chat for five hours because class fitness has been around for 40 years, I think about aerobics on TV and calisthenics and things like that. But SoulCycle come in and just say, Hey, we’re going to make it about really people coming together and feeling good. And that ritualistic notion of probably slight disintermediate personal training you a bit, but also drive real discipline that you’re going to be there and you’re going to see your friends.

And they used mechanisms like penalties to encourage that. And anyway, so I, long story short, I’d admired what these brands had achieved then one of the couple of really impactful things was certainly like having your meeting with Steve. Now Steve’s a very, very successful individual and you go to kind of a circle and you sit down with him and he’s just so interested in your story and he’s so interested in your background. And he did two store tours where he went to multiple stores and he asked so many people about Bluestone. And I think when he sees something that he likes and he believes the entrepreneur, he’s got strong conviction, he moves quickly. What was fascinating, what a lot of people don’t know is Steve Ross doesn’t drink coffee. So he couldn’t taste, he wasn’t drinking coffee and saying, oh it’s great coffee, I’ll like this.

He was based on experience and he was based on conviction that the team and probably the culture I was trying to scale was something that he was interested in. And I certainly do think that the fact that I tried really hard in both sports and in banking resonated with him. And I was very honest that didn’t achieve everything I wanted to in football. I tried really hard but wasn’t the dream career. And I think probably he liked that even more. But yeah, picking investors is a real art. You got to do a lot of diligence. And what’s extraordinary is despite working in banking for sort of 10 years, 11 years, I’d never worked in the private side. And just the negotiation on LLC agreements and operating agreements, sorry, is incredible and can determine so much about how you’re going to grow what you’re going to do, the culture and certainly a lot when if things go really well or things go really badly. And that’s been an incredible awakening and I do really enjoy that aspect now. I do think it’s quite fascinating,

Ed (50:43)
Nick. I’ve loved absolutely every second and there’s no doubt in my mind how this story ends and it’s a successful fairy tale. So good luck. I’ll be continuing to be a patron all across America if and when I’m here

Nick (51:00)
Gross tanks. I’m going to fly you over, mate, just to crop it up.

Ed (51:05)
Thanks for your time

Nick (51:06)
Thank you.

Footnote
It’s worth noting that this podcast was recorded in the first week of March, 2020 in Santa Monica, California. Two cases of Covid 19 had been confirmed in the US at that point in time. And the world was a very different place to the one that you are now listening in. Consumer businesses like Bluestone Lane are and will continue to be the hardest hit as cities go into lockdown and government restrictions continue to grow. And I only mentioned this because I think it’s really important to timestamp Nick’s comments as no doubt. In hindsight, his comments may well have changed if they were recorded, even just a week later.

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