Inclusive Innovation: Lauren Fernandez Ushers a New Era for Women and Minority Entrepreneurs in Dining

In this insightful episode, we're thrilled to welcome Lauren Fernandez, the visionary behind Full Course, a groundbreaking initiative reshaping the landscape of the food industry. Lauren joins host Meredith to share the exciting journey and purpose of Full Course, an organization dedicated to empowering underrepresented entrepreneurs in the culinary world.

Lauren reveals the inspiring addition of three dynamic women to the Full Course board, each bringing a wealth of experience and knowledge to support the mission. From the revival of legacy brands to the infusion of tech in restaurants, Lauren and Meredith delve into the essence of Full Course's mission: to provide minority and women entrepreneurs with the necessary tools, strategies, and capital to grow their brands.

This conversation is not just about investment; it's about making a tangible impact, nurturing brands that cater to diverse communities, and fostering a more inclusive industry. Lauren discusses the challenges these entrepreneurs face, from the lack of access to capital to the need for operational expertise, and how Full Course is addressing these gaps.

Moreover, Lauren touches on the significant consumer behavior shifts post-pandemic, highlighting the demand for culturally rich and diverse dining experiences. This episode is a deep dive into how Full Course is not just investing in businesses but is committed to changing lives by supporting the growth of unique, culturally significant restaurant brands.

Meredith and Lauren explore the critical role of technology in modernizing restaurant operations, emphasizing the need for innovative solutions to age-old problems like inventory management. They also discuss the essential elements Full Course looks for in potential investments, with a strong focus on the founders' vision, leadership, and the brand's unique position in the market.

Join us as Lauren Fernandez shares her passion and vision for a more inclusive and innovative food industry, through the lens of Full Course. This is more than an investment story; it's a movement towards a future where every entrepreneur, regardless of background, has the opportunity to thrive in the culinary world.

Chapters

• 0:00 Empowering Women in Business
• 5:55 Empowering Women and Minority Entrepreneurs
• 17:29 Understanding Capital Structure in Business

Transcript

Speaker 1: 0:00

We are live at Create, this time with Lauren Fernandez of Full Course, and I am super excited to talk with you, Lauren, not in the least, just because we finally get to see each other in person, yes, which is exciting. Very exciting I have spent a lot of time looking at you through Zoom, which, don't get me wrong, your Zoom background is amazing.

Speaker 2: 0:18

Thank, you, your lighting is fabulous.

Speaker 1: 0:20

You always look good, but it is exciting to see you in person and be together. And we just came out with some news for Full Course, didn't we?

Speaker 2: 0:28

We did. We just announced that you joined our board and we are so excited. One of three amazing women that we just added to our board, including Jennifer Ryan, who is not only a restaurateur but a tech founder in the space and former Goldman Sachs, but a tech founder in the space and former Goldman Sachs. And also Stephanie Stuckey, who is a CPG expert and is rekindling and reviving her company that has been in the family for two, three generations now and really bringing back Stuckey's, which is a famous C-store pecan candy company. So we're just super excited to have all of you on the board. I could not be more fangirling right now. Very excited, I love it.

Speaker 1: 1:07

We are excited to be joining you and I think at least for me personally, I'll say I believe so much in the mission. I know that you're going to make money while you're investing in people. That's what investors do.

Speaker 2: 1:16

That is what we do.

Speaker 1: 1:17

But the particular style of investing that Full Course is doing bringing the tools to minorities and to women who have historically been underfunded in the space, to help them grow amazing brands, I think is just incredible and a personally rewarding mission for me, so I love it.

Speaker 2: 1:35

Thank you and we're honored to have you be a part of this and to have those voices around the table who've been through a founder journey, women who've been in executive leadership in this industry and who understand what that struggle is like and what that journey was, so personal for each of us. And I think it's easy to say. I know I worked four times harder, probably, than the average bear to get to where I am in my career and I don't lament that, but I think rather celebrate it now that I can turn around and build those bridges for other women, other underrepresented founders to come forward. It's time, that's right.

Speaker 1: 2:11

Maybe just talk a little bit about Full Course and what inspired you to start it.

Speaker 2: 2:16

I just looked around and I think I knew this instinctively even in sitting at my seat as the general counsel at Focus Brands. But when I became a multi-unit franchisee and restaurateur, I think I understood even with more detail how hard it is for women and minorities to lead enterprise in this space, whether you are a multi-unit leader or you're an executive or you're a founder of a brand. I had a front row seat at that time to watching Stacey Brown grow Chicken Salad Chick with the team there and it was still in the fairly early days of the brand and it really reinforced for me one. There's a ton of demand for these brands that are targeted to women and minorities. They do incredibly well when they have that targeted demographic and I certainly experienced that as a franchisee for chicken salad chick where we had double-digit comp growth year-over-year. It was insane.

Speaker 2: 3:11

We need more brands like that and when you ask yourself why they don't exist, it's because they're trapped at that one, two, three unit level where there's not a huge return on the value of the business maybe two times EBITDA if you're going to exit. But more importantly, they don't have the capacity to grow. They lack the right growth strategies. They don't necessarily have the right team and they certainly don't have access to capital. So when we founded Full Course, I was really trying to solve for that and I think, as a value proposition, our palates are ready for this. We compressed, as you say, so much consumer behavior change into such a small period of time during the pandemic. I think we're just hungry for different kinds of foods and we want to have those experiences that are a little bit outside of our norm and we're ready to bring those kinds of culturally representative brands forward.

Speaker 1: 4:04

I think you just said about five things that I want to follow up on, so I'm going to see if I can remember all of them.

Speaker 1: 4:09

The first one I am reminded of, npd group used to talk about the rise of drive-thru and that it really coincided with women entering the workforce. In mass labor force participation rates increased for women. You saw drive-through really growing as a format and a lot of that was around bringing convenience to a woman who was now going to work and trying to take her kids to soccer and trying to cook dinner, and it turned out she couldn't do all three things at the exact same time and drive-through solved that need for her. Now we're what, 30 years on from that, and you're seeing a different type of convenience arise, which part of that is obviously delivery and home meal kits all kinds of innovation and prepared food, whether it's at grocery or elsewhere really making it easier for both men and women to be caregivers and parents, but also to be at work. I'm wondering if that's a thesis in some of the things that you invest in. Are you thinking about how can this make life easier for those people who are trying?

Speaker 2: 5:15

to do it all. Yes, as a working mom, I can't unring that bell. I feel like I intentionally, or maybe even unintentionally, put that stamp everywhere. So when we're building restaurants, it's changing tables in all the restrooms. Has someone paid attention to the kid's menu? And we had one client where we made a recommendation that they offer to cut the kid food when it came out with the parent food. So you as a parent don't waste 15 minutes while your food is getting cold trying to convince a toddler to eat squares or strips of the hamburger. And that kind of forward thinking and that thoughtful consideration, you know where it comes from. It's just empathy. 47% of the women who are working in restaurants right now are single moms, and why are we not tapping into what those working parents need, not just as employers but as customers too? You want to know how to tap into the kid market. That working mom, that working dad.

Speaker 1: 6:15

Ask your teen. The challenges that a consumer faces are also opportunities for businesses to help solve those challenges.

Speaker 2: 6:22

I agree, but I think that this is about thinking more constructively about what we can do to better the service model. We came out of the pandemic. We added more technology, we had less labor, we had to deal with food shortages and all kinds of food inflationary processes. Sometimes it's not just about completely re-engineering your menu. Sometimes you don't even need a brand refresh. You just need to take a step back and listen to your customers, listen to your employees, who should have their pulse exactly on what's going on with those customers. Sometimes we just get so buried in the day-to-day and I know this is true when I was an operator I would definitely four hours at home at night after the kids went to bed to bang out marketing and schedule the social media, and then get up the next morning and do it all over again, right, and you don't have time to be thoughtful and intentional about the practices in your business, and sometimes even the smallest changes can have a huge ripple effect.

Speaker 1: 7:21

So do you have a hypothesis about why it's been more difficult for women minorities to get past that one, two, three unit stage? Attract the capital they need to grow? What do you think has been the barrier historically?

Speaker 2: 7:31

It's access to capital. They're ridiculously undercapitalized, and that is everything from traditional banking all the way through to raising from friends and family. You know those markets traditional banking all the way through to raising from friends and family you know those markets. Traditional banking and finance have been traditionally white, male-dominated, and there just tends to be, I think, some inherent gender bias in how we fund businesses. Studies have shown that also women and minorities are less likely to apply for and get bank loans.

Speaker 2: 8:00

A lot of research has been done on this and sometimes they're actually self-defeating in the way that they're not filing at all for the bank loan out of fear of rejection. This is especially true in African-American communities. So one of the things we really try hard to do at Full Course is to educate around capital options, especially for the emerging entrepreneur. What are your debt options? Can you do it as friends and family? Can you do a crowd raise? Is an SBA loan right for you? And just do a lot of education in this space, not just about equity options, but debt as well. And gifts right, sponsorships, scholarships grants.

Speaker 1: 8:35

There's a lot of research around in particular, women not putting themselves up for, say, a promotion until they're sure they tick every single box, and I imagine that applying for a loan can feel a little bit like that. Or going to ask your friends and family for money even you want to feel fully prepared and like you have ticked all the boxes and you're going to knock it out of the park, which is tough when what you're doing is inherently risky. You're creating something new.

Speaker 2: 9:04

Yeah, and I think there's also this sense of okay, we have to prove ourselves and work that much harder. And you feel the sense of failure when you have to ask for that kind of help, when it should be framed as oh my gosh, look at how far I've come and I've been able to do this on my own so far. Maybe that's just me, but what I will say is I think that women need to have the courage to stand up and ask for help. I think this is also true of minority owned businesses as well.

Speaker 1: 9:26

So in the last five years, our industry has been flooded with capital coming in, in particular on technology, but also to what I will call tech enabled restaurants.

Speaker 1: 9:38

They have often gotten multiples that would not have historically made sense in the restaurant industry and now, because interest rates are rising, a lot of that money is pulling back and becoming more conservative. I think a lot of venture capital money also realized maybe restaurants wasn't the right place for venture capital money. They are more, by definition, capital intense than, say, a piece of software. So as that's happened and folks are starting to come back to, oh, this is how you're supposed to fund a restaurant, I imagine you get a lot of people knocking on your door asking Lauren, wait, how are we supposed to do this again?

Speaker 2: 10:14

It's always back to basics. What I will say about the technology flood into our industry is a couple things just to set some context. Here is one is we have had a technology desert in this industry for a very long time. It was fairly recently that we went to the cloud and got rid of those giant satellite dishes on top of our restaurants. That was in fairly recent history, and so untethering us from these big bulky cash registers and really taking it to the iPad format was a fairly novel innovation for our industry, but it had been around in other industries for years prior. So we're always late to the party.

Speaker 2: 10:52

It's interesting and I think that's because a lot of technology companies don't really have that operational sophistication to layer the two things together and to see successful innovation land and land properly in a restaurant context. The other thing that I'll say is, yes, a lot of tech and venture capital. There was so much capital and I think because of the digitization of restaurants, especially during the pandemic, it became a kind of a hot investment. So you just had to say the words restaurant and tech and you got a check right.

Speaker 2: 11:23

I actually had several people suggest to me when we conceived of and did the first year full course, like 2020 to 21,. Why don't you have a tech solution? Slap a tech solution on this and you'll get a check. And I said well, it's not, really not our purpose, that's not what we do. No one on my team is expert at that. That's not what we're doing. Do what we do? No one on my team is expert at that. That's not what we're doing. Do we need tech solutions in our investments?

Speaker 2: 11:44

Absolutely, but we're not a tech company and I held fast on that and I don't regret it. But I think the third thing I will say is a lot of these tech enabled restaurants that have IPO'd or been in the public spotlight are still losing money, and so there was not a focus on the basics. What is your payback period? Does it take you five years to get paid back on that restaurant? Two or three? I know what I like as an investor. I like to see that under three and close to two, right. And so we stay in our lane and we repeat the things that we know have worked in this industry, even through periods of economic contraction like 06 to 09. I think those tested strategies are where you go back to and yes, we do a lot of coaching in this space and it's not even just how to build a restaurant efficiently. It's also things like how to read a P&L right, how to manage and shift your labor so that you're meeting the right customer demand. What's the highest and best use of your menu? Are you cross-utilizing on your menu? And it's almost shocking to me how we've gone back to basics again. But I'm here for it because those are tested strategies we know work. We just go back to basic and I'll give a really easy example and I'm still waiting for someone to solve to this.

Speaker 2: 12:54

Here we go, why there exists in other industries optical recognition of bottles, cans, cases, and they count, inventory and immediately transfer it into an inventory account.

Speaker 2: 13:07

Please put a camera like that with that kind of software in every walk-in cooler and dry storage rack, because we waste so much time counting buckets, counting packets Is it this unit measure or that unit measure? And inventory is so critical to understanding that we even recommend it as a best practice to do it weekly in some cases, especially on high ticket items like protein. And so the thing to understand there is, in a volatile economy, especially where you see inflationary pressures through the supply chain, you not understanding your cost of goods sold fully loaded means you're not pricing correctly in a very dynamic and fast-paced environment. And while there are amazing dynamic tools out there that do adjust for pricing, even in a digital environment, if you don't have that base cogs covered, what's it for? Because you could be adjusting your pricing down too far right, even the most rudimentary and basic tasks that are done with a clipboard in a restaurant can really benefit from appropriately applied technology. So someone build that for me, please.

Speaker 1: 14:11

Okay, so what do you coach restaurants? Maybe they come to you and they have three. They have clear consumer demand. Maybe they don't have the back of house completely in order, they're not totally profitable yet, but consumers like the product and they come to you and they say, oh Lauren, we want to invest and roll this thing out. Where do you tell them to turn? What's the first stop?

Speaker 2: 14:30

Fundamentals. We like looking at a foundation that's really solid in these brands, and so we will coach them and help them work through some of the basic unit level economics need to be there. The operations, the procedures, the documentations and standards. There are some of those things that are more critical than others before you scale, and so we try to prioritize them and front load them prior to investment. It does take six to nine months sometimes to get these brands ready for investment, but it's the right thing to do when you are looking at a restaurant concept to invest in?

Speaker 1: 15:00

what are the things that you tick, tick, tick? Yes, they're ready, there's a long list.

Speaker 2: 15:05

You have to triage the things that you want in the ranked and importance and for us it always starts with the founders. We do a lot of work around their leadership style, their communication style, and for us that's really where it starts. Is there a compelling story to tell here? Is it going to have a niche in the market? You start looking at the brand itself and if it's sticky, if it's interesting to us, and then you start getting like really down into the nitty gritty of the brand itself and you fundamentally want to see that the unit level economics are there so that it's franchisable at some point. But really, I have to say, it just starts with the founders. We want to work with the right people. We look at this as an investment in the future of the industry and the leaders are the people who are going to do that. Are we backing the right people to make the changes we want to see in the industry? That is a big part of the equation.

Speaker 1: 15:52

Now, not every investment is going to be right for full course. That is the way of the world. There are certain things that match to you and certain things that match to other investors. So one of the things I love about full course is that when you see something that isn't quite right for you, the relationship doesn't stop there and you give a lot of coaching and feedback on what things they need to do to be ready for you or which other sources of capital might be more appropriate for them. So can you talk a little bit particularly about the latter, now that we're in this era where money is not free, how you coach restaurants toward different avenues of capital.

Speaker 2: 16:26

The education piece is at the heart of everything that we do at Full Course and for us, what this means is you have to be willing to let someone go if it's not a good fit on both sides, and you have to wish them well and give them the right tools. The lawyer in me always told my clients like I just want you to make an informed decision. I can't turn it off. And so I like just laying it out like this is what we offer, this is how we're different, and maybe it's not for you, and that's OK. And if it's not for you, let me make sure you're asking the right questions of the next investor. Let me make some introductions for you.

Speaker 2: 16:59

In some cases, it means the timing is not right, so we have to just let it sit. We have to work with them as coaches or consultants, and we're willing to do that too. And now that we're tracking deal cycles, it's crazy because some go right away, six months and done, and some have way longer cycles, like they'll come back to us in a year. But I'd rather be the benchmark that sets the bar higher than to try and do every deal that comes through the door in a very compressed timeline. You just have to be patient. You spoke here this morning at Create.

Speaker 1: 17:31

Can you tell us a little bit about what you talked about?

Speaker 2: 17:34

We talked about all the different capital structures, equity debt and doing gifts or grants. For most entrepreneurs, understanding how capital works and what the different forms are and making sure that they have their head wrapped around. Their options are at different stages of the company's growth and how they can execute that with a blended strategy. To me, that's always a risk reward matrix. Some of these forms of capital at different stages in the company's existence are going to be riskier than others. Some will have higher or lower reward and you have to map that out to understand what the best strategies are.

Speaker 1: 18:08

Thank you so much for spending a little bit of time with us. My pleasure Telling us more about full course.

Speaker 2: 18:12

Yes, yeah, thank you. See you around the conference, absolutely.