#12: Jim Balis on Balancing Growth, Team Culture, and the Founder-to-CEO Shift

Daniel Tsentsiper (00:01.819) Jim, welcome to the show. It's an absolute honor to have you on, my friend. Jim Balis (00:06.862) Thanks, Dan, I appreciate it. Daniel Tsentsiper (00:09.605) I always ask my audience a little bit about themselves and I'm sure that most of the people watching this episode have probably seen you at maybe a conference, have seen you on the news, but for the folks that don't know you, could you tell us a little bit more about, you your background? You've had an amazing tenure, but how did you start? Which I think is a really fascinating story. It's quite interesting. And what are you working on these days? Jim Balis (00:33.71) You bet. So I started in the restaurant space when I was 14. I was a dishwasher in New York at an Italian restaurant where I held multiple positions. you know, went to college, actually started a small catering company there, as well as a committee that liaison between the students and the food and beverage program there, because everybody, all my friends are complaining about the food. And I was like, well, why don't we find the people to complain to? They'll be happy to hear that we'll eat more of their food. Did that. I think that committee actually exists to this day. And yeah, you know, kind of stayed in the space, took a brief stint outside of the restaurant space post-college. Went right back in. then formed a boutique advisory firm called the Restaurant Management Group, which was working with banks and financial institutions and sponsors that had some troubled situations and did that for many years and joined Capital Spring in February of 2014. So I've been here almost 11 years. And then as part of that, I've been the CEO of a few of their portfolio companies, most recently Sizzling Platter, where I served as the CEO for almost five years. And that's a large-scale franchisee business that has 800 locations, 100 of those being in Mexico. So I'm a partner at Capital Spring. We're a restaurant-focused investment firm that loves emerging brands, franchisors, franchisees, you name it, small businesses, big businesses. We just love to partner with great businesses and help them grow and really are, I believe, a very good strategic partner to growing concepts. Daniel Tsentsiper (02:16.636) You've breezed right through it. You're extremely humble. I would say that from our conversation, I got a chance to kind of learn more about your approach. And he started off kind of focusing mostly on restructuring and helping, you know, distress brands, you know, pick themselves back up. And then over your, your career, you've kind of shifted into more of a strategic CEO. And then now you're focused on helping founders and emerging brands grow. So what was that kind of like transition like for you from going from helping distressed companies, companies that needed a turnaround profession like yourself to now being where you are today? What was that mindset shift like and how did you kind of go from going from there to where you are now? Jim Balis (03:01.166) Yeah, I mean, it wasn't planned. be honest with you. I honestly did not plan to start a boutique advisory firm, but, you know, it was a situation where I saw an opportunity where there really wasn't a player in the turn around restaurant turnaround space. They actually have a certification for turnaround professionals that is certified by the Bankruptcy Institute, which is, you know, I think it's like a subsidiary of the Bar Association. So I actually certified myself through that, which was quite a process. You have to take a two day test and some other things. So I was the only certified turnaround professional in the restaurant space. And, you know, for that was able to get. a lot more engagements, I think, than maybe others. And then transition to Capital Spring. Capital Spring had engaged me a couple of times on a couple of projects they had. And I had kind of talked to them about, there should be equity investing here versus just debt. And when they decided to pivot to do some equity investing as well as debt, they said, why don't you join the firm and help us with that? And what I would say is it is a psychological change because, you know, as a turnaround professional, it's all about preserving liquidity, you know, reorganizing the business, the balance sheet, you know, spending as little as possible and getting the most, which we all try to do even in growing businesses. you know, growing businesses, there's a lot of investment infrastructure, you know, and knowing when to invest in that infrastructure for growth is the balancing act, right? Because you don't want to pay it Daniel Tsentsiper (04:30.714) Of course, yeah. Jim Balis (04:42.724) bunch of people to sit around while you're opening stores, but then you don't want it to change your growth either. So I think one of the big fundamental shifts has been really understanding the need to spend and how to spend it prudently, but not from a turnaround perspective where you just don't spend and focus truly on saving your rate of prosperity to some degree. Daniel Tsentsiper (04:47.002) Thanks. Daniel Tsentsiper (05:09.462) So that's a really good point. And Have you seen from your experience brands like scale too quickly or maybe scale their GNA function to the tunes of millions and millions of dollars and not actually make a dent in their ambition or growth? What would you say is like the right time to start investing in that? Jim Balis (05:32.077) Yeah, that's a very good question and it's a very tricky one to answer because it's very situational, right? But we have seen businesses, look, we look at deals all year long. I don't remember how many opportunities we looked at last year. I want to say it was. Daniel Tsentsiper (05:37.104) in question. Jim Balis (05:52.207) somewhere around 400, not to say that we went out and visited each one. you know, there's obviously not enough days in the year, but, um, you know, there are a number of businesses where you look and you see, this GNA is very bloated, right. And, you know, they've over invested relative to the size of the business and they're only opening two stores. Do you need that? And we've actually underwritten businesses to say, if this were a non-growth business, what would the GNA be required to operate this business? So, you know, you don't need the development person, the real estate person, the other individuals that are there, and underwrite the business based on the fact that you might not be a growth-oriented business. Sometimes we'll look at it and say, it's bloated, but we'll underwrite it without certain people knowing that those people may not be needed or some other reason. Timing on that is very tricky. Daniel Tsentsiper (06:24.07) All right. Jim Balis (06:52.08) It depends on, are you six stores going to 12 stores or are you 30 stores going to 40 stores? It really is, and that's why it's such, I'm not dodging the question, although I would like to dodge the question because it's so hard to answer, honestly. It's really hard. It really is. Daniel Tsentsiper (07:06.232) No, for sure. I think that's, that's a good answer. It's situational. Yeah. Jim Balis (07:14.06) You know, there are some great outsourced resources now that are starting to emerge to support restaurants in these areas of growth where they can bridge to hiring somebody full time. And, you know, they're, might be more expensive than hiring a full time person, but you don't have the full time person on staff. And so there's benefits to that. Right. and so we look to bridge with these outs, outsourced resources and then a capital spring, you know, we do have some of those resources as well. You know, we have some. in real estate that supports our smaller businesses. They don't have to go out and hire somebody. And we've already subscribed to some of the site selection services, then procurement, and financial, and some other functions so that they may not need to scale their infrastructure. And maybe they can tap into some of our resources. Daniel Tsentsiper (08:03.683) And out of those stages, I'm sure you guys at Capital Springs, you guys have seen every single size of company, small, you know, to maybe even hundreds and thousands of units. For you personally, what's the size and stage of company that you like to play in? And you see like the, you guys would be the right people for the job. Jim Balis (08:25.442) Yeah, I mean, it's hard to answer on size. We like highly performing businesses, right? So those that are generating north of 20 % margins, preferably even north of, they get into the 30s, that's like incredible, right? Those that have built a couple of units recently at least, right? So they've proven that the growth is there. They have a prototype or maybe an idea prototype, they have a clear ROI on the investment that's also probably north of 20%, preferably maybe even 25 % or north. We have some businesses in our portfolio that we invested in recently, seven unit business in Southern California that's high 20s to 30 store level margins, the cash on cash returns of new store development. mean, it's a lot of second gen, but very strong returns. returns close to 50 plus percent. So it's more about the economics of the business and it is how people always ask me like, how many units? Well, it can be four units, great business, and it can be 50 units. I personally like some of the smaller businesses and working with those founders and those groups because usually we can add more value because they just haven't seen a lot of times what we've seen. I mean, last year, I think I visited close to 200 restaurants. I I stopped counting. Daniel Tsentsiper (09:34.625) Right. Yeah. Jim Balis (09:55.169) But you see a lot of best practices when you tour with great management teams like I got the opportunity to do, which I love. And we can share it with those. And we learn a ton from these founder-led businesses because a lot of times they're super scrappy. And they have fantastic ideas. living their business every day. So it's incredible to learn from that. Daniel Tsentsiper (10:17.55) Yeah. And this thing, I think that's a good segue. One thing that you've talked about quite often is you like to go in and help the founder turn into an executive, right? There's sometimes, you you, think that a founder equal CEO in my, in my opinion, I don't think that's always the case, right? When you're starting off, you assume whatever title works, but what is your approach to helping a founder turn into a professional, a leader? Is there something that you kind of look for, you look for in training these, these founders? And, I also know that you've, I've had the difficult conversations when you've realized that perhaps maybe the founder is no longer as effective in that position. And you might need to bring in someone from the outside to be that CEO. Jim Balis (11:06.626) These are pretty darn good questions you're asking. I'm not sure if ChatGPT helped you with these or not, but they're great. Daniel Tsentsiper (11:15.315) No, I mean, in Silicon Valley, has been a resurgence of this thing we call founder mode, right? And you see all these like top level executives coming back to their companies and, you know, completely changing things up. So yeah, I'm curious like how you kind of approach that challenge because it's very much a people challenge as well. Jim Balis (11:35.139) Yeah, I mean, it's very different. to be a CEO of a business of scale, right? You don't need to be a CEO of a seven unit, you know, whatever restaurant business, probably. you know. But once you start having department heads report up into you, you're managing, you know, potentially different revenue channels. Maybe, you know, there's CPG, there's your conventional business, you know, you're managing perhaps franchising or licensing. Now you're going international. Like you're managing, you know, multiple pieces of the business. that's when you start to evolve into more of the CEO and leadership role and that responsibility is very different. When you're a founder-led business typically, right, you're doing almost everything, right. mean... Daniel Tsentsiper (12:18.987) everything in. Jim Balis (12:19.822) At some point you're going to hire an operations person or two underneath you to be sort of a district manager, regional manager. You may bring in somebody to do some digital marketing for you that may or not be full term. You're managing that person. You're managing a bookkeeper controller type person, right? And then you're managing all the pop-up areas of the business, the facilities management, and dealing with landlords and real estate and attorneys. oftentimes what happens, and I'm not saying always this is always the rule, founders gravitate to do the things they like to do. I like new sites and I'm not saying I like it, but the founder may say, like new sites. love growing and driving around looking at real estate and dealing with landlords. And they tend to do a little bit more of that than they hire people to do the things that they don't like to do as much. And we're all guilty of doing the things on the list first that we like doing. As a CEO, you don't necessarily have that liberty and you Daniel Tsentsiper (13:11.372) Course. Absolutely. Jim Balis (13:19.306) aside from You know, there's being a CEO is obviously being a great leader, right? It's it's motivating your people. It's Managing their expectations. They know what's expected of them They know what you want from them and how they achieve and overachieve and you know how to develop a good culture and how to create an environment of teamwork There's all these elements to being a great leader But you know the area where I find You know some of the coaching comes into play the most is in prioritization, right? Let's sit back back and look and say, you know, I always say there's, you know, there's a limit to the amount of financial capital there is and human capital, right? And Within your day, you have so many hours you may want to spend. It could be 40 hours a week, could be 60 hours a week, could be 20 hours a week. But how do you look at those hours and spend those most efficiently and prioritize those items to make sure you're focusing your attention on those action items that are gonna impact the business the way you want it. you want yourself to impact the business the most, right? And if it's growth, am I making sure that I'm prioritizing growth and I'm not sitting there driving around to my restaurants and working the expo line because that's what I like to do. And refine that prioritization and really focusing on the top priorities of the business that deliver value to the business is an area that people oftentimes, founders typically don't step back and look at really objectively. Daniel Tsentsiper (14:53.73) I see. Those are all, I mean, these are all like leadership principles and things that I think what makes you, I think quite unique is that you've been in several CEO positions at different companies at different stages. So a lot of the times, I mean, as someone that has been a founder myself, you don't really know what you don't know. So you're kind of making shit up as you go. And I would have loved to have had, you know, someone that is, was a mentor advisor kind of guide me along the way, but think founders, they have such a big ego and it's so personal to them. It's their baby. They've worked so hard to get to where they are. And sometimes, you know, having someone come in that's helping drive the business in one way versus the way they see it can be a very difficult conversation. um, you know, you mentioned that when you started to educate yourself on, how to become a good leader, um, not, not a huge fan of asking people for like the recommendations on books and, people they look up to, but has there been anyone that has been like pivotal in your growth? Maybe it was an author or a mentor that you've kind of adopted a lot of their leadership, like learnings and. Jim Balis (16:04.492) I mean, I really like, there's a book that I just finished called Connecting to the Future, Mohammed Al-Hardy. That's pretty interesting. mean, it's a little bit more on the fun side. He started and led a very large scale fund. So it's a little bit more, but the leadership principles that he talks about in that book, I think have been very on point. Daniel Tsentsiper (16:11.508) and I tend to future. Jim Balis (16:30.378) And it's not on everybody's reading list, which is one of the reasons why I was intrigued by it. It's good. Daniel Tsentsiper (16:37.216) You're gonna have to read that one. You recently had a very fun period over the last like four years or so with sizzling platter. What brought you to sizzling platter and what have you been able to accomplish in those last four years? Jim Balis (16:53.902) Yeah, I mean, what brought me there is, you we were invested in the business and the CEO left very abruptly. So I was forced to step in and then COVID hit, navigate through that. what was great there is we really had a fantastic team that worked extremely well together and we had a lot of very complimentary skill sets. And so, you know, hitting the ground, running there, you know, putting a three year plan together to grow the business. You know, at the time we were 242 units and five brands. And I knew I wanted to add more brands. I knew I wanted to really accelerate, M&A and acquiring, you know, other, units within the franchise. as businesses we were in. I knew we wanted to improve the relationships and the brands that we were in and obviously grow the business and organically build stores that were very successful with high ROIs. You know, we did it. And then as we started to achieve success there, you know, we kind of stepped back from the business at one point and said, well, geez, you know, like, how are we doing? And one of the questions we asked is how many people did we onboard in the last 12 months? You know, and it turned out to be close to 22,000 people. And we looked around the room and said, we're doing something wrong if that many people are leaving our organization, you know, because our total payroll was like 13,000 at the time. And so we relaunched our mission. Daniel Tsentsiper (18:19.177) Wow. Jim Balis (18:21.448) statement to really put the team member first and really lean into our mission statement core values. Part of that exercise was even if we had a meeting on financials, give us an example of where our mission statement came to life last week. And as we had our brand president calls, that was the first item on the agenda that they had to start with to really live and make it part of our DNA and show us how that is coming to life. And, you know, it was a big overhaul of the philosophy of the company. But one of the, you know, items I'm most proud of, and again, this was an effort that was actually led by other people at the company. But, you know, it worked out extremely well and became our ethos. And really materially, I think, you know, changed a lot of success, our turnover went down our you know, employee sentiment improved and, you know, that was a big piece of it. And, you know, not only achieving the financial success that we had, know, really enjoyed those elements as well. Daniel Tsentsiper (19:34.847) Congratulations. Yeah, that's, I think that's, when I first started looking to see how big sizzling platter was, I was, I was surprised. I thought you guys just owned sizzler when I first started in the restaurant industry, but yeah, you guys, yeah, you guys definitely grew and, you know, there's been news about your guys' success. So, yeah, big, congrats to you. And, I guess as we're wrapping up, this is another one of those tough questions. You can take it any way you want, but this has been a very, Jim Balis (20:01.39) Thank Daniel Tsentsiper (20:03.721) tough year for restaurants. Last year was also very tough. Let's take a more positive outlook here. What are you most excited about? Whether it's restaurants or franchising or new concepts that are popping up, what has been getting you excited about your work and where do see yourself maybe exploring in the next year or so? Which areas? Jim Balis (20:28.578) Yeah, I mean, look, value is going to be a big subject discussion in the next eight to 12 months. Right. And so it forces you to be creative on value. And I think Chili's has done a fantastic job with that. Right. They're messaging around we're better value. We're against a McDonald's. Look what we deliver. Right. And I'm excited about what these times are going to force us to be how they're going to force us to be creative around value. I think that's going to be very Daniel Tsentsiper (20:44.094) Absolutely. Jim Balis (20:58.512) interesting as well as a challenge. I think you're gonna start, I mean you are starting to see a lot more entrance into categories that are unique, you know, and then I think we're continuing to see more experiential type brands and I'm excited for those and you know those can come in. various farms in fashion, whether it's how you order and receive your food and engage with the brand to truly like what the experience is like. where it can be more immersive or. gaming and so forth. look, think it's, it's, we've gone through a lot of tough times, you know, we, we are constantly experiencing challenges, but those, those challenges challenge us to be better and focus on, okay, you know, what, what appeals to our guests right now? And, know, how do I most effectively win against the competitive set? And, you know, I think those groups that are, that are more creative and better at executing are going to be the winners here. Daniel Tsentsiper (22:10.141) Jim, thank you so much for joining us. I really appreciate your time. Jim Balis (22:14.018) You're very welcome. Happy to be on. Daniel Tsentsiper (22:16.509) Take care.