Willie Degel on Why Politics are Killing Restaurants, and Why He Keeps Fighting
For many people, Willie Degel might be most recognizable from his time as the host of Food Network’s popular series Restaurant Stakeout. But the opinionated, intense, and authentic food professional remains on the front lines of the restaurant industry, a place he says resembles a figurative battlefield these days. Founder and CEO of the New York City landmark Uncle Jack’s, which has since grown to three units, he’s expanded his portfolio with fast casual Jack’s Shack Organic Eatery and Uncle Jack’s Meat House—a full-service brand that recently debuted in Duluth, Georgia.
Degel is far from finished building his empire as well. Like any successful entrepreneur, however, he understands the challenges and hurdles ahead, especially in a transitioning industry that’s figuring out how to cope with increased regulations, burgeoning wage rates, technology, younger consumers, and much more.
Degel took some time to chat with FSR about the business, what’s holding it back, and how his personality as a fighter is keeping him in the game—and swinging.
So, what’s going on with restaurants right now?
The restaurant industry, in the last so many years, has been under attack politically. There have been a ton of regulations, from cities, states, local governments, the labor department, lawyers, and numerous things. The business has really been scrutinized. Department of Health. DET. Labor Department. Lawyers suing employers like crazy, attacking them. The business is looked at more as a revenue stream for city and state agencies and lawyers than anything else.
The industry as a whole is under attack. Social media is changing the game as well. Food itself, in my book, is being dummied down. People don’t look at going out to eat the same way they did 10 years ago or 20 years ago. It’s not this entertainment, ultimate experience. People aren’t dressing up. There’s not this wow factor. It’s not as much of a celebratory thing. It’s done a lot more, and it’s done in a lot cheaper-type places, but yet the places still have to be funky and cool. But the menus are becoming more standardized, more Americanized. Burgers, mac-n-cheese, and all these normal things are going everywhere. They’re on social media. Colors. Ooey-gooey wow-y. The Tomahawk steak chop, I almost invented that chop 20 years ago and now it’s the most popular thing because on social media it’s about the bone.
With all that in mind, if you were giving advice to an aspiring restaurateur just getting started, what would you say?
It’s tough. I’m under pressure. Our brands, everything here is under pressure. Trying to find good, loyal employees is tougher than ever. The younger generation coming into the market doesn’t have the work ethic. With the immigrants, it’s different. Everything is different. Everything has changed. The whole world has changed.
It seems like, in regards to regulations and pressure, everything feels more pronounced in New York.
Yeah, I mean listen, the labor increases—they moved the front-of-the-house staff from $5 to $7.50 and they’ve moving them to $10. That was a 50 percent increase that took $350,000 out of my pocket. Then all of the other minimum wage [changes]. So just in the last two years it was $500,000 out of my pocket. They think you can keep charging the customer more. You can’t. You have to do more with less. You see restaurants opening up. You see McDonald’s. You see new concepts where everything is order online with new technology; order with a kiosk. They’re forcing people to be replaced by technology. Now, not every style of restaurant can do that. You’re an existing restaurant already, how do you do that? People come to your brand and they expect the personalized service. So how do you do it?
A lot of places are closing. Retail is under attack, so they’re closing. But retail has increased the square footage, price per square foot of leases astronomically in the past so many years because they were willing to pay top dollar to put their brand somewhere and only have a couple of people work there. For restaurants to compete with them and banks, it was tough. And then everyone looks at restaurants now and they want 10 to 15 percent of your revenue toward your rent. But with all of the increases in labor, Department of Health, the rules, the regulations to different agencies inspecting and checking in on you, it’s crazy.
You’re a big quality-of-service proponent. Where do you stand on the whole tipping versus no-tipping debate, especially in New York, where Danny Meyer really brought it to light.
I’m standing on it wherever whatever works for me to keep me in business, to keep me alive, to keep me where I can employ people but yet hire managers to be working partners and oversee my staff and run my system, then that's what I'm going to do. Whatever we have to do to make that work, we have to do. Because the front-of-the-house keeps getting raises and the back-of-the house, well we’re in dire strait times right now.
Is there a solution to this back-of-the-house problem?
It’s the hardest thing possible to me: finding good, hard workers. Everybody thinks they’re the best. Everybody thinks they deserve the most. The education, the language barriers, the different people mixing together. It never stops. It never gets easier.
With everything going on, how do you maintain the customer-service standards that have defined your restaurants over the years?
To start, we had to eliminate the bus boy position. So you’ve got to ask more out of everybody. We have to do more with less and the people working here have to understand that. You have to make some cuts. You have to make serious changes. You have to take some risk. You have to look at portions. You’ve got to look at prices. You’ve got to look at linen. You’ve got to look at bread. You’ve got to look at your lighting. You’ve got to look at energy. You’ve got to look at everything. Your purchasing has got to be as tight as possible. Look at steak prices—through the roof. There’s always some reason why something I’m buying every week is through the roof. It can be asparagus. It can be iceberg lettuce. It can be broccoli. It can be fish. It can be lobster. It can be steak. It’s always choose your poison of the month.
What I feel is the bigger companies are getting stronger and they’re bringing in technology and they’re mass producing. They’re making it much easier for the bigger guys to survive and they’re really hurting the younger start-up entrepreneurs.
Talk a little bit about your fast casual concept Jack’s Shack. What are some of the challenges of the counter-service model?
Jack’s Shack, you still have people who need to make minimum wage and that’s going to $15. So when you have, say, eight to 10 people full time making $15 an hour, if you add that it’s costing you $150 an hour, right? That’s $150 an hour of labor in the store besides your rent, your gas, your electric, the food, the perishables. So how much sales do you have to do an hour to cover all your expenses? How much can the customer afford to walk in a fast casual concept, order their concept, and pick it up to leave? We do over 300 customers in Glen Head, Long Island. Three-hundred people there a day is a lot of people. Could the store do a lot more? Sure. Based on the hour, it could do a lot more. We could do 400–500 on the weekends and the busier days. But you can take that same square footage and put it in Manhattan—1,500 square feet—and serve maybe 1,000 people a day. But then your rent is exorbitant. Again, they just think you can keep raising the prices. I just don’t see it happening.
They’re killing us. As an owner/operator I’m getting crushed. There’s no money left in the business. There is no reason why we should be doing it today. That’s how it feels. Everyone I talk to tells me they’re working harder to do way more to make less. And they don’t see any light at the end of the tunnel. A lot of people are selling and they’re looking to get out. That’s all I hear from anybody.
For you personally, do you see a way forward?
Me, I’m trying to grow and build more concepts, package it up. I’m a fighter. But then I talk to other people in fast casual and without the delivery companies they couldn’t stay in business. And then the delivery companies are extorting them because they’re a huge conglomerate and they’re using software and technologies and they’re charging them to come up first. People don’t talk about that. All these delivery companies have all merged and they’re almost one, and they’re charging people 20 to 30 percent of the sale of the ticket to deliver.
Have you had any experience with delivery?
Uber reached out to us and that’s what they were looking for. I said, no thanks. I talk to guys with six or seven fast casual locations, like Jack’s Shack, and they wanted me to buy them and I was looking to buy them, it was a healthy Mexican restaurant, and then when we looked at sales I said, ‘Your sales are all through Seamless and you’re giving them 30 percent. You’re not making money. You’re pumping your numbers up.”
This business is a 10 percent profit margin business. It used to have a lot more meat on the bone. Now, it’s 10 percent, but you better have systems, technology, and set up accountability everywhere. I have a full corporate infrastructure. Right now, they’re making all the money. I’m not making the money. I employ more people to oversee it.
How many people do you employ?
With your new Uncle Jack’s Meat House concept it sounds like you’re taking the route of diversification, not scaling up a single concept at this point.
We’re going more for affordability. With the Meat House, we’re talking about five different burgers. They’re all pre-loaded. Five different styles. They’re $14–$15. We have 12 core appetizers from $6 to $14. We have five, six sandwiches. It’s much more of a eat-in, all-day, anytime of day. But we built this really cool, incredible looking spot that looks like an old meat factory wearhouse. Then you have your cuts of steaks. But I’m doing choice cuts. And then we’re going to have rotations of some prime cuts. You can come in and get a nice, choice, dry-aged type steak for $20–25.
This value-driven concept, why do you think this is a great fit right now?
Look at American Express card. Everybody talks: Why isn’t the American Express card hurting. Businesses have been regulated. Businesses have been scrutinized. They’re not allowed to expense and they’re not allowed to entertain as much.
Every action the government takes, there’s a reaction. Do they think of it? I don’t think so.
Again, New York might be one of the most, if not the most, difficult places to deal with these regulations.
I just think New York State, New York City, is going way too fast on these increases. It’s going to kill us. It’s almost like we’re opening the door for anything and everything. But you know what unbelievable? This city and state wants to regulate everybody’s business but who’s regulating them? Everything this city and state does. How about their workers? How about their function? How about their accountability? How much are we getting out of them an hour. Look at the MTA. Look at how many billions it makes. It’s a mess. The trains are always breaking down. They’re not on time. Why? Why? They don’t have a revenue-making problem. It should be privatized.
People talk about the flying process the same way.
Airlines right now are killing us. They’re making more money than ever. They’re charging you for everything. We bailed them out and they went a la carte and they’re charging you for everything else. And that’s what the restaurant business is going to become. We’re going to ride this tough wave and you’re going to go out to eat and you’re going to have to pay for bread, for butter, nothing is going to be free. Everything is smaller portion, more controlled. And service is going to go down the tube. You’re going to see a lot less people working in restaurants.
What’s inspiring you to keep putting the gloves on?
It’s what I do every day. I wake up to do it. I’m a fighter. I figure we keep innovating and keep adapting and keep opening new concepts. But hey, sometimes I look in the mirror and say, what am I doing? Everyone I’m talking to is saying the same thing. And then, you know, you see these other big guys and they’re going public and they’re blowing up spots and opening up with the public’s money, but a lot of them are doing cheap, dummied-down junk food.
That’s one thing you’re definitely not doing.
Well, it’s my taste. I only know how to do things good and high quality. You have to learn how to do that and still execute more at a mid-level concept.
Jack’s Shack, Meat Houses, definitely can be scaled. I’m going to do a Jack’s Tavern. It’s like a little bit more upscale than the Shack. You can have a bar and come in. If that’s what people are looking for, that’s what you have to build them.