SHAWN: Welcome to Digital Hospitality! I am your host, Shawn Walchef, founder of Cali BBQ and Cali BBQ Media. Digital hospitality, we’ve come on quite a journey. Today we are here, from the Restaurant Transformation Tour, Restaurant365 has an incredible space they are activating at an event to bring restaurant professionals, from actually all over the world, to this space. And today I have the privilege of sitting down with Tom Rutledge, RDMS.
TOM: There it is.
SHAWN: There it is. Give me the elevator pitch.
TOM: Well, thanks for having me. We are an outsourced accounting firm, so we only deal with restaurants. It’s our singular focus. We bring both the numbers and some operational consulting to the table, but this is all we do. So, outsource accounts, payable payroll, all the fun stuff that nobody wants to do. Sales tax –
SHAWN: Wait, are you telling me that the accounting side is not the sexy part the restaurant owners sign up for?
TOM: It’s a secret. and I don’t want to share it, but I’m getting on camera saying it…but, you know, fundamentally we are also operators. So we look at all the things that we want restaurants to focus on to guess the quality of what they’re doing, the service, their staff. And we try to remove anything that requires the administrative side, from their day-to-day. That’s our elevator pitch.
SHAWN: Bring me back to the operator background then, Tom.
TOM: Absolutely. My initial background was in finance and accounting, that was my education. My early 20s, I got into finance and realized I made a terrible mistake. It was not how I wanted to spend my every day. I call it my “early life crisis.” Dropped everything in New York, moved to San Francisco actually, and went to culinary school, and thought I was going to be, you know, the next hot chef going around.
SHAWN: You didn’t look at the finances of the restaurant business?
TOM: You know, I was just kind of like, let’s take 18 months to make some food.
SHAWN: It’s two different ends of the spectrum.
TOM: Exactly. Actually, I worked in restaurants when I was in college. And just being a numbers guy, being in business school, just kind of realizing this was underserved, right.
TOM: You hear the horror stories. Restaurants fail, not many of them survive, all that fun stuff. I came out here to see what it was all about. I wanted to move to the West Coast. Food is an obsession, that was really the foundation of everything. It was dining which really brought me to the game. And I attacked it from the back of house side. Cooked for a little while, went around to some of the fancy kitchens around San Francisco. Was politely told, ‘Hey, front of the house maybe, you want to do that instead?’
SHAWN: Politely told.
TOM: Yeah. Put the pan down and went to the front of house and started running things. And again, it’s such a fun, unique, twisted industry, right? You have to be production, you have to be sourcing, you have to be service, you have to be sales, you have to do everything, and you have no budget to do anything.
TOM: So, to tackle that, it’s challenging. When you get great people in there, it can be so much fun, and I had a phenomenal fun time doing that. In my journey on the ops side, I found a restaurant accounting firm. They were doing the books where I was working. Gave my background to join them for about two years. Met my business partner at the time, knew enough to be dangerous, but realized I didn’t know enough about the restaurant industry to get in that lane yet, so I went back into ops and was running groups. Went to New York, joined some big firms, big restaurant groups. Found another group where I eventually ended up taking over the COO role of about 15 units. And it was then I was like, I still don’t have the data, I don’t have the tools, I can’t run this business the way I want to. We were using a payroll software, a polling software, an accounting software, it’s just the whole thing. So, you get into technology to fix the problem, and that was part of it. And the other side was, you still need people who know what they’re doing.
TOM: And that was the foundation of starting RDMS. My business partner and I called each other and said, it’s time, let’s go do this. We jumped in head first. We do consider ourselves a service company that uses technology.
TOM: We are not a technology company that provides a service. We don’t create the tech. We evaluate everything, we have our fingers in every piece of software that’s coming out there. What we do is we bring the best in-suite to our clients and say, don’t use that, use this, don’t waste your time on this. What we find more often than not is people look at technology, they see something that is shiny and go, that’s going to fix all my problems. It doesn’t fix all the problems.
TOM: You can’t let technology become the project. The project might still be food cost, right? You can’t then make technology become the project, forgetting that you’re actually trying to reduce food costs. So, that’s where we come in and bring those solutions to the table and help guide them into making the best path forward.
SHAWN: That’s interesting. When we first started working with uh Brad Newberg, who actually was our U.S foods rep, I remember we were having a theft problem, and what we were talking about is, oh, let’s get cameras to solve the theft problem. And what he said at the time, which is, you know, back to what we’re talking about, is: you can have cameras but that doesn’t solve the fundamental issue of what’s actually happening
TOM: Or your power’s too high, why do they have access to it, what’s going on with your receiving, what are you doing in inventory. That’s what we like to figure out, right. And there are, U.S foods has incredible software themselves, like there’s a lot of cool stuff out there, but is it distracting you from what you’re actually trying to do? So, what is that ecosystem that you’re using? And the restaurant industry is very fractional, it’s all over the place. It’s fun to see what all the cool tech is and people are doing, but can you bring it into your organization? Can you actually get value out of what you’re bringing to the table? Do you spend more admin making the technology right versus, again, reducing food costs or writing vendor schedules and all that fun stuff. So, it’s a fascinating thing. What we like is, what we bring to the table from the accounting side, we’re bringing through the account, the restaurant side, we’re physically implementing it. Did it work for us? We’ll let you know. And it’s also fun too because, you got a 15 unit group, they need solutions. At a single, two, three, four, or five unit group, they don’t know they need it, it’s not available to them, the scope is too big. So, there’s a lot of different pieces and leverage you have to pull.
SHAWN: I mean, it’s really exciting for me; that’s why we do the show “Digital Hospitality.” We talk to small business owners, we talk to tech founders—you know, like Tony from Restaurant365. Understanding that we don’t need to go and build the technology, we have access to great, incredible brands that are out there. And the rate of change that they’ve gone through, it’s significant.
TOM: It’s incredible. We’ve been with R365 since about 2017.
TOM: And so, we were looking at it in 2017, we kind of brought it on. When you have the variety of brands we have and the variety of operators we have, some people get stuck in their lane. “I want this thing that I’ve known for 20 years.” Okay, but just so you know, I can get it to you faster, quicker, better, more accurate if we do this. “No, I know, I want it this way.” And then eventually, it’s fascinating, there are slow adopters and early adopters. By 2019, we were ready to go full tilt into 365—just all in, no questions asked. COVID in 2020 made it. well obvious, that this is the time to make the change, correct? So, we went really headfirst. The response has been awesome.
SHAWN: Isn’t it amazing?
TOM: It’s incredible. I’m saying that from the accounting side, too. It’s not just the operator’s side. As an operator, to be able to pop in and know what you want to know and not have it behind some theoretical wall. Call the guy, he didn’t answer the phone and all that fun stuff. From the accounting standpoint, to not push all that data, game changer.
SHAWN: That’s just fascinating. I’m reading Matt Higgins’ book on “Burn the Boats.”
SHAWN: When I’ve been fortunate for our barbecue brand in San Diego to go on a lot of different media opportunities, you know, what happened during the pandemic and everyone’s responses. So, we pivoted during the pandemic and we say, well, we didn’t pivot, we already believed in the internet. We went all in on the internet. So, we picked our partners strategically, understanding that we need to have the best in-class so that we don’t have to worry about that side of our business.
TOM: It’s phenomenal. It’s really, really interesting. You know, pivot is, I had to sell on DoorDash, right? Like that’s a pivot. I’m a fine dining Michelin two-star spot, now I’m selling to-go food. But then, did you have a point of sale that had it integrated, were you manually entering everything?
SHAWN: Correct. We had to switch to Toast in order to solve all the other problems that we had.
TOM: I mean, Toast came on like wildfire. I mean, that has uprooted so many things. We went from everybody on Aloha, more or less, to, I think it took two years to be 95% total.
SHAWN: Wow, incredible.
TOM: And it was purely organic. So, I mean, I have a Toast terminal in my accounting office, that’s how much we use it. We’re just sandboxing everything. And you have to these days. But you’re right on the pivot. You always kind of needed to do delivery, you didn’t realize there was 20% of your sales hanging out there that you had no idea about. And catering too, groups like Triple C, you know. There’s just so much out there to just get events done, and if you don’t know all those games, your competition does. That’s the really interesting part.
SHAWN: Why is it important? Because for me, this whole show, Digital Hospitality, it’s creating content online on podcasts, on YouTube, on TikTok, on LinkedIn. I talked to founders, restaurant owners, small business owners. How important is to tell your story. Literally, our story is that no one was telling our story. Like, we would have gone out of business if I didn’t get behind a microphone and get behind an iPhone and start publishing content. But for me, when I go to events like this Restaurant Transformation Tour, I realize the work that gets done, it always happens in real life. You know, business owners, creators, entrepreneurs. We are the original creators.
TOM: That’s true.
SHAWN: Now, we have Internet storytelling that helps us connect to the people that matter. You know, you’re trying to find and help other restaurant groups. How do you get to discovery? Well, you come to events like this, where they’re literally – Tony was giving the keynote speech, half of the room has flown into San Francisco just to attend this Restaurant Transformation Tour. Isn’t it incredible? Y
TOM: You know, it’s funny because my business partner, we came out of COVID, we were very fortunate. We lost no clients due to COVID, which was terrifying in the beginning, and we were proud of it to come out of it. We have grown by nothing but word of mouth. We’re restaurant operators and accountants. I mean, we call our company RDMS, we don’t know how to –
SHAWN: What does that mean?
TOM: Restaurant data management systems.
SHAWN: Restaurant data management systems.
TOM: We’re accountants.
SHAWN: Was “we’re accountants” taken?
TOM: I think we were looking at “NYaccountingforrestaurants.com” back in the day.
SHAWN: We started this California Comfort Restaurant and Sports Bar, so now we’re down to Cali BBQ and Cali BBQ media, so you know, we all can grow.
TOM: Exactly. 2023, after founding 12 years ago, is the first time we’ve spent a dollar on marketing.
TOM: We’re not saying that proudly, we’re just saying that’s fact.
SHAWN: It’s just the reality.
TOM: Yeah. So for us, it was, we work with you, and you told them, and they told them, and they told them. And literally, that’s been all we’ve ever done. Coming out of COVID, we’re like, we have a great system, we have phenomenal people, we have great software, it’s time to let people know what’s going on. This is our first conference ever. We called up a website SEO group and we’re like, what does this mean? And so, from an accounting standpoint, people come to you when you have a need, they’re not looking for the next sexy accounting system that’s out there. So, my accounting’s bad, I need better accounting.
SHAWN: Who does good accounting?
TOM: Who does good accounting? That’s why word of mouth works. And then things like, hey, we did an analysis, here’s your biggest competitor, their score on a scale of one to 100 is 99, you’re one. And that was the eye-opener, I’m like, wow, we really don’t know how to talk about our brand enough. And I say this not as a plug but with all sincerity, we really like helping restaurants. We’re based mostly in California because we like to have this connection and say, I’ll go to your restaurant, I’ll have lunch, I’ll have dinner, I’ll give you the feedback, we’re not just debits and credits, we’re going to come and say your menu is designed wrong, your average check is wrong, you’re not doing good steps of service, you’re not setting yourself up to maximize your revenue potential, we have to get back to the landlord and talk about this lease, you’ve got three empty spaces within two blocks, the value is not there anymore. So it’s very, like I said before, it’s service. And coming from a hospitality background, I’m a hospitality guy. That’s the foundation of all the people we hire We want to help, so that’s what we’re trying to do. And the restaurant game in this business – you’re in California – find a more difficult place to operate.
SHAWN: It’s unbelievably difficult.
TOM: This city in particular. Wild.
SHAWN: Yeah. San Francisco.
TOM: So, to be able to do great food and great beverages and provide an experience to build a really cool space, you’re operating on this margin. And if you don’t know it every day, you’re in so much trouble.
SHAWN: What does digital hospitality mean to you?
TOM: You know, restaurants exist beyond their footprint. And for me, everybody has to understand that who you are is everywhere now. For me it’s everything, your Instagram and my board, am I not checking it out, did it not come up on my feed? I’m looking at restaurants in Kyoto, I better find it in my local neighborhood. Yelp, unfortunately, that horrible four-letter word in our industry.
SHAWN: It’s an active marketplace, you know. I talk to restaurant owners all the time. As much as we want to be subjective about any platform, call it TikTok, call it LinkedIn, call it Yelp. However you feel about it doesn’t matter. There’s people that are searching for your service in your village, in your community, in your city, like you have to be there or someone else will be.
TOM: We take it so far that when we recommend bonus programs to our clients, what is your trending Yelp score? You need to pay attention to it.
SHAWN: For sure.
TOM: If your management team doesn’t care about it, you’re going to be in trouble. Now, yes, dinner was bad, the server was flirting with my boyfriend, one star. It’s the reality of the situation. But again, if you’re on TikTok, you know, I don’t think restaurants have fully engaged enough. Frankly we’re not having the conversation, and let’s be perfectly honest, it’s not just about the quality of your food service. It’s who are your people, what are your foundational values, why did you create the business to begin with? Why did you open a restaurant in this neighborhood? And if you’re not telling that story, you’re going to become boring. And you can’t do that anymore, it’s just not within the cards. I don’t care if you’re a local taqueria or a Michelin Three Star, the game is the same. You have to be relevant to what’s going on because there’s so much noise, so much noise out there. If you’re not being as loud as possible and hitting the right marks, you might as well be serving bad food.
SHAWN: Why is it uncomfortable for accounting professionals to tell their story to the internet?
TOM: You know, because I think we’re tired of people falling asleep when we do.
SHAWN: Trying to make accounting sexy.
TOM: Yeah, because you know, no one wants to hear that I can reconcile your bank account, it’s not the point. From our side, do you know I can help you find the way to get that server you’re missing on the floor to give you an extra service? Like, that’s really the conversation accountants need to have. And accountants focus on the fact that they did the task, and they have to stop focusing on the task and realizing that by completing that task, you did – by reconciling the bank account – you have this incredible information to do stuff with. And I would say globally speaking in the industry, they think getting the task done is their job, and they’re now realizing that the analysis and the information that it created is actually the job. And if you’re coming into the restaurant space, that needs to be your value add. If that’s not your value add, there is no story to tell. If you can’t take somebody who – I use this script all the time – if I came up to you and said, do you want to open a steel forge? I don’t know anything about steel forges. But if I called you and said, do you want to open a restaurant? Yes! Do you know anything more about restaurants than you do steel forges? No. So from an accounting standpoint, you have to help that person who made that life decision do the best that they can at it and provide education and support. It’s not there to pay the water bill or the U.S foods bill or whatever it may be, it’s to make sure that their service never goes down, that’s important, but more importantly, can you help them with the information you’re creating? And that’s what technology brings to the table. You don’t have to be a genius in this stuff, but you do have to know what’s important. If you’re not talking prime cost in every conversation, what are you talking about, right? And if somebody doesn’t know what prime cost is –
SHAWN: Explain it.
TOM: You have to look at your total sales and then look at your cost of goods and your cost of labor. So the total cost of goods and your total cost of labor compared to total sales is prime cost. Benchmark 65%. So if you have prime cost of 65%, you’re good. You get under 60, you have a fantastic model, that’s really a nice model. Under 50, you’re probably in something highly calculated and pretty incredible. If that’s not your primary conversation on a daily and weekly basis, you’re looking at the wrong things.
SHAWN: How often should restaurant owners have a profit and loss statement?
TOM: So, from a Restaurant365 perspective, if you’re not looking at a weekly operation statement, you’re behind.
SHAWN: Isn’t that amazing?
TOM: It’s incredible.
SHAWN: I mean, that was the eye-opening game changer for me when we were running our business. Understanding that all the best of the best, the corporations that are winning and opening up all the big restaurant groups – weekly.
SHAWN: Like, what? Not monthly? And monthly is like, oh, good luck, monthly. It’s more like six weeks, seven weeks, oh, maybe we got it. And then what can you do with that information after you’ve waited six weeks?
TOM: You’re dead. You’re dead in the water already. There’s nothing to go forward. The weekly ops statement – and the change to take it from not just down to prime cost, but to go all the way down through controllables and non-controllables – is to put that in the hand of a manager and say: explain that. And they can drill down and click through and see it. That’s been probably what clients are most impressed with from RDMS using this software is, what is your actual labor versus your theoretical? Well, we can do forecasting, we can do schedules, and you can see the result of that in your weekly reporting. The clients who really grasp that, unquestionably they are actually making money. If you’re waiting too long, you’re not gonna know. The P&L should be a reminder of what you already know, it should not be the roadmap, it’s too late at that point. And there’s other incredible software out there. Do you know when an item has jumped in price, right? Restaurants don’t focus enough on their supply chain. It’s a massive miss, and there’s a lot of interesting ways to get that. If you’re scanning and you’re doing line item extractions, highlight a few. And that’s the other thing I think a lot of accountants do, is, “here’s a thousand data points.” You don’t need a thousand, you need this handful that’s important. If your labor’s good, why am I showing you a labor report? I’ll bring it up when it goes bad, but why am I showing you a labor report? Hey, you moved a lot of BBQ, did you know your pork went up by 15 percent? You better. You know, how long is that going to be? What’s your trend? We have some really impressive Michelin places that have crazy produce. If they don’t figure it out in the first week of season change, their entire tasting menu is going to lose some money.
TOM: It’s pretty wild. So the access to that data is why I do get pumped about it, you know. Our business partners, we’re always like, where did you buy that mug? Did you know you can get that sourced from here for less than that, and do this and go here and do that? It’s not just cost of goods and labor. The rest of it you can figure out, but supply chain is everything.
SHAWN: Well supply chain is amazing. Because what we think as business owners is that we do not think that Pepsi cares, I don’t think that UberEats cares, and I’m here to tell anybody that’s listening to this show: you matter. Your voice matters as a restaurant owner, and no matter what you’re buying, they too need user-generated content. Back to what we do, we make business to business content so that we can have deeper relationships with the people that matter and the things that we use inside of our restaurant.
TOM: Correct. And there are some really fun people doing some really fun things. There are people that are sourcing base spirits and doing customized liquor at a price that’s less than what you’re buying from major distributors.
SHAWN: It’s incredible.
TOM: If you just pick your head up from the day to day and take certain projects… and our goal is to direct you what to look at. Your liquor cost is too high, go find somebody creative, go find something fun. And once you did it by the way, this is the problem that we have. We say this all the time. I can help you fix your numbers, but I can’t increase your sales, right? Top line sales is still up to the operator, that’s digital marketing. You need to get your voice out, and I would say that it’s the largest opportunity. Congratulations, you have the best margarita anywhere around here. And nobody knows it.
SHAWN: Congratulations, let’s tell the story now.
TOM: That is the best birria taco I’ve ever had. I’m the only one who knows that that is good. You have to figure out that part these days. In San Francisco, there’s new restaurant openings all the time, there’s closures all the time. To make a wave, it’s going to be digital these days. You have to get into it.
SHAWN: So what is your firm going to do with your data storytelling?
TOM: What do you mean by that?
SHAWN: So what do I mean by that is – what’s so important for anybody, it doesn’t matter what business you’re in. I don’t care if you’re in the legal profession, insurance profession, restaurant business, accounting business. It’s up to us to tell our stories. You say you didn’t do marketing, you say you don’t have social media. I’m here to push you, to push any executive, any CEO, I don’t care what restaurant group. Like, this stuff matters and your voice matters and what you’re telling us today. I appreciate you coming onto this show, talking to me, sharing this insight, because this is the stuff that hopefully will affect one person. All we need is one person that’s listening to this that helps them move their business forward so that they can go, I didn’t get into the restaurant business to work 90 hours a week to not see my kids grow up. No, I want to build a successful business where it’s more profitable, more sustainable, I can have some sort of, you know, love and passion. Like, my kids are here, I have a whole team in San Diego. For me, I’m grateful for that opportunity 15 years later, but it’s taken me a long time.
SHAWN: You know, how do we jump start that? And back to that is, you guys need to get out there. You need to get uncomfortable.
TOM: We are working on getting uncomfortable.
SHAWN: You’re here today getting uncomfortable.
TOM: That’s correct. And you know, we realized – I wouldn’t call it a mistake per se – we were focusing on our skill set, our knowledge base, our tech stack. And then the problem with the accounting mindset is, focus on the product, the product, the product, the product, the product, the product. And then we looked up and said, we have a great product, and nobody knows we have a great product. It’s like that margarita that nobody knows about, and we’re like, wow. We do great work, you know. Someone calls us 90% of the time because they’re not happy with what they’re getting. And then we see what they’re getting, and we’re like, oh my God, what is this? This is crazy, we can fix this for you. And that’s why we turned on the jets, frankly. And that’s why we are getting out and having the conversations. And you know, the other side is, the game is only getting harder.
TOM: The economy is only going to make it that much harder. We generally believe we can help people achieve the goals you just mentioned, get out from underneath it, take the workload they don’t want to do, focus on what brings them joy, get to a normal workload. It’s not really a sales pitch as it is a core belief of ours. We are now wanting to kind of help more people, is a real take on this. So to get uncomfortable, spend the money to get the website done correctly, get on social media.
SHAWN: Put your face on the website, put your story on the website.
TOM: We’re getting headshots, we have to go do that. We scheduled it for next week. There’s like a tomato, I think, at the moment.
SHAWN: Yeah, yeah, I saw. All your social links that are going to be active.
TOM: They are going to be active.
SHAWN: Plus video.
TOM: The other side to this is, we also have to practice what we preach. I can go in and help you with food costs, I can go help you with labor costs. But when I tell you that I can’t help you with top line sales, it’s only because I haven’t really focused my own company on top line sales.
SHAWN: That’s correct.
TOM: So we realize that by us doing the work, we can help other people do the same work. So that’s a huge part of it. And also the connections. I will say, like you – 12 years later, it’s the 80-hour week, the not taking the weekends and doing all that kind of stuff. This is the stuff I like to do. I like getting to talk to restaurant people, it’s why I got into the restaurant game to begin with. And when you’re sitting behind a desk talking to people on Zoom and all you’re doing is talking about P&L’s all day, it’s not my fun zone either. It’s not why I wanted to get into this. I like going into the restaurant, having the face to face and working with people, you know.
SHAWN: So every single week on Wednesday and Friday at 10am Pacific Time we do a group meeting. It’s a digital hospitality leadership group. We invite you, the listener – if you’re listening to this podcast, if you’re watching this podcast – it’s 10am Pacific Time on the social audio app Clubhouse. Please raise your hand, come up on stage. It’s only an audio app so you can tell us about your restaurant, tell us about your marketing problems, your sales problems, your accounting problems. We bring incredible people onto that show. It’s a way for this podcast to come alive, so we’d love for you to join us there. You can always reach out to me, it’s @ShawnPWalchef and that’s on any social platform. I’m weirdly available to have digital hospitality conversations. Tom, where’s the best place for people to connect with you?
TOM: Currently our website, as we mentioned we’re building out the rest of it, www.rdmsgroup.com. We’ll be posting a lot of content, not just accounting, like how to reconcile your bank account. We’re really big into the industry, so talking about where we like to go, who’s doing fun stuff, and we’re really making a push to bring more of the community into what we do.
SHAWN: And if you guys are listening to this Restaurant Transformation Tour, go to the Restaurant365 website. There are more events coming to your city. So, if you’re in Austin, if you’re in New York City, if you’re in Chicago, Restaurant365 has an incredible team. I mean, one of the most impressive things for me is I got to meet with them last year at National Restaurant Association in Chicago, and these people care. They care about helping restaurant owners, and they have the tools and the technology to help you do that. Please connect with Tom, we’re going to hold him accountable and make sure he’s posting those videos and doing the work that he does. But if you’re in San Francisco, meet up with Tom, connect with him. This why we do what we do. We’re grateful for you guys for tuning in, and we will catch you next week. Thank you.