Nick Kokonas - Know What You Are Selling – [Founder’s Field Guide, EP.8]

Episode Summary

Executive Summary: Patrick O'Shaughnessy interviews Nick Kokonas on building Alinea, Next, The Aviary, and TOC. Kokonas argues restaurants are often misrun as vanity projects; instead, they should be treated as businesses that know what they sell, price dynamically, and own customer relationships. He extends these lessons to software, publishing, and COVID-era resilience.

Main Topics: Own something and make decisions with outcomes (Priority: 5/5): Kokonas frames wealth and agency as ownership plus measurable decision-making. Restaurants as businesses, not vanity projects (Priority: 5/5): He argues high-end dining can be highly profitable when run with discipline. Alinea's business model redesign (Priority: 5/5): He explains startup-like structure, aligned incentives, and revenue expansion at Alinea. Ticketing and dynamic pricing (Priority: 5/5): He pioneered deposits, prepayment, and variable pricing to reduce no-shows and lift margins. TOC and customer-data ownership (Priority: 5/5): He built TOC to give restaurants direct relationships, better data, and better monetization. COVID response and operational resilience (Priority: 5/5): He describes early risk response, carryout pivots, and TOC's rapid growth during the pandemic. Selling what you actually sell (Priority: 4/5): Across restaurants and publishing, he says businesses should expose and market all revenue streams.

Key Arguments: Ownership creates wealth and control; dependence on others limits both. Restaurants fail when treated as art projects instead of businesses. Alinea succeeded by aligning investors, managers, and operators long-term. Deposits and ticketing reduced no-shows and added over $1M of lost revenue. Dynamic pricing should apply to any time-slotted business, not just restaurants. TOC exists because restaurants should own customer data, not intermediaries. Publishing is attractive when authors own rights and sell direct to audience. COVID showed that prepaid floats and flexible operations improve resilience.

Data Points: Alinea dinner volume: 40 to 50 to 60 people a night - Michelin three-star service level discussed as easier to operate Lost revenue from no-shows and table mismatch: over a million dollars of revenue - Estimated annual revenue lost before ticketing/prepayment Next opening day ticket sales: $562,000 - First day of ticket sales for Next Immediate bank deposit from a ticket sale: $625 - Example of instant sale after a seat became available First-year margin at Next: over 30% margins - He says the restaurant sold every seat for a year TOC early team size: five people - Started in a closet/spare storeroom TOC flat fee: 3% - Charged for carryout and event orders during COVID TOC growth during COVID: over 3,000 restaurants - Restaurants signed up since March TOC GMV run rate: a billion-dollar GMV run rate - Expected by the end of the year Free reservations share on TOC: 70% - Most TOC bookings are free reservations, not deposits Food cost structure: 30% to 35% labor, 30% to 35% food costs, 30% fixed costs and insurance - Typical restaurant cost breakdown he cited Book retail economics: $50 retail book costs about $2 to print - Example used to critique publishing economics Publishing revenue example: $120,000 of books in a week - Sales for a restaurant-related book project

Pivotal Quotes: "own something, make lots of decisions that have outcomes, try to be right 51% of the time, do that often, and repeat." — Nick Kokonas: His operating philosophy at the start of the interview "Everything we do has to be fun and it has to be delicious or we will not do it." — Nick Kokonas: Explaining the Alinea brand and product filter "Know what you're selling and then actually sell it." — Nick Kokonas: Summarizing his broader business lesson for restaurants and beyond

Implications: The next frontier is broader adoption: restaurants and other service businesses must build direct customer channels, dynamic pricing, and ownership of demand.