Each year the American business magazine Forbes honors powerful young people under 30 years with their “30 under 30” lists. In this year’s edition, WHU alumnus Dominik Stein was included in the category Food & Drink. In 2011 he founded the successful restaurant chain VERTS Mediterranean Grill (former Vertskebap) in the US, together with WHU alumnus Michael Heyne, who unfortunately does not meet the criteria of the Forbes list as he is already 31 years old.
Last year in an interview with their alma mater the two founders answered five questions about the ups and downs of the founders’ life, the importance of the right business idea and the differences between the German and the American market.
What were the challenges you had to overcome when you incorporated your business in the U.S.?
We found ourselves confronted with the same challenges all other founders have to face. This includes, for instance, the development of a thorough, realistic concept and business plan based on the essential market and consumer research, the funding for the initial restaurant, the recruitment of a compatible team for the back and front of the restaurant, the planning of the processes and a comprehensive marketing analysis. What’s so fantastic about the restaurant industry is everything has to be perfect from day one, since patrons are not forgiving at all if you do something wrong. That’s why it took us three years to get things ready – considerably longer than most start-ups. In addition to the familiar challenges any new business faces, we also had to take into account the different legal situation, the immigration policies, the new culture and the related complexities with regard to staff recruitment and training paired with having to learn to understand the significantly different diner expectations.
Did you anticipate any problems that either did not arise at all or were less difficult to handle than you had expected?
Unfortunately, the opposite happened. We found ourselves tackling even more unexpected issues, which we had not even thought about. For instance: the complexity of the equipment and vendors as well as the unexpectedly stringent mandates imposed by the metropolitan construction and zoning offices. While we had spent several years on preparation, we ultimately had only grasped a small percentage of what it takes to be successful in the chain restaurant industry.
To what end did you align your corporate concept with the American mentality?
Initially, we were a bit naïve and overly optimistic. We simply presumed that we would have to reproduce our German or European kebab restaurant concept 1 : 1 in the United States. One recurring question we asked ourselves was: Why aren’t there any kebab restaurants in the United States? At first, we told ourselves that nobody had seriously tried to implement the concept or that there were not enough immigrants from Turkey in the country who could have established the product in the same way they did in Germany. As a result, we saw everything related to the product and concept development through rose-colored European glasses for the first few months. This affected for instance the interior design and the flavor profile. Now that we have more than five years of experience in this market, our perspective has changed completely. Our concept is now perfectly tailored to the expectations of our U.S. clientele and this is evident in numerous everyday details. The flavor profile is just one small example. In Texas, given its proximity to and close affiliation with Mexico, spiciness and heat are absolutely essential when it comes to meat dishes. That’s why we have added jalapenos to our kebab dishes. That’s only one small example of many. Ultimately, the brand and products have to make complete sense to the U.S. consumer.
Was VertsKebap your first business idea or did you have others you eventually scrapped?
Verts was the first “serious” business idea. Of course, when you’re a student you’re constantly contemplating your perspectives, the things you want to do with your life, and you have a lot of dreams. Back in the day, we were keenly interested in entrepreneurship; for instance, we completed internship at online start-ups and were very involved in many such activities at the WHU (e.g. in the organization of the IdeaLab! 2007). After all, the WHU does a whole lot to foster the contemplation of its students’ own ideas. Consequently, we came up with quite a few different business ideas when we were students. Yet we never worked out a business plan or conducted more intense research. It wasn’t until we came up with Verts that our fascination and enthusiasm for the idea was big enough. And that’s very important for us because we are as fascinated with and enthused about our company as ever.
What should any German who wants to establish a business in the United States definitely keep in mind?
Any German who considers the establishment of a company in the United States should invest, first and foremost, a lot of time (careful preparation) and back the endeavor with a solid financial plan. As far as the time dimension is concerned, it is most of all the deep comprehension of the consumers and the market – it takes a lot of hard work. Many things we intuitively consider appropriate in Germany are quite different in the U.S. In the restaurant industry, for instance, the perception of what defines good service or good pricing based on the service offered, are important factors. As far as the timing is concerned, you also always have to take into account the regulatory obstacles (visa, permits, etc.). The second component – solid financial planning – is directly linked to the first. In the United States it is particularly easy to underestimate the start-up costs, given that the prices for the available products and services appear to be very reasonable at a first glance (net prices). However, once you add taxes, fees and other surcharges, they can be up to 50 percent higher. This applies in particular to services. We had to learn at few lessons at first, but thankfully we had planned for sufficient start-up reserves from the financial perspective so that we did not have to deal with any cash flow issues. If a solid time schedule and financial plan go hand in hand, nothing should prevent a business from launching a successful start-up in the U.S. The buying power and the markets are vast, so that the potential for fledgling companies – regardless of the sector – is great as well.