Season 02 Episode 14
Nick Bayer, founder and CEO of Saxbys

Doubling down on how you make people feel

Chris Allen: All right, well, Nick, welcome to The Entrepreneur’s Studio.

Nick Bayer: Thanks, Chris. It’s good to be here.

Chris: Where’d you come in from?

Nick: I came in from Philadelphia.

Chris: Philadelphia, all right. Well, I’d say that’s one of my unsung favorite cities.

Nick: It is. I didn’t know how great it was when I moved there probably 15 years ago. It’s a great place, a great place to call home. I’ve even gotten fully on board with all the sports teams, which is hard — because I’m from Chicago, to get rid of all my old growing-up teams and be a full Philadelphia fan. But it’s a great, great city to live and visit.

Chris: That’s good. Well, Saxbys Coffee. It’s known as a hospitality company that happens to be great at coffee. You’re also known for something you emphasize, experiential education. So, maybe tell us what caused you to really link entrepreneurship and education.

Nick: Yeah, we’ve been at this at Saxbys for a really long time now and there have been several iterations and pivots in the business. Early on, we went by the name Saxbys Coffee. We were a franchise coffee company. Our focus, what we were going to hang our hat on, was going to be hospitality. The taste of a product is often very subjective — whether you’re in the alcohol business, the coffee business or the hamburger business.

But how people make another person feel is very objective. It transcends culture, it transcends age, it transcends wealth. People like to be looked at in the eyes. They like to be remembered, they like to be treated nicely. And so, I always wanted our business to hang our hat on something that could be objective.

So we really focus on being a hospitality business above all else, but our mission statement has always been to make life better. How can we leverage the business we’re going to create, hopefully a business that will scale to be able to make people’s lives better?

Sometimes it’s as simple as giving more great coffee. Sometimes it’s as simple as comping their coffee because they’re having a bad day. But it’s also about how we employ people. How do we develop life skills for people? Because the coffee business is a great business to teach through.

So the evolution of our business has gone from being a coffee business to hanging its hat on hospitality. Hospitality has always stayed with us as part of our mission to make life better, but the evolution to what we are today, we now describe Saxbys as an education company disguised as a coffee company. It’s on a mission to make life better by supporting and empowering the next generation of leaders and entrepreneurs through experiential learning. So that’s the business we’ve become today, 17 short years later.

Treating entrepreneurialism like a team sport

Chris: It definitely flies by, and I think one of the things that was really striking to me is where you have this juxtaposition between entrepreneurship and education where education has typically been hands-off. It’s theoretical, ethereal at times, and then it’s like, “Hey, now when you’re in the real world, you’ve got to figure it out.” And you’ve had your own entrepreneurial experience. What was the earliest spark that made you think, “I’m going to be an entrepreneur?”

Nick: Yeah, I think there were some really early sparks that I certainly didn’t recognize at the time like in middle school, maybe a little bit in high school, a tiny bit in college. But from a generational perspective, entrepreneurship wasn’t taught or engaged or pulled out of people, particularly in the higher education (higher ed) space until really the last 10 years.

When I was coming through higher ed, practically nobody was teaching or supporting entrepreneurship. I was a bit of a square peg in a round hole. I knew traditional corporate life wasn’t what made my heart race, but I didn’t immediately jump to, therefore I should be an entrepreneur because no one was talking about that.

This is embedded deep within my story — my parents were the first people in their families to go to college. They met each other during their freshman year and found out nine months later they were going to be having a child. So they dropped out of school, moved back to Chicago, and took whatever jobs they could get.

My parents were incredibly talented people, but when you don’t have that diploma and you have the need to put food on the table for a little kid, you get whatever job you can possibly get, and you blink, and 30 years went by, and you stayed within that industry.

So my parents have always really impressed upon me to get my education because it would give me the opportunity to do whatever it is I’m passionate about. So I went to college, and I had no idea. I mean people were like, “Nick, you like to talk a lot, you should be a lawyer.” So I have a political science degree.

I thought real estate was interesting, so I took a real estate internship. I thought finance was interesting, so I did a finance internship. I did all these different things, and at 22 years old, and this is really where I think the spark came from for me, I just picked up the phone and started to call some people who made a huge difference in my life.

Because I was literally trying to sort out what it is I was going to do professionally, and really those calls were to coaches and teachers. For example, there was a seventh-grade teacher who encouraged my parents to send me away for school to a different school setup that might be more enriching for me from an academic perspective, high school baseball and basketball coaches.

I remember hanging up the phone with them thinking to myself, they are so passionate about why they went into coaching and teaching. To mold young people and help them pursue the things they’re passionate about. But in school, I’d spent a lot of time in businesses, and there’s nothing better than having to work together as a team to compete against competitors and take losses some days and have to come back and fight another day and try to put one foot in front of another.

I love the competitiveness of business, but I was really motivated by the impact coaches and teachers, and people in the nonprofit space could make on other people’s lives. So that spark for me at 22 years old didn’t immediately turn into a fire, but that spark for me was thinking, “How can I put those two things together? How can I grow a competitive business that as it scales is not going to just be focused on making more money, but also making a difference in people’s lives?”

Today we talk about social entrepreneurship quite commonly. It’s being taught in college, it’s being taught in secondary school, but it wasn’t when I was coming out of school. So I felt a bit like a square peg in a round hole, but that spark was there, and I think my antenna went up and I started to really think about that as I went into my corporate life for a few years before eventually quitting, starting to swipe my credit card, and build what is Saxbys today.

Chris: It’s amazing, time after time we have people sitting in the same seat and it’s just like there’s a moment when someone decides to take the risk, and whatever the risk is doesn’t matter. It’s the thrill of the hunt, the chase. The thing that mattered most, my purpose, all that kind of stuff.

But I thought something you just said was really powerful — the spirit of entrepreneurship, for you, was about winning together rather than an entrepreneur winning on their own. And I wonder if that’s a theme you have some thoughts on, the winning-together approach. What swayed you in the direction to see entrepreneurship and building businesses like it’s a team sport?

Nick: Yeah, I think part of it was growing up as an athlete. I played sports my entire life, and I noticed that sometimes if we had the best player on the team, which sometimes was me, but most times it wasn’t me. But whoever the best player was, rarely did we win because we just had the best player.

Some of the best teams I was on were the teams where there was so much equal talent, but there was so much camaraderie and culture and sense of purpose in the organization. So I think that was naturally embedded in me by playing sports for a long time, but I know I was always so focused.

Once I made the decision to start my business, I was always so focused on scale. Scale was important. We can impact more people’s lives by growing. It was never about, “Oh, I can make $100 if I open another location, or $5,000 if I open another location.” It was never purely money that was going to drive the scale. We can impact more people’s lives by scaling more.

And so, we do some very interesting things in our business. At Saxbys, our average cafe does almost $1 million a year in revenue on an annualized basis. And because they’re student-run, exclusively student-run, that means each cafe is employing about 50 students.

So, as a student CEO, you are running a $1 million business and managing 50 of your peers. And we’re doing that across many different states, and hopefully, we’re going to scale across the country and maybe beyond. And so I knew if this business was going to be about Nick, it would never see a second location.

But if we could hire people who shared our mission and shared our core values, and they felt like they were actually entrepreneurial, we’d get the best out of them. You start to add up more and more of those people, and then all of a sudden, you can do something most people thought could never be done.

You could never have 50 undergraduate students be responsible for a business 24/7/365 and run a successful for-profit business. You could never do it 25 times, 100 times, hopefully one day 3,000 times. We’re doing it because it’s about the group. It’s about everyone being entrepreneurs. It’s not about an entrepreneur who once had an idea and started a business.

Embracing experiments

Chris: I love that. I love that. So you touched on the model. Why don’t you break down the initial framework of Saxbys and how you went from a franchise to universities?

Nick: Yeah, so right around 2013, we received an investment from a private equity group. I smile thinking about it now because I’m like, “I’m not sure that was a very investable business,” but they saw something in us. And at the time when they first invested in our business, we were 100% franchise-owned and operated.

But right around that same time, 2013, that’s when entrepreneurship started to really take off in higher ed. And we talked about Philadelphia at the outset of this, Philadelphia is nothing if not a huge college town. There’s 50 institutions of higher education in and around the City of Philadelphia. And so, with it being such a big college town and everyone starting to teach entrepreneurship, they were looking for entrepreneurs in residence. They were looking for people to come into the classroom and talk about and show the battle scars like, “If you could do it all over again, how would you do it better?” And I’m like, “It’s great because I have a PhD in failure, so let me tell you about all the things I’ve messed up.”

Next thing I know, I’m spending a lot of time in higher ed, big schools, small schools, secondary ed, and I loved it. Because I think the best way to learn is to teach in front of people and share your experiences. And seeing the reactions and hearing the really insightful questions, I was learning so much.

So I went to Cornell in Upstate New York, which is only about three-and-a-half hours from Philadelphia. I became the first entrepreneur in residence in what was then the Cornell Hotel School, and is now part of their business program.

I remember feeling crazy imposter syndrome like, “What am I going to teach anybody about entrepreneurship?” And they’re like, “Look, Nick, just share your experiences.” So I went up there, and actually, over your shoulder, Chris, is a book called “Setting the Table”. I know Danny Meyer was on your podcast, and that was one of the books I read. It was given to me by a professor at Cornell, and I remember reading that book and being like, “Oh my God, the principles that are in this book exist in some places at Saxbys and not in others.”

So I was driving from Philadelphia to Cornell every month for five straight years, so I had a lot of windshield time to just be thinking. And higher ed was exploding in entrepreneurship. Saxbys has always been a very entrepreneurial business running our cafes with CEOs, cafe executive officers.

Our business has always resonated well with young people, so anytime we had a location around either young residents or college campuses, those usually performed better. And higher ed was looking for what they called experiential learning. How can we take what we’re teaching in the classroom, how to write a business plan, how to raise money, how to create a SWOT analysis? How do we allow our students to push a door open and then go put that into play? How can they learn experientially, learn by doing?

I was thinking to myself that our business has always been very entrepreneurial, and if you think about all the moving parts that run through a Saxbys location, a $1 million operation where you’ve got a global supply chain, you’ve got finance, you’ve got recruiting and HR. Everything that happens in any business…whether a behemoth like Heartland or a small place like a neighborhood coffee shop, the coffee shop might be the perfect vehicle to teach business.

So I brought this half-baked idea to the president of Drexel University, a really entrepreneurial guy in Philadelphia. I said, “Hey, President Fry, you guys are teaching entrepreneurship, you’re doing it phenomenally well, but your students are looking for an opportunity to learn by doing.”

We partnered with one of our first partners eight years ago. Engineering students designed, and then students from all academic disciplines every day since have run their own Saxbys. They get full credit, full wages, and have full P&L authority. They make mistakes every single day, but there’s no better way to learn than by making mistakes.

All right, so that was the original concept of the idea, but there were so many people who said it’s a great idea but you can never actually scale it. We never thought that it was going to become the thing we’ve done as a business, but fast-forward—

Chris: Yeah, you didn’t know it was a pilot.

Nick: No, no, it was really just a cool thing. It was almost an itch to scratch, and hearing people say there’s no way you could actually do that made me want to do it that much more, and to hear our teams say, “Let’s get together and prove to people that we can do this.”

Chris: So, how did you build that initial team to say, "Hey, we’re going to take this concept and we’re going to create a repeatable process that’s going to become a core part of the business?”

Nick: Yeah, there’s actually a lot of the core principles we focused on when we were first opening that location. Everyone at Saxbys calls that first one OG Drexel. It’s our original one, it’s at Drexel. We opened a second one at Drexel, we now have 25 of these cafes spread throughout college campuses.

But our core principles were that you could sit down and interview someone and say, “Hey, Chris.” Mind you, Chris is 19 years old in this instance. You’re interviewing to be the student CEO. Have you ever managed 50 of your peers? The answer’s no. Have you ever run and had penal authority for a $1 million business? The answer’s no.

I’ve interviewed every single person who’s ever been a finalist for a student CEO. The answer has been no every single time. So we said let’s hire for attitude. Let’s hire for a passion for our mission statement to make life better, our six core values. Let’s hire for those innate human skills and teach the skills necessary to be able to run a business.

So that was the original decision we made back when we hired Kelsey Goslin who was the original student CEO, and that’s a lot of what we do really today. It’s so important to build the right culture.

Laying the groundwork for an innovative business model

Chris: That’s incredible. What’s the career trajectory? What happened to Kelsey? Is she still running Saxbys or doing something else?

Nick: The beauty is, there’s a little bit of both. We’ve now had well over 200 former student CEOs, and we partner with universities. We don’t have a lot of requirements per se. One requirement though is that it cannot be strictly for hospitality students or even just business students.

The idea for that is that the skills you’re going to hone in having this experience are what we call the powers skills, things you can’t learn in the classroom. Emotional intelligence, critical thinking, cultural agility, resilience. Things everyone needs regardless of what you’re going to do professionally in your career.

As a result, our students have come from I think 60 different majors at this point. They come from marketing, they come from finance, they come from nursing, engineering. We have dance majors who have come through this program.

They have gone into a myriad of different careers, but there’s a lot that we’re really proud of. So, according to the Harvard Business Review, the average college graduate gets their first leadership position seven years after graduation.

As you and I both know, it’s really hard to manage people. I’ve been managing people for a long time, I still struggle with it, it’s still really, really hard. Therefore, when you come out of college, it takes a long time for someone to tap you and say, “You’re ready to manage people.”

Our former student CEOs get their first leadership positions post-college, 12 months after graduation, seven times faster than their peers. They have a different level of experience, and an ability to be able to articulate what they’ve done. So, when they get hired, they often stand out and start moving into leadership positions, which is really awesome.

The second side of this is that as a growing business, we have investors, we have a lot of desire to scale, to continue to make life better, to bring this to learners of all shapes and sizes. We have the best minor league system in the business. So many of our former student CEOs and student leaders in our cafes graduate and then join us at corporate.

So, as we continue to scale our business, we’ve got this great minor league system that we can tap, and we can move into markets to support the next generation of student leaders.

Chris: Yeah, it’s a bench squad. That’s a huge leg up that a lot of businesses don’t have, and I think the idea of practice is really important. And you bring up a really important point as it relates to people leadership. If there’s anything I learned, I thought early in my career that leadership was that you had the authority to control outcomes. I have learned that it has nothing to do with that.

You cannot control the outcomes, and I will say that leaves a wake in people. I really love what you said, that the objective thing is how people feel, and employees have to feel that. So, talk to us a little bit about the value system and how that translates into leadership development.

Nick: Yeah, absolutely. So, I mean one of the benefits I get to have now is that we’ve got a lot of tremendously talented people at what we call the Saxbys HQ. They are the support system for our student CEOs, and the folks in the field who support the student CEOs directly.

So I get to spend a lot of time working directly with the student CEOs. I see them in their interview process, I see them at training camp where they come to Philadelphia and go through a very intensive training process, and then I go to their campuses throughout the semester.

I don’t care if you’re my age or if you’re 20, if you’re thrown a thousand things and you’ve got to do this, and this, and this, and this, and this, they’re not going to remember any of those things. So it’s about keeping things simple, and it’s the thing I tell them when they have coffee with me on the first day of training camp, and they’re all really excited and also really nervous because they know this is hard. We make it clear this is a consequence-rich environment.

Chris: It’s demanding.

Nick: When I meet with university presidents, one of the most important thingsI make clear is that we don’t give people a cute title and then wrap them in bubble tape and actually just do it for them. It’s quite the opposite. This is very consequence-rich, it’s not going to be for everybody.

We really throw them in the deep end, but the pool is surrounded by lifeguards. And so, we’re not going to just pull them across the pool. They’re going to struggle, they’re going to choke on some water. We’re going to pull them up, we’re going to show them a video, and then they have to swim themselves across.

So when I meet with them at that very first meeting, usually they’ll prompt it, or I will make sure I bring up three things I always want them to be thinking about. I think there are three things great leaders should be — you should be kind, you should be real, and you should be consistent.

So, be kind. You said it before, Chris, that I know when I first became a leader I was like, “Oh, I have to act like I have all the answers. Someone made me a supervisor, I have all the answers.” What a horrible leader I was. It’s not about having all the answers. Be kind, let people understand you’re a real person and default to kindness.

Second is to be real, be who you are. I was pretending I was someone so much more experienced than I was when I first started to manage people and they could see right through it. And the third one, which I think it’s not sexy, but if you think about the people who are great leaders, they’re consistent. You don’t have to tiptoe in their office and say, “Is Chris having a good day or a bad day?” Chris is having his normal day, he’s consistent. And playing on that consistent plane I think is so important.

And so, those are the three pieces of advice I give our student CEOs. They get a lot of other support, they have a lot of former student CEOs supporting them to teach them the technicalities of being a cafe executive officer at Saxbys. But those are the things when we talk about leadership development because that will make them not just a great leader at Saxbys, but a great leader post-Saxbys.

95% of them are going to leave Saxbys after they graduate college, they’re going to go somewhere else. So we have a really important responsibility as a company to teach the skills necessary for them to run successful cafes for us, but also the skills that will translate into whatever they do in their careers.

And I just think being nice, being kind, being real, and being consistent is going to help you regardless of what you do with your career.

Connecting everything back to your core values

Chris: I mean the thing that is really powerful about that is that by living by those values as a leader I think it really does instill something in the person. I think there are probably levels of being kind and there are probably levels of being real because we all change, and we grow. And I think that’s one of the things that’s probably really great about them from day one to their exits, that they’ve probably grown in those areas, right?

Nick: Tremendously because being real for you is going to be a little bit different than it is for me. I’m a very verbal person, so I try to embrace the fact that I’m a verbal person. And therefore, the way I express my niceness is often going to be very verbal.

There are other people — we’ve had some tremendous student CEOs who probably say one-hundredth of the words I do each day. I’m a very verbal person. We don’t teach them or encourage them to speak a lot because Nick speaks a lot. We want you to be you, be real. Be consistent and comfortable in your own skin. Your leadership side, how you will show niceness and kindness will come through as a result of that if you’re consistent.

Chris: I love that.

Nick: That’s what we do, but they all struggle. It’s really hard to do what they’re doing. Many people don’t get that level of responsibility until they’re deep into their careers, often at double the age of our student CEOs. So, they do struggle, but I think it all, again, comes back to the mission and core values of our business. They signed up for a business that’s in the business of making life better.

Our core values are that central north star, so when it feels like the proverbial roof is falling on your head, that is the north star. Because they don’t always have corporate leaders right there in the cafe when there are three callouts, or a vendor doesn’t show up, or business is up two times higher than we had projected for the day.

When you’re really in it, we’re not there in their earpiece saying, “This is what you do.” It’s just happening, it’s happening right in front of them. The mission and the core values are their north star that we always want ringing in their head to help them make great decisions.

They struggle, they ultimately make great decisions and they come out the other side incredibly more mature and incredibly more experienced, and more importantly, as a more self-confident person. You don’t know what you’re capable of until you’re challenged. It’s human nature that we want to avoid challenges. And today, as parents, as a society, we try to hide people from being challenged.

And so, often for our young people, this is the first time they’re really having adversity in their life. But you don’t know what greatness you’re capable of until you’re really challenged. We’re in that business. We’re in the business of challenging you, but we’re supporting you through that challenge.

It’s not about putting you down or making you cry. It’s about letting you face your fears and come out the other side. And the gratitude they have for it, the way they point back to this being such a life-altering experience makes my job the best job there is. I can’t imagine doing anything better.

Mastering change management and creating new leaders

Chris: It’s a really incredible model. It sounds like you’ve got some really incredible stories and outcomes. It sounds like it’s something that’s really great for the student, though hard as crap, I’m sure. For the business of Saxbys, change management sounds like something you have to really face because if you think about it, you have student CEO transitions probably—

Nick: Every six months.

Chris: Yeah, often. So talk to us about how you’ve installed a business practice process for change management.

Nick: Yeah, so years ago we realized how we could take what everyone is going to perceive as our greatest weakness and actually turn it into a strength. Imagine a Heartland or a Saxbys or any business changing their CEO, the highest person on the org chart, changing that person every half year. It seems like, “Wow, that’s a recipe for failure. You’re going to fail.”

We said we’re not going to fail, so how do we actually turn that into being a great strength and a great learning opportunity? So the way we do that from a change management perspective is by focusing on talent curation and talent retention. Meaning we know as Chris comes in as a student CEO on January 1st, your tenure starts on January 1st, you end on June 30th, we know June 30th is coming and it always comes really, really fast.

So knowing you’re going to be stepping down as student CEO on June 30th, how do we prepare ourselves to not just keep the wheels on the bus, but how can we actually let the bus drive even faster and drive even better come July 1st? That talent needs to be on that team. Chris needs to be a great servant leader. He needs to be someone who identifies, trains, and empowers, and retains talent around him. So when Chris moves on, that next student CEO is on his team. We have almost a 100% success rate of internal promotion.

Change management for us is that we have a lot of entrepreneurs and a lot of leaders in our cafes. If the student CEO is out that day or is visiting their parents or is sick that day, if the business were to fall apart, that’s a terrible leadership model. No one wants to work in that kind of business.

Whereas if a lot of other people are well-trained and empowered to be able to make decisions, that business can move forward and can actually lose its CEO every six months and get better because each student CEO comes in. You might have an engineering student CEO who’s great at process, and the next student CEO is great at marketing. So they inherit a business that has a great process in place, but then they get to flex their own unique muscles from a marketing perspective.

I mean are we perfect? Of course not. There are a lot of things for us to be able to improve, but one of the things I’m so passionate about is how we’re taking a perceived weakness and turning it into a strength. We continue to build on the individual strengths of our people and there’s no greater, more fun thing to do as a leader than to develop talent and watch them succeed after you step down because most of our student CEOs do this as juniors.

So Chris is a student CEO, his tenure ends, you bump down to the number two person on the team. You go into the certified position, and so, as the new student CEO, you’ve got a nice safety net because the former student CEO is typically there. But you also get to flex humility as the former student CEO when you’re not the number one anymore.

So, it creates this unique dynamic that again translates outside of Saxbys. It allows us to be great while they’re running our business for us, but it also allows them to be great as they’re moving forward in their careers to lean on that level of experience.

Chris: Yeah, it’s a great safeguard bumping to the number two and recognizing that leadership is a cascaded, decentralized thing. It isn’t about being the only person with leadership. Everybody is either leading themselves, leading others or leading the business, right?

Nick: Yeah, because they’re taught to be CEOs. They have to look at the business across 360 degrees. They have to look at it holistically, and every great person wants to be promoted. But once they start looking at it from an organizational perspective, we can’t promote you unless we’ve got a tremendous backfill for you.

So we teach the student CEOs that the responsibility of developing that backfill is on you. Don’t look to the company to do it. Create your successor and then it makes it so much easier for us to promote you into the next role. Again, it works really well for us internally at Saxbys, but I love talking to our student CEOs who are three, four, seven years out of college now talking about how they apply those same principles in whatever industry they’re actually in now.

Chris: That is phenomenal. I think one of the coolest things about this is to have the real onus, pressure, weight of leadership on you. And my mentor said the same thing like, “Chris, you’re not learning if you’re not teaching.” So I think it’s a really incredible idea to get somebody to learn about leadership fast, and it’s a baptism by fire, so it’s really powerful.

I wonder if you could expound a little bit on being a mission-driven business and talk a little bit about doing well by doing good things. Talk about that pillar or central element in your business, why it matters, and how you propagate that message.

Nick: Yeah, I think there are two really critical things to that for me. The first was growing up in my parents’ house for 18 years. They went into industries and jobs that weren’t necessarily the things that made their hearts race. My mom wanted to be a businessperson, an entrepreneur, my dad wanted to be a coach and a teacher, but as teenage parents starting a family, you’re pretty much just going to take whatever job you can get.

So sitting at the dinner table with them for 18 years, I would hear them talk about how they felt like numbers and that they weren’t empowered and they weren’t doing what they would have loved to do. I put that deep into my head and said, “If I ever get into a position where I’m going to be a leader, I’m going to be an entrepreneur, I want to do something about that because I wouldn’t want people to feel in my organization the way my parents felt in their organizations, so that was one element for me.

And second, I really believe people want to work for people, not necessarily for companies. I think the importance of leadership and the camaraderie you see from people to people... that’s why we’ve gone so aggressively into this company having a lot of CEOs. Most companies have one CEO, we have a lot of CEOs, and when I go into a student CEO’s cafe, they’re the primary student CEO.

If they need the napkins swapped out or if the trash is overflowing, they’ll turn to me and say, “Hey, Nick, can you empty the trash for me? We’re a little short-staffed today.” And the culture we have of servant leadership at the company is really, really important.

So those are the two things I always wanted to be able to solve for. I wanted people to feel like they were working for a very humane business that meant something to the world and to the people who worked in it, and I wanted people to feel entrepreneurial. Because I don’t define entrepreneurship as strictly the creation of a business. It’s easy to create a business. You can go and incorporate a business, you can come up with a tagline and a website, that’s easy.

How you scale and improve an organization in a competitive environment takes way more than one person, and those are the truly great companies, when they are just loaded with entrepreneurs — people who approach their jobs every day like they own the business and who feel empowered and comfortable to make decisions to compete and differentiate. I think those are the things we always have really tried to do entrepreneurially as an organization.

Making a tremendous impact through social entrepreneurship

Chris: That’s really good. I think there’s a social impact you’re making as well, and I’m wondering what are some of the things you’ve seen that have surprised you with the college campus approach and the way a community bands together to make the student CEO successful?

Nick: Yeah, in the early days of Saxbys, back when we were a franchise business and we started to own some locations ourselves as part of corporate, I always loved the coffee business because we can and do serve and employ any and everyone. So, for many years, we were partnering with great organizations like YouthBuild and Big Brothers Big Sisters to give people who were often going to have a hard time getting employed, not only jobs but to give them jobs where they were really valued.

We didn’t say, “Oh, we hired this person out of YouthBuild, so you get treated better than someone who we just hired from a college.” They were treated like peers, and we saw them really, really thrive in that. That’s when we realized our commitment to social impact was at the core of our business, it was not just once a year doing a community event where we all dress up and donate money or something. But we wanted impact to be embedded in the core of what we did as a business, and wondered, “What do we do? We employ and serve people.” So it had to be something we put at the center of that.

And we did that for many, many years. We built up a reputation, particularly in Philadelphia where we’re based for many, many years as being known as a great community hire. A business that was really focused on not just giving things away, but actually giving people the opportunity to be able to grow because if you can go and work in a really bustling F&B establishment, those are skills that translate and will help you get into a lot of other things.

As our business started to move more into the higher ed space, that’s when we realized we could really make a difference for people from both a resume perspective as well as a self-confidence perspective. So higher ed is a beautiful thing because you have people from all walks of life.

You have people who come from very, very successful families, and you have people who come from the complete opposite. No one’s ever set foot on a college campus before. They’re afraid, they have imposter syndrome, they don’t know where they’re going. We are a home for all of those people, all of them. Our current crop of student CEOs going into the fall of 2023, our current crop, 50% of them are first-generation college students. These are the first people in their families who have ever gone to college.

Chris: That’s powerful.

Nick: Six months from now, they’re going to have on their resumes that they ran a $1 million business and managed dozens and dozens of their peers. And self-confidence and humility goes with that. The trajectory of their lives is changing. We’re seeing it. It’s not real because Nick says it’s real. It’s real because we’re tracking everyone who goes through these programs.

Chris: There’s evidence.

Nick: There’s tons of evidence, and they’re connected to their peers. Our former student CEOs who have gone through this are connected to them. They’re part of an alumni network the same way you are with your fraternity or your sorority or your university’s alumni network, we have the student CEO alumni network.

I just connected a graduating student CEO from Community College of Philadelphia. She really wants to go into finance. I connected her to Tauheed Baukman who was our inaugural student CEO at our second Drexel location. Tauheed is a fast-rising leader at J.P. Morgan, one of the best banks in the world.

And Tauheed is a first-generation college student, lost his dad when he was nine years old, almost dropped out of school, and he’s this tremendously successful young man. So now Amira gets to be directly connected to Tauheed to be able to figure out whether finance is right for her, and likely, Tauheed is going to be able to pull some strings and get her an internship to see if it’s right for her.

So it’s just really, really powerful stuff, and higher ed is a beautiful thing because you have people from all different walks of life and all different backgrounds. And we can be such a synergistic value add, value provider for our higher ed partners for students to get real-world experience to figure out who they are and to have the resumes and skills to go pursue the things they love.

Prioritizing team development, community leadership and finance

Chris: I watched a video where you talked about the three pillars of business, and there’s a lot of talk about entrepreneurship.

There’s starting up, so you have to come up with the idea, then there’s building all the processes, all the products you’re going to select, how much you’re going to charge, where you’re going to sell, all that kind of stuff. Then you’ve got the exit bucket — if you own the business, how will you exit?

But I think one of the things that’s powerful is that you focus right in the middle with the three pillars of team development, community leadership, and financial management. What made you pick the middle, if you will, of operating a business, of entrepreneurship?

Nick: Yeah, I think, again, we focus everything that we do around the intersection of needing to teach young leaders how to be able to run a Saxbys really successfully because our whole business hinges upon that. But then we also want those skills to be very transferable after this experience.

So every great organization has their principles around something like the three pillars, but we use the analogy of having a three-legged stool if you will. And if only two of them exist, the stool falls over, or if you have two that are really, really strong, and really, really high, and the other’s really, really short and poor, it’s going to tip over as well.

So the three pillars are of equal proportion, but in a particular order that is really important to us. That first one, as you said, is team development. Great leaders, great organizations develop and hire people based on their fit to culture. It’s about who you hire. Who do you open the castle doors up for to let them into your organization?

The right answer is generally that they’re a great culture fit, and you can only have culture if you have mission core values. You have a defined set of things you believe in, and that you all pursue every single day. So, what team, what talent do you attract into your business? How well do you train them, how well do you retain them as an organization? Our student CEOs have direct responsibility for that.

The second pillar is community leadership. Some would call it marketing, some would call it philanthropy. Why is the community going to support your business? Why do you exist? And then how do you talk to people about what it is that you do?

So, fraternity, sorority, student organizations email our corporate website all the time, or people will stop me and say, “Nick, can you support our organization at Drexel?” I’m like, “It’s not my decision. Contact our student CEO, it’s their decision. They have their own budgets, they know what organizations to be able to support and how to best support them.” Then there’s the community leadership side. What do you do to be able to make your community better? Why are they going to support you?

And then third, and we think it’s a byproduct of those first two is your finances. How does your revenue look? How do you manage your costs? What is your bottom line? But I know when our student CEOs present us their profit-and-loss statements every single month, I know if we’re seeing a profit-and-loss statement that’s off, the issue is not the financial side of it. The issue is upstream. It’s likely going to be on the team side.

Once they get to the point where they’re like, “Oh, you know what? We had two times higher turnover this semester than we expected to have,” or, “We don’t have the right number of certified trainers, we don’t have all these kinds of things.” When their team development or the talent bucket is off, the rest of it’s going to be off too.

And those are the pillars. When they really master those three pillars and put them into play, we see success in their business, and we see them have great success post-business as well. That’s the mastery of leadership that we really try to teach people, and do they master it in January? No. Do they master it in March? Not really.

Do they typically get to mastery by the end of the semester? Yes. And then they often bump down and become the number two in their cafe, and so, they get to help that next student CEO be even better at mastering the three pillars.

Operating as a Certified B Corp and public-benefit corporation

Chris: I love it, I love it. And one of the things I was wondering about was that on the financial management side, they’ve got their own budgets. This is, from what I understand, a franchise approach to running Saxbys. How does Saxbys corporate not only remain profitable but how do you drive the corporate business? How do you finance the corporate business with the locations, or is it all investor-funded?

Nick: I mean these cafes are for-profit. The beauty of this is that we’re not a nonprofit, we are a for-profit business. The way we generate cash flow in our business is at the unit level. So a university says, “Hey, we want to put our Saxbys in our student union right here,” and they build the cafe.

So the CapEx (capital expense or expenditure) comes from the university, but the only way Saxbys makes money is by the bottom line. So we have a lot of incentive to ensure we drive revenue, and manage cost, and we do it with 18 and 22-year-olds. That’s the beauty of it. We have a lot of skin in the game in these situations, but we have a lot of confidence in our young leaders, we have a lot of confidence in our system, we have a lot of confidence in the protocols, and we have in place to be able to support them to make good decisions to run the business profitably.

I think we’re going to take a huge step back on the business. We’re a Certified B Corp, and I think there’s only 1,200 Certified B Corps in the US because it measures all your non-financial decisions. Any businessperson can look at a balance sheet, can look at a P&L, and understand the financial health or lack thereof in a particular business.

Well, how do you measure a business for all their non-financial decisions? How diverse are they? How do they pay people? How do they make decisions in the business? What does their supply chain look like? How do they treat vendors and all stakeholders of their business?

We wanted a business that was going to be holistically successful, not just financially, but we wanted to be great from a non-financial perspective as well. So one of the only certifications that exists out there that’s certainly well regarded is from B Lab. It’s called B Corp Certified. So we pursued that. It took us many, many years to eventually chin the bar we did three years ago.

We’re actually a public-benefit company as well. We changed our articles of incorporation to where we make decisions to benefit all stakeholders, not just our shareholders. We’re still a for-profit business, so we have to make money for our shareholders, but we think we will do that and do that better by prioritizing our stakeholders, our employees, our communities, and our vendors by an equal proportion.

I think because we have been able to generate pretty significant social outcomes, particularly in education, every former student CEO has graduated. Every former student CEO is employed in an industry they choose. And you look at the higher ed space, only a little bit more than 50% of all students who enter higher ed ever graduate.

Our education outcomes are really, really significant, and I think it’s those education outcomes that are actually driving our financial performance. We would have never gotten to our level of financial performance if it wasn’t for the educational and social outcomes.

So it’s that flywheel of education and social success that’s driving financial success. And if we start making decisions to only benefit our financial side, I think the brakes will start to come off the bus. We will lose the education outcomes and ultimately lose our financial outcomes as well.

That’s why impact is so important to us. I do not believe someone’s going to be like, “All right, I’m showing up at University of Oklahoma. Let me search what coffee shops are B Corps, that’s where I’m going to go.” You might have one student who does that, you can’t run a business off that.

But I think once people choose you because you run a good business and they peel back the layers of the onion and they see that at the core you’re a well-run business that treats people well, you treat stakeholders well, they’re going to be so much more loyal to you. They’re going to become marketers for your business. And so, that’s what we’re really—

Chris: Yeah, advocates.

Nick: Yeah, they’re going to become advocates for your business. That’s what we’re really focused on, but I don’t think we would have ever gotten to the financial model we have today if it wasn’t for our social success, if it wasn’t for our educational outcomes.

Tapping into your core values as you scale

Chris: That’s powerful, that’s powerful. You talked a little bit about financial success. How do you get scale to open up more locations? What is the framework to decide, “Hey, it’s time to open a new location?” Are you constantly looking for them? How do you decide to open a new location in a new region?

Nick: Yeah, so right now I mean we are far too reactive. Meaning it’s a great luxury that universities reach out to us saying, “I heard you on a podcast, I saw this article, I saw one of my colleagues at a conference and they talked about this experiential learning environment and Saxbys.”

Right now, everything is very inbound and we’re very reactive to all of the interest, but that’s a good problem to have if we’re very focused on growing. So one of our six core values is that profit creates opportunity. Some companies, they generate profit, and they put it in the pocket of a few. We generate profit and it creates opportunities for us to grow.

So we started at Drexel University, a very famous co-op private school, and then we went to Temple University, a flagship public university in Pennsylvania. We’re also at the Community College of Philadelphia, we’re also at Bowie State University, a historically Black college. If we didn’t have a core value like profit creates opportunity, we would have made this experience for only certain sectors of higher ed. It’s not who we are culturally.

We’re taking the profit we’re generating as a business and investing heavily to create opportunities for students who otherwise wouldn’t get this kind of opportunity. That’s something that is just really, really important to us as we try to scale this business.

Right now, a lot of it is inbound for us to become a great partnership organization — I don’t love the word sales. For us to become a great partnership organization, we’ve got to invest more heavily in that side of the business. We’ve got to have more people who are widening the funnel, understanding what makes a great partner, having the right outreach for that, and then having the processes in place to go from early conversations to partnerships as quickly as possible knowing that most of our partners right now are in higher ed. Higher ed is a pretty awesome place. One thing it’s not known for is being quick or entrepreneurial.

Chris: This is true.

Nick: So we can’t control that. We should and will focus on what we can control, which is how quick and entrepreneurial we are so that the process can go a little bit faster. Because look, I’m so proud of this, we have built something really special. The young people who are coming through this are succeeding in life. This is a part. We’re not the reason why they’re being successful, but we are a reason for them being successful. We want to share it with a lot of people.

We need to get out of our own way and be able to continue to overhaul and improve our own systems to ensure we can provide this opportunity that so many young people deserve.

Chris: Well, so from the inception of Saxbys through today, how has your job changed?

Nick: Yeah, I think in the early days, and it’s probably not uncommon for most entrepreneurs, you have to wear every hat. You have to be the main barista and the real estate person and the finance person. The reality is I’m not good at most of those things. So, I think I’m finally getting to focus on the very few things to be honest with you that I’m actually good at.

I have experts in this company for all of the things I’m just not good at. I care about making a difference in people’s lives. That’s the thing that makes my heart race. Sitting in my finance meetings, yeah, I have to do it, I’m the CEO of the company. Sitting in our marketing and our product and our education meetings, yeah, I have to do it. The people who run those things at Saxbys are so much better at it than me, and that’s what makes their hearts race.

I like the human impact side of it. I like meeting with our university leaders, talking about what their goals are for their universities and what we can do to support those goals, and then meeting with our young people. Meeting with our leaders, inspiring them, sharing my experiences.

My talks with them are not about I’ve got the world figured out, let me just show you the sale book or the pitch book on that. I’ve made so many mistakes, how can I help you make less mistakes than me and make better decisions faster than I was able to do? So, I love that side of the business.

In many ways, my role has evolved in a way where I get to do the few things I’m actually good at, and I’ve hired people who are just really good and really passionate at the many things I’m not good at. And I think that’s a great luxury, and honestly, I wish I would have had the foresight to do those things a little bit faster.

Allocating responsibilities for onsite managers and corporate

Chris: OK. Well, I’d say if someone who is a student CEO has their own budget, just tell me a little bit about your product processes. If you’re going to roll out a new product or if you’re going to improve one, you have to make changes in areas like marketing and pricing.

How do you enable or provide the resources at the corporate level to support your student CEOs, or do they need to have their own marketing managers? Do they need to have their own product people? Do you have a microcosm, or do you have some shared services that can support them?

Nick: Yeah, it’s a great question. So, there is definitely the shared server side that it would be completely inoperable for our student CEOs to have to start from scratch every single semester. For them to say, “OK, what bread am I going to carry for our grilled cheese? Where am I going to source coffee from?”

That’s why our corporate office exists. Those are very important things, but those are not part of what allow us to teach leaders to be great leaders. And so, there is a great shared service. I like your term for that, a shared-service model — that’s why our support center, our headquarters exists. I must say it 100 times a day, this place — I’m acting like I’m sitting in my headquarters, is a call center.

This is not important work. The important work exists in our cafes. Our jobs all exist to serve them. So, we need to be able to put the things in place that allow them to make great decisions. They have their vendor network, they have their infrastructure, they have their systems and they have to order their items, and the revenue is projected for them out of the corporate office.

But they have to make the decision to say, “You know what? Weather is expected to be really, really bad today, and what we see is revenue going down 30%.” They have to be able to adjust how much product they order so that the inventory that’s done at the level of the individual cafe reflects the kind of performance they’re going to see on the ground.

It is shared service. It’s not like the eye in the sky just does it all for them and they just show up and just operate the business. They have to make a lot of critical decisions.

Chris: They have to pull the levers, turn the dials, all that stuff.

Nick: They do, and look, there are often mistakes in that. They have weekly financial reviews. Not with me... they have it with their pods, their operational pods that are done regionally. So they’re getting a direct look at the financial performance of their businesses on a weekly basis.

They also have their own apps that show them the revenue and their labor, which is all real-time, but every single week, they’re essentially going through miniature P&L reviews. They’re getting a lot of feedback really directly and really, really quickly, and we often mess things up at corporate. We might not have done some things properly for them at the corporate level.

So this shared service goes in both directions and it’s a fragile ecosystem if people have egos. If people are pointing fingers at each other versus, again, looking at the bigger picture here, the north star for us is that we’re in the business to make life better. How are we going to impact young leaders and young entrepreneurs to make life better? And I think that takes a lot of the edginess off of what we do because there’s a greater purpose than just purely making money in our business.

Rapid-fire questions

Chris: I have some rapid-fire questions for you though.

Nick: All right.

Chris: Are you ready?

Nick: Probably not, but go ahead.

Chris: There may be a curveball in here, we’ll see.

Nick: I was a pitcher, so I could never hit curveballs, so I’m sure that will continue.

Chris: OK, OK, so this one’s straight down the middle of home plate. What’s your favorite Saxbys coffee drink?

Nick: So, my favorite has historically been what we call The Cure. It’s a secret menu item, and it’s espresso over ice filled with coconut water. Actually, it sounds strange. Espresso is bitter, coconut water is sweet, but because of the way our espresso is roasted, it’s actually roasted to mix well with other items versus just particularly to stand on its own.

And you have to like coconut water. There’s a lot of people who don’t like coconut water, but if you like coconut water, The Cure is actually unbelievable. It’s so refreshing, it’s so easy to drink. Today, it’s actually just a secret menu at Saxbys, but that’s typically my go-to.

Chris: One day.

Nick: And cold brew’s our number one selling SKU. It’s a very versatile item, it’s very refreshing, it’s light, it finishes sweet. I drink a lot of our cold brew, but The Cure is my unique go-to.

Chris: That’s the deal, OK. Well, we talked a lot about work, but what’s your favorite activity or hobby to do outside of work?

Nick: Pilates.

Chris: All right, you have to tell us about that.

Nick: You were probably not expecting that answer. It’s just been really life-improving for me. I’m a pretty intense person by nature. I like to go after things, and so, I think doing something like CrossFit would only put me over the edge. I needed something that was a little bit more meditative, good for my mental state, my soul, and my body as well.

So Pilates has just been amazing for me. I’ve done it for probably 10 years now. My wife owns a Pilates studio, which obviously helps as well, but I feel lengthened, I feel strengthened, my flexibility is great. I broke my back when I was 17—

Chris: Oh, my goodness.

Nick: So it helped take care of my core. Knock on wood, I’ve never had any back pain since I started Pilates, and so, it’s awesome. I really like it. I like it from a mental, a soul perspective, and a body perspective. I can’t get enough of it.

Chris: Unexpected, but a great answer.

Nick: Thank you.

Chris: All right, what’s the most unusual skill you possess that people might not know about?

Nick: Oh man, I don’t think I have many skills. I already used that card with Pilates. I’ve been doing it for so long, I’m pretty—

Chris: Yeah, it’s got to be something like, “I juggle.”

Nick: I’m pretty decent at Pilates. I still can juggle three tennis balls. On a good day, I can still dunk a basketball.

Chris: Hey, there you go.

Nick: Maybe that. My son is actually surprised. I did it this past weekend. We were out playing, and he was very surprised. I’m not sure other people were that impressed by it, but he was.

Chris: You were like, “Yeah, bro.”

Nick: Yeah, he’s nine, it’s not that hard to impress him, so yeah.

Chris: “Dad, you can dunk.” All right, well, if you weren’t in the coffee industry, what would you be doing?

Nick: I would probably be a coach or a teacher. I do think of myself a bit as an educator, just being in the higher ed space, but sports are just such great teachers and such great life lesson providers. So I would likely be in that space, but again, I love scale. I love being able to scale something and allowing your impact to scale with it. That’s why I think being able to be in the impact space but in business, really checks the box for me.

Chris: That’s powerful. Well, what’s next for Nick?

Nick: I think we’ve got something special in that we’re a first mover with what we’ve created here as a business. That flywheel that our social and education outcomes have created a really successful financial business is pretty special. That’s such an amazing opportunity, and so, I think constantly having a healthy paranoia in our business that we can’t just rest on our laurels and be like, “Look at all the student CEOs we’ve impacted.”

Instead, we need to look at all the people we haven’t yet impacted and figure out how to be able to slam the gas on this to be able to continue to have the quality of relationships and outcomes we have with even greater quantity. That’s really the important part, and so, it’s why my Pilates is so important to me. Keep my mind and my soul and my body right.

And being able to just share the mission and the purpose and share the success of this business because I think this business, I said it many, many years ago, where people were like, “God, Saxbys has a pretty good culture back in Philly, but how are you going to have it when you go to DC and Pittsburgh and Oklahoma City and all these other places?”

And I said we’re going to bet heavily that because we’re so decentralized and so entrepreneurial, and because we have student CEOs everywhere, our culture will get better as we get bigger, versus getting worse as we get bigger. And so far, that’s exactly how it’s playing out. That’s the challenge we have, the challenge I have for myself as a leader is figuring out if our culture can actually get better as we get bigger and as we spread out our geography. That’s that healthy paranoia where we can slam the gas and really bring this opportunity to a significant portion of the next generation of leaders and entrepreneurs.

Chris: Well, something that’s been clear to me in the conversation is that there are lives you’ve impacted and that your team has impacted, and you should be proud of the work you’re doing, your team should be proud of their commitment. I think if there’s any encouragement I would have is to just not stop. Keep going, help as many people as you possibly can. It’s really a powerful story.

I would say if there’s anything I’ve appreciated most about our conversation is that your level of authenticity and your passion is real. It’s contagious, and I hope you don’t ever stop.

Nick: Thank you so much. I really appreciate it, it’s been so awesome speaking to you, Chris.

Chris: Yeah, absolutely, thanks for coming.

Nick: Thank you.