French robotics restaurant founder Ylan Richard on why he shut down Cala after 8 years and is relaunching in New York

doing? What's going on? Hey, I'm good. I'm good. How you guys? I'm good. Uh, we met at Miami Tech Week a few years ago, correct? Yes. Yes, that's right. Yeah, actually.

And I remember you telling me uh quite specifically, you didn't see yourself starting a venture business, but ventureback business, but you said media was something you were very interested in. So, it looks like it turned out quite well. Here we are. Here we are.

Um, but yes, uh, give me give me the background on your journey. Uh we'll get to the current company, but I want to talk more about um building a company uh outside of America. Delian gave us a little bit of the background, but I wanted to just hear that journey and kind of tangle with it for a little bit. Yeah.

So, I started a company called Kala um with two co-founders probably a bit more than eight years ago. Um the vision and the mission was to basically make real food more affordable by using robotics and and AI to automate the back kitchen operations. Okay.

If you look at the typical P&L of a restaurant, it's like 30% food cost, 30% people cost and 30% overhead, real estate of rent, electricity, those sort of things and like the 10% the margin if you're performing well. Most a lot of restaurants are actually in of losing money. Um so that's that was the vision.

And we said, okay, we can actually build machines and robotic systems to bring down operating cost to bring down the required footprint of a restaurant to run, which means we bring down overhead as well.

And hopefully we can reinvest part of those gains into better quality ingredients to make the product more affordable and more higher value. And then we can also make the restaurant itself more profitable, thus more scalable. Uh so that was the vision.

Um we basically ran the company for for eight years, did a bunch like an ungodly amount of mistakes along the way, but in the end managed to have five very very profitable restaurants. Um basically give you a few numbers but like 60% retention, customers coming more than once a week, 95% customer satisfaction.

Um can give you the profitability numbers but much higher than what any other restaurant has achieved in the world of thus far.

Um and so the thinking from there was okay we had those great kind of first result with a few restaurants let's kind of start scaling we had raised 10 million up to that point from VCs um and we kind of get got hung on a very kind of structural problem of Europe which is there's a big kind of financing gap when you go when you get to like the series A/ series B kind of moment uh where basically there's just a gigantic cliff of funding there um and so basically we didn't we did not understand that when we kind of created the business and structure the business and so we basically were like starting to assemble the plane ready to take off and then we hit the wall like straight straight on um and we just hadn't kind of build we should have built like much smaller plane or or whatever delta plane or something that's more lean than what we had prepared to do because we had a much more ambitious vision that what was achievable in Europe um and the thing that's quite specific and that Deion was referencing a few days ago in the show was restructuring the business to go from those handsful of restaurants that were like very profitable uh and a very high kind of HQ cost trying to restructure that to get to a profitable kind of break even point at the business level uh uh was basically on paper possible like we could have cut down cost enough to make the business profitable.

Um but just pure French regulation prevented us from doing that.

just the the severance cost quite well like the the the purely the severance liability was higher than the cash on the hands we had at the time and we had quite a lot of cash and and still it was like a lot of money that we had to pay in severance and plus other kind of liabilities around that.

Um and so in the end we basically tried talk to the regulators to the government to kind of any structure that was around us to try and find a workar around but we kind of in the end we couldn't really go go beyond what the the laws and rules allowed and so we ultimately we had to shut down the business around yeah a bit more than two months ago which was kind of quite a shame I was very very angry throughout the the whole process which obviously kind of pented up in in the next few in the past few weeks and and when I met Deian a few yeah actually a few days after the decision from the court kind of came down, um I was still kind of on the fence about what I wanted to do next.

I was still thinking, should I seem very angry about this? Yeah. One thing I I would just highlight I I that the idea of using robotics to deliver better, cheaper food was not novel. What was novel was actually getting it to work, right? Like so many compan so many people have tried to do this in the United States.

This is a graveyard. Yeah. It's an absolute graveyard of companies with super talented founders and teams that for some reason or another couldn't like you know it's hard enough Freedberg started one. Yeah.

And it's hard enough many people interesting was the other way around like they automated the front of house not the back of house. That's true.

But but a lot of a lot of businesses like I could of give you 20 30 different businesses that have tried and I I think up to that point we are the only business that had and technically Sweet Green does as well but had kind of proven uh let's say kind of incrementally positive kind of return investment on the whole investment of a restaurant.

Meaning like if you actually invest the money it takes to build the machine and put it in the restaurant you actually get end up with a higher ROI on the whole investment than if you are just launching with a normal team.

I think food gun is the only restaurant that had this apart from us and I for them it's not very clear exactly how they achieved that in terms of how transparent they are with the the numbers but yeah other than that I don't think anyone had even made like had even actually paid back a single installation of a robotic system in a restaurant um and so yeah we we are very proud of that result that we got a few years ago and then we managed to launch more stores get more revenue get stores doing very high kind of aid margin but yeah in the end of couldn't really get there uh with with Kala.

Um, and I think in the end the biggest mistakes we made was definitely starting the business in Europe. In France specifically, there's just the the the market and the let's say the whole ecosystem is just not made for ambitious plays.

Uh, um, and like if you want to build something ambitious, you can't really do it there. Yeah.

Do you think that the the restrictions and the regulation that you ran into, are those broadly popular or are they kind of like legacy rules that if you put them up to a purely Democratic vote, most people would say that doesn't make any sense because there's a lot of like like you know legislative and regulatory crust in America that isn't popular but hangs around and people just kind of deal with it.

Um but but what is like the mood in France around this?

Like it it sounded like there wasn't very much like public outcry, but it feels like a situation where kind of everyone loses because the customers were enjoying the food, the employees were enjoying their jobs, you were enjoying building this company, and now they all go just go away. Yeah.

So I don't So this regulation specifically, I don't think it's known enough like company going bankrupt is not something that makes national news. So it's not something that people have top of mind.

But I think overall people would probably support it because what the regulation actually says is just that when an employee when a company kind of goes bankrupt the employee gets pretty high severance meaning they don't have to find a job straight away or if they can't they can take a few months to find it and it's fine.

So I think on with the very kind of socialist kind of mental model that most French most French people have I think this would probably be popular.

Um but on top of the severance itself the state puts in place a lot of other protections even beyond what the severance kind of cost is like you basically get your full salary for a year if your company goes bankrupt um paid by the state. So there's I mean partially by the company but the state puts a bit more on.

Um and so there's a bunch of those rules that I think people would probably be in favor of if they thought about it but it's just not something that's top of mind for anyone.

Have you talked to any other founders in France who went through something similar or had like cautionary tales to share is because it feels like this was widespread. We'd be hearing about it a lot and people would be starting to lobby or anything or maybe just everyone leaves. I don't know.

I think the one of the reasons why it was so hard for us specifically is that the the uh so first we hardware business and so the HQ cost component is is kind of harder to scale down than a typical software business.

I think that's probably one reason why it was hard and also I think a lot of businesses that fail especially startups in France just fail because they can't really find product market fit and they can't even get kind of commercial traction and so in the end you don't really mind the company going bankrupt because like you just didn't have something that was worth working for versus for us I think it's a bit different because we actually had a product that work and and the economics were there we just couldn't keep on scaling and we should have understood that maybe two or three years earlier and been a lot more conservative on the the structuring of the business what's the strategy for the new company.

Uh how do you you know leverage what works and avoid what doesn't? Yeah. So, so I think so the the first one kind of key lesson is definitely being a lot more lean on the on the HQ cost.

I think one thing that I learned is that even though I think this business can be of scaled built with venture capital, uh I think you have to to build a strategy around your financing that's both VC but also private equity that does retail and restaurants come more naturally.

you have to be able to tailor your business toward those guys because at some point you're going to need them. Um and so that that means of low HQ cost more of HQ operations that means other structuring element that you have to do differently. So that's definitely one big learning.

The second one is is also in terms of um let's say structuring of the operations. We had built restaurants that were too small and so even though they were very profitable they didn't bring in as much as aida as we could have.

If we had stores that were doing like let's say 3 million revenue per store, we'd have been bringing a lot more a bit per store than the revenue we had in our stores. So that's another kind of key learning. Um and the tech itself also we are changing a bit the product.

Uh we are not taking any of the previous IP or tech that kind of ke developed. We are kind of rebuilding everything from scratch. But we know overall we have kind of rough good ideas of kind of what are the prototypes we made, what worked, what didn't work.

And so we're also kind of approaching the tech a bit differently than what we did with Kella. And thus we're also approaching the the product differently. We're not going to be serving the same the same food. Makes sense. Jord, anything else? So So what uh yeah c can you sh what's the timeline for the new company?

Uh and where what what kind of key markets are you looking at? Yeah. So when I spoke with Dian a month and a half ago was not really decided on it yet.

So barely basically incorporating the business now already have um um basically I talked to a bunch of Kala shareholders um that kind of when I announced this the we had to shut down the business and in the end we kind of we were forced by the state to shut down. It's not even like we decided to do it.

Uh um talked with a bunch of them that basically said whatever you guys do again if it's the same business we want to back you again. So I'm right now just thinking about kind of how I want to think about financing and and the first few months is very very kind of high level at the moment not really into any details.

Um um but so that's kind of first step in next few months uh the high level higher level kind of road map is to launch the first store in New York um middle of next year midpoint of next year exactly kind of when is going to depend a bit on a few elements around funding and also timeline on regulation.

Um but yeah, the first restaurant in New York, going to launch a few restaurant there and then pretty highly considering franchising as kind of a path um to to scale a lot more aggressively than and a lot more efficiently capital efficiently than we did with with Kala where we own every single restaurant.

Yeah, I think most people don't understand just how if you if you have a hit restaurant, you know, concept and you can scale with uh you with franchises, not only can franchises, you know, change their lives through through that opportunity, but you can have what ends up looking like a software or better than software margins and that like super lean HQ and just printing cash off the top line.

So and imagine imagine if the restaurant itself doesn't do 10% a bit multiple kind of X around above that the amount of money you get out of the top line of the restaurant is just so much higher that let's say you are a typical restaurant does 10% a bit the margin as a franchiseor you're going to take 5% that's not a lot of value you're taking for you basically not doing everything but creating the whole value in the end if you have a restaurant that does a lot more than that you can get a much bigger chunk of the top of that restaurant and the the gains into by not operating is also much better.

Very cool. Cool. Well, excited for you to come to the US