QandA With Scott Miller, CFO of Cotti Foods

Scott Miller, the CFO of Cotti Foods, a thriving business operating 200+ Taco Bell, Wendy’s and Pieology locations, shares his insights on cutting costs and building prosperous franchises. Read ahead to discover the lessons learned from Scott’s two decades of progressive experience in restaurant accounting and finances, and gain valuable insights into his most effective financial strategies for restaurant operators.

So Scott, tell us your story. Where did it all begin?

I went to the University of New Hampshire. And when I graduated in 1989 I was fortunate to work for the FDIC examining banks. And at the time, it was kind of the tail end of the savings and loan crisis. Commercial banks in New England were really struggling. And so it was a difficult time. The economy was not great. The FDIC was understaffed. And so my friends and I got to do an awful lot really early in our careers, and learned quite a bit. It was a fun and challenging time.

When you’re young, learning is spectacular. I took that, and went to Indiana University and got my master’s degree, and moved to Dallas, Texas, and started working for Nortel networks. But I realized I didn’t know much about telephones or how they work. 

And one Sunday I was reading the Dallas Morning News, and there was a a job posting for TGI Fridays. And I’m like, I understand why people eat and drink that I get. So I applied for the job, got it, and that was my first corporate restaurant job, and I was the Director of Finance for TGI Fridays, America.

TGI Fridays got me into the restaurant space, and I fell in love with it almost immediately. and I’ve been fortunate throughout my time, I’ve worked for publicly traded companies, private companies, private equity owned, family-owned, individual owned, startup, pre bankruptcy. I’ve seen a lot. 

And I think I’ve tried to take little bits from all the companies that I’ve worked for to what I’m able to do here at Cotti Foods.

You started at Cotti right around the time that COVID hit, right? Tell us about that. 

My second interview and the job offer came on March 13th, which was a Friday. It was 2020 just before Covid shut down the restaurant industry. and it turned out that my first day of employment at Cotti Foods was April 1st.

The President and CEO of the company at the time said to me, “We definitely want you to start. We need more smart people here thinking about what to do.”

A lot of companies wanted to immediately scale back, do pay cuts, let people go. But the owners of Cotti thought they should get more people thinking about how to survive this. 

After about 2 months of COVID, drive throughs started to pick back up, and our world stabilized relatively quickly.

We were very fortunate to not be in casual dining, which really had much more significant struggles than we did, but coming in with a fresh perspective in a time of crisis, I think, was very interesting and very helpful.

How many locations does Cotti Foods have today, and how has it grown? 

So currently, we have 230 give or take. We have a 107 Taco Bell’s. We have 120 Wendy’s and 5 Pieologys. We operate across 6 different states, Hawaii, California, Texas, Kansas, Oklahoma, and Missouri as well.

Our CEO’s father was a franchisee of Taco Bell and opened Taco bell number 12 back in 1968. We’ve been in the Taco Bell Brand for 58 of the 62 years that Taco Bell’s been around. So when we sit with the folks from Taco Bell, we like to let them know we’ve been in the system longer than they have, and will remain in the system longer than they will. 

Ours is a family owned business. And second and third generation come in every day, and they’re smart, and they’re humble. And they taught me as much as I’ve taught them, that’s for sure.

We grow both organically and through acquisitions. In 2022, we just did our last major acquisition, which was 17 Taco Bells. In the last 2 years, we built 7 or 8 restaurants each year.

We want to continue to grow. We want to buy land and build. We’ll do ground leases and build. We want to grow. We think growth is healthy.

We’re headquartered in Rancho Santa Margarita, California, Southern California. We try to stay under the radar. As an organization, we don’t go out and publicize what we do and how we do. But you know, just for perspective, we are the 29th largest restaurant franchisee in the country.

You’ve talked about the importance of a healthy work-life balance, and being ranked 29th is probably a testament to how you treat your people.

Yeah, I’ve been a CFO of organizations going on maybe 15 years, and I was quite used to getting phone calls at night and on the weekends. As a CFO, that’s just the way that it is.

But I’ve been with Cotti foods for 4 years now, and I think I’ve gotten 2 calls on the weekend. And that’s it. I’m home every night to have dinner with my wife and son, which is terrific.

Those aren’t things that as a CFO, I’m not used to. But when it’s a family owned business, they take their family very seriously. They don’t want to be bothered on the weekend unless it’s an emergency, so they don’t bother us.

How big is your team?

I manage payroll accounting. So we have 20 people in those 3 groups combined, which represents about half of our corporate office. We have a large maintenance group, too. Effectively, I manage half of half of our corporate office.

How do you reach and speak to your customers?

As a franchisee of the major brands, Wendy’s and Taco Bell take care of much of that. Both in terms of providing us information around who the customer is. They do drive a lot of that communication. We’ve made a decision to go over and above the advertising requirements that we have from our brands. We do a lot of remodeling. So when we reopen after a remodel we’re inviting the mayor, especially in the small Midwest towns.

What is a day in the life of Scott Miller?

I walk in every day with kind of a plan on what I want to do. And it can go south relatively quickly, for good reasons and bad reasons. I might walk in one day and have an email from one of the bankers selling somebody else’s franchisees, and all of a sudden I know that we’re now gearing up for doing the acquisition analysis. Is it something we want to go after and make an offer on, and if so, how do we line up the financing to support that? Or, it could be trouble with a team member that pops up.

When I look at my day I try to bucket it into a couple of areas. The first bucket really is all about cash and cash management. That’s early, and I do that before anybody else is in the office.

The second bucket for me is checking in with my key team members and making sure the teams are on track. I touch base with my critical team members and make sure we’re on the straight and narrow. We know where we’re going and what we’re doing and address any issues quickly. Being in a small office, that’s easy to do right.

The third big bucket that I spend time on really is more strategy. Looking out a couple of years, what is it we need to do and where are we going?

What’s your closing cycle typically looking like, and what kind of risks are you managing? 

When I got to Cotti Foods, our close cycle was about 35 days. When I was at a 7 unit chain, we closed in 7 days. So I’m like, “how can we be this large and not close faster”? I think some of it was not processing things timely or in the right order. We worked hard to get that down. With certain organization, We’ve now changed our general ledger that’s allowed us to speed up the process.

Leasecake has been a huge help. As CFO, I picked the system, I implemented it, and the major stakeholders totally love it. We love Leasecake because it helps to reduce risk. We don’t miss lease options which can come back and bite us, because we know about them all ahead of time.  Before we had Leasecake, we didn’t have a formal process for lease renewals. We kind of waited for the landlords to tell us when the lease was up. Now with Leasecake, we’re proactive, and we’re doing our own CPI (consumer price index) calculations and sending it to the landlord, because now we control how that’s going. We don’t let the landlords choose any of that information, or whatever the assumptions are, we’re doing that to utilize that  kind of information that we’re getting out. Utilizing technology has helped us to get that time to close down, and it’ll continue to allow us to get that timeframe down.

How many point of sales systems do you currently have?

We have 3 different point of sale systems. The major brands have 2 different back office systems, all of which we had to integrate into Restaurant365. It was a lot of hard work, and it took longer than I wanted, but it was a key step in how we’re managing a couple of different aspects of our business.

What keeps you up at night?

A couple of things that I’ve really been thinking about and struggling with is over the last several years we’ve seen the cost of food away from home grow faster than the cost of food at home. I don’t know when that’s going to become such a big variance that our industry starts to see people making the decision to cook at home more often than they do today. There’s not much I can do about that, but we can make sure we’re getting orders accurately, keeping a clean restaurant, and being friendly.

Has the Leasecake technology helped keep your staff count low?

The way that we’ve approached the implementation of Leasecake isn’t to reduce our staff, but how we can take on additional work that needs to be done. We’re now taking on more work, being more productive, having better control than we did in the past, and not increasing our cost and keeping our staff engaged in relevant important work.

Are you looking at AI drive-throughs?

Cotti Foods isn’t, but Wendy’s and Taco Bell are, and we’ll be supportive of it. The technology is getting pretty good, and with most languages you can place an order. I think it is something we’ll see more of in the near future.

What’s been the driver of growth since you joined back in 2020? 

We buy a fair amount of land. We own 55 of the 225 restaurants, we own the dirt underneath. We want to do more of that. We look at it as an effective way from a capital standpoint for us to keep growing. If we choose to buy the land, build a restaurant, and then sell, we can essentially cover our costs. So now I’ve got an operating restaurant with 0 capital that I’ve invested in, it  makes for a pretty good return, no matter what. We do like to acquire when we can, too.

Any challenges with post covid terms and conditions and real estate leases?

Since we have drive-throughs at all of our locations, we were never in danger of shutting down. We are, however, trying to get some pandemic relief language into leases, with mild success. 

In terms of critical clauses, what kinds of key clauses are important to you? 

The most important is notification around exercising options. We sign 25 year leases with 5 year options and we always have some leases that need to be exercised. And we can’t miss those. When I was young I just assumed that would be an easy process, it’s not.

The restaurant’s open and it’s running, and it just happens. Next thing you know, you’re getting a landlord saying “how come you didn’t exercise your option?”, Woah what happened? Of course we want to stay. If you don’t have a good relationship with your landlords, they might want to renegotiate the rent because you’re doing great. You’re doing better than they thought and you didn’t exercise timely. Sure, we’ll give you the term.

We will use Leasecake more every year. We see the opportunity to expand our functionality and to maintain other information that’s critical or important. Whether that is things like having dates for permit renewals, franchise agreement, or expiration dates, we always try to align the lease in the franchise agreement. Having some of those items in place is about risk management.

Who does your day-to-day work when a lease is signed, or when you’re acquiring a location?

We have a vice president of real estate and she has a primary responsibility for the shell of the deal. Once that’s done, it gets turned over to our lawyers, and they negotiate the finer points.

We’ve got a gentleman who runs our development, who’s been doing this a long time, and so that lease gets passed around to kind of the critical decision makers, and we all get to weigh in on what we see as potential issues. When you’re negotiating with a landlord, it’s the best time to be asking for things. But one of the things that we have found is, as we explain to the landlord why we want to make a change to the language and how the language may not work for us because of systems or timing, or whatever it is, the more of the why you give them, the more likely they are to accept what you’re asking, or at least take it into perspective on how they want to alter them a term or the language.

What advice can you give?

Don’t ever stop learning. The pace of change with technology is amazing. There’s always something you can learn more about, whether it’s how the data works, the structure of tables and the interplay between the tables, anything. It is. Just keep learning.

To learn more about Leasecake’s lease management platform and how we can help you grow your business, manage multiple locations, save money by understanding exactly what’s in your documents, and minimize the risk of overpaying or missing a lease renewal, schedule a demo.