How to start a business in a foreign country, with ex-Lawyer Michael Philippou of The Frozen Fruit Co. | #415

Tim

In what way?

Michael

Well when we first came up with it we were lawyers and we didn’t have really any clue about making any of it so we went on to an ice cream course. We took a day off from work just told everyone we were taking a few days off for vacation. We went off and did this ice cream course and we kind of went there just like how do you actually even make ice cream. And so, we kind of learnt that process and we started speaking to some of the people there. We just want to make it just from fruit. You know it’s not sorbet it would not work and we just want to use whole fruit pulp and swing just fruit sugars and everyone was like hey no you can’t do that. That’s not the right way. You know there’s no money in it and just using fruit pulp is too expensive. It’s just not how the industry works. And after we came away from that day actually a little deflated because you like well you know these guys been doing it for years. They’re the experts you know. Maybe there’s a reason someone hasn’t done it before and so we’ve got we got put off from it for a bit but we just kept on coming back to the idea and we were like oh who says it has to be done that way. And actually, I think one of the advantages we’ve had is that we actually don’t come from that industry or we don’t come from a culinary background so no one’s told us this is how you make a frozen treat. It has to be with a custard base with a dairy base or even lots of alternatives now are made with a base. So, we’re like well why is it have to be like that. They feel that’s kind of given us an advantage.

Tim

Michael just for a minute. So many questions in that short monologue from you. I have, but two things. First of all I love naivete and I’ve spoken about naivete in previous episodes and what I mean by that is when you enter go into an industry or try something new about which you have no idea and often that brings a very fresh approach and it’s sad when I say that I go that sounds good in theory but what about the people who have been in the industry for a long time and know it backwards and I sort of do know in quotation marks I mean is naivete truly a wonderful advantage?

Michael

I think yes and no. I think yes, it is because it just lets you look at stuff in a different way because we everyone was saying you do it this way and you know Danny Meyer has this great saying he always starts with a phrase you should always ask yourself well who ever said you had to do such and such in such a way you know and that’s the first question should always be asking yourself. So, who said ice cream has to be made certain way. And then what you can do is then you can use these people in the industry and you can use their knowledge and their expertise to kind of leverage off your naivete. So

Tim

I like that.

Michael

That’s how I kind of view it because yeah, you’re not you’re not going to be an expert but

Tim

of course

Michael

I’m a big fan of filling your gaps where you can and building that knowledge gap and that’s where people in the industry can help.

Tim

Does naivete wear thin?

Michael

It could be frustrating. I mean the main question is do you want to ask yourself. Is there even a market for what I’m doing. Do people actually want this? You know like everyone loves ice cream everyone loves vanilla ice cream it’s the best-selling flavor in probably every country in the world. But the real question is, what am I doing? Is there a market for it? Do people want it? And I think that’s the more important question you could ask yourself.

Tim

Great question. I also before we go into the journey of how you’ve built frozen fruit co. I’m interested in. I mean you guys your wife Victoria yourself your lawyers you’ve gone to the trouble I don’t know how long a law degree is in the U.K. but here it’s a number of years five or six years I think. So, you studied law, you practiced law. You’ve set yourself up for a life of lawyer I guess you tell me but you’ve invested a lot of time in energy and have the expectations of family and all that stuff. Oh yes look at Michael and Victoria the lawyers and you have literally just walked away from that although I imagine you use a lot of your learnings in running a business but I just feel like it’s such a big decision, was it for you guys?

Michael

Oh yeah it was and everyone, most people thought we were bonkers. We didn’t tell everyone at our law firm what we were going to do because we just know everyone be like you’re doing what? But for us it was we kind of we really saw that gap in the market and doing a law degree is a long time but the great thing about it you get so much knowledge of when you do law.

Tim

Yes

Michael

You have a different hat you can wear. You can look at stuff from a different perspective. One of the bad things about law I suffer from is that we’re probably a bit too risk adverse. You think about I got to dot all the i’s and cross all the T’s and you go oh my God you think about everything what’s happening wrong and that can be a really hard mindset to change to when you want to become an entrepreneur. When you have to think well what’s everything that can happen right

Tim

Yeah that’s a good point. And I must say if I reflect on some of the famous lawyers who have gone on to do amazing things I think a lot of the cast of Monty Python were lawyers and we’ve got a TV production company in Australia called Working Dog and I think a few of those guys who are now sort of TV personalities we’re also lawyers I guess the bottom line is it sets you up for being able to do a lot of things and a big expense in running a business can be legal fees so yours are free.  I like that.

Michael

And also like with being a lawyer. Your pay is quite good to begin with. You have to get out quick. Because if you’re going to do something and your pain barrier becomes too much. Because of your dropping your salary on a100k

Tim

Yeah

Michael

You’re going to have to be an entrepreneur and it’s funny its dropping to a fifth of what you’re doing. You know your lifestyle is dropping to much. Your pain level becomes too much. So, we were like, our level where I’ll pay whatever we’re dropping in salary. We can deal with our pain levels okay but I don’t know so if I was to carry on maybe it would just be too much of a change in lifestyle.

Tim

Your pain level was less about the salary you were earning back then and more about the fact that you had a newborn baby and you’re all of a sudden excited to completely change careers and start a business that is a pain point right there.

Michael

Our baby was born last year and the business, so she was born when we’re in states.

Tim

Beautiful. There you go. So, you were living in London and you didn’t feel it was the right market for what you wanted to do with frozen fruit co. So instead you’re going to Los Angeles or Dubai and I understand the more research you did the clearer your vision became. What was the research that you did and what did it reveal?

Michael

We have this saying that we say between us which is, you make big decisions with your gut and small decisions with detail. And when we came up with the idea instantaneously, Victoria looked to me and was like we got to get this to LA or Dubai the middle east you know. And it was just kind of one of those big gut instinct moments I thought straight away yeah, I completely agree. Now bear in mind at this point I had never even been to the states before let alone los Angeles. Victoria had visited once before. But we were just like, that seems to really resonate. And then we were kind of like well let’s kind of work out why and so we kind of started doing more and more research and it just became more of a fit to go to just because we felt there was like you know same language. We felt we just do that.

Tim

Good climate

Michael

Yeah good climate. And we started researching, so this is where Pinkberry started. This is where soft service really understands. Froyo. It’s the center of froyo people understand the concept and we want to take that concept one step further. It’s where the large vegan, large health conscious population and it is a place where lots of food trends start and people look to for food trends.

Tim

Are you speaking specifically of Los Angeles, of Santa Monica? What were you referring?

Michael

I’m speaking specifically of Los Angeles and Santa Monica. Yeah

Tim

Santa Monica I’ve been there once. What a beautiful beautiful town. It would just be full of vegans I’m guessing. It’s just it’s just way too cool for school.

Michael

Yeah Lots of them was a vegan and lots of Brits

Tim

Lots of Brits getting away from the cold

Michael

Yeah exactly. But it’s just people are very open to trying out new concepts and new food items and it’s really a place where all the early innovators are. And we knew that’s where we need to be and we need to be where people are going to latch on to it quickly.

Tim

So, there’s an energy in Santa Monica. I’m guessing but you wouldn’t know that when you got before you got there. Is this a sort of is Santa Monica a bit like the Silicon Valley for foodies?

Michael

Yes and No. I mean when we when we came here we basically have three months to find a lease. Otherwise we wouldn’t be able to come back again for a year. So, we had three months and we were just like we need to find somewhere and we kind of looking all over LA. Kind of trying to scope every area and we just came across this lease on Montana Avenue in Santa Monica and it was kind of the right space. The right sized. The rent was good. It seemed like in a good location. So, if I were open to that. That was just a bit of luck you know

Tim

I just understand that I’m getting very clear on the detail of this fascinates me Michael so just humour me here you have finally you’re in London. You’ve made the decision. You and Victoria. You’re heading off. You’d be packing up leaving the law leaving everything I guess. Packing up with the view that you weren’t necessarily going to be coming home permanently for a long time yet you were going to America and you’ve literally got three months. Is that the visa thing where by, what do you have to do within three months in order to be allowed to stay?

Michael

So basically, they wouldn’t grant us our visa which is an E-2 business investment visa. Which means that, you can’t get your visa and it makes perfect sense until they want to see that your business is actually going to open and start. You’re not just going to come in and you’re going to disappear. So, part of that is they want to see if your brick and mortar business you’re going to have a store. You have a rent. You signed a lease.

Tim

Was that a blessing having that three-month deadline?

Michael

At the time we were both pretty stressed I’m not going to lie. But in a way, I feel like sometimes when the pressures are like that you just kind of, just got to go into that mode and just like, right we’ve got to find this and do something otherwise it’s not going to happen. So, in that respect it did mean that we couldn’t just muck about and just lay on a beach and relax for three months.

Tim

I imagine it would have been very stressful. Are you and Victoria, from what I’ve read, have been sort of like high school sweethearts so you’ve been together for a number of years. You know each other very well. Tell us about the conversations in the middle of the night in the middle of L.A. where you’ve gone oh hang on this is scary.

Michael

I don’t think we ever had that conversation. We had panic conversations. Where like, we don’t think we’re going to find something. What we’re going to do next. But it never really crossed our minds. We were kind of, we’ve got to fight. We didn’t want to just find the location and just get in somewhere and then it turns out to be a bad location. It had to be the right spot. And it had to be the right size because in a brick and mortar business we were looking originally in Beverly Hills and

Tim

started at the top

Michael

We were. We were looking at Beverly Hills and to be honest we were probably a bit naive and the rents were crazy but we thought that’s where we wanted to be but that’s because we were basing it off what we are reading about Los Angeles and not kind of what we knew about los Angeles. So, it was more like we wanted to make the right decision and if this doesn’t work then what we going to do next. We’re going to go back and reassess and how we’re going to do it. And by this point we sold everything we owned. So, it was more kind of we were committed to this it wasn’t kind of like a time to panic.

Tim

Do you mind if I’m asking, you don’t have to put a number to this, but did you have a fair bit of financial backing?

Michael

Well basically, we got lucky. So, well we were lawyers. We bought a house in London and then the London property market went crazy. We ended up flipping the property and then we ended up moving to Cannes and then we flipped that property and then we ended up with a lump sum for ourselves that we could invest in the business. So that was how we got it ourselves. I mean yeah.

Tim

So, you we’re in Santa Monica. Within three months you found this wonderful location I don’t know the exact Avenue you’re talking about but I’m guessing it’s sort of in that kind of key area of Santa Monica. Up from down from the pier, up from the pier, whatever you say. Is that right?

Michael

That’s right. Yeah yeah yeah. We’re where we’re up from the pier. Yeah

Tim

Beautiful now. What do you do. I mean you’ve got to get a name. You’ve got a good branding. You’ve got to start manufacturing. You’ve got to get staff. There’s so many things you’ve got to do. You simply just kind of create a list and work through it?

Michael

Yeah it wasn’t a long list I mean the first thing was you can’t do anything until you get your company incorporated and then you have to get a ATIN from the IRS. So that takes a while and we would just kind of slowly kind of trying to break down all of it. The hardest bit was getting all your permits and everything and getting a contractor to deal with the plumbing and all the work.

Tim

What was your network over there like? You knew a lot of people right.

Michael

No, I didn’t know anyone. A lot of it was kind of Googling. I mean our landlord was, we were lucky our landlord was very specific about certain contractors he wanted used. So, that was kind of we were limited in what contracts we were using but a lot of it was just reaching out to people. Getting an idea what’s doing. Speaking to the local health departments in the city and being like what do we want to do and actually we spent a long time sitting down and reading all of the health code and reading all of the building code and going up to building.

Tim

Ah the lawyer. The lawyer in Michael in Victoria comes out

Michael

It’s not very interesting but it’s actually really essential. When we now we look at place and we’d be like okay this is what needs to be done you know the rules in and out. So that was a big part of that

Tim

Now we are talking fascinating story we’re talking to Michael Philippou who’s also  representing his wonderful wife Victoria. They’ve set up frozen fruit CO in Santa Monica. Having left the legal profession in London. Now Michael let’s talk marketing as a small business. This is a quote from you as a small business I feel that one of the biggest mistakes we all make is that we go running off focusing on branding and social media all the fun marketing things but we forget about the basics, which are product and customer. I know you’re big on both let’s start with product. I’ve looked at the photos of your product look amazing. What’s your approach to ensuring just the highest of standards?

Michael

It’s got to wow people. The moment they go in, to somewhat tasted it, they’ve got to be wowed and that’s really important. No substandard flavours. No compromising on what we do. No adding waters. And that’s really care where you want it. That’s the biggest experience people have with us, is to have this tasting experience and so the flavour doesn’t cut it, then it just doesn’t go in and we spend a long time coming up with flavors, searching for ingredients, making sure they’re really good ingredients and we only offer four flavors. We are really streamlined business.

Tim

Wow

Michael

Yeah. Because and that’s really important for us because what we’re doing is a new concept. You know it’s not Froyo. It’s not soft serve. It’s not sorbet. It’s a fruit soft serve. So, you really got that barrier when someone comes in. I don’t understand what this is. So, we wanted a really streamlined and four flavors and then four different flavors. So, when people try them they like wow all of these are really good.

Tim

As someone who is freaked out by choice, I love the fact that you’ve only got four flavours. What’s that famous burger joint in the States?

Michael

in-n-out

Tim

In-n-out burgers. That is one of the most limited menus that I’ve ever seen. But boy you know every in-n-out burger I drove past while I was there was just they had lines out the door. People love it. So, for flight there’s a great marketing case study where a jam manufacturer had an aisle end in a supermarket and they thought this is going to be great and they went with 20 flavors of jam. And the sales were not what they were hoping for. They slowly reduced the amount of flavours on offer and the optimum amount of flavors was four when they made the most sales because we don’t like to choose

Michael

We sit in the store. We have four flavors but the best seller is chocolate and that’s normally followed behind one other. So, you think these places where they have a million and one flavors you know how many of them are loss leaders. You just got to have them in there for the sake of it. So, we’re very much in opinion, is it better to do a few things but doing really well and then and that speaks for itself.

Tim

I have some bad news. I am an ice cream lover. And the frozen fruit co will never meet my demand of salted caramel. I don’t think because there’s not a fruit on it.

Michael

Wow. Actually, you say that. So, this is really ironic this week we’re actually launching a salted date version

Tim

That does not do it for me

Michael

Which is our take on a salted caramel.

Tim

That said I do love a sticky date pudding despite the fact that I hate dates I think it’s because I just completely drown it in hot caramel sauce. So okay you are putting massive effort into product. Interestingly enough as lawyers who you could argue aren’t creative although I think you’d be probably quite creative. I imagine that part of growing frozen fruit co. for you is very exciting. Coming up with flavors making them testing them presenting them. Do you love that creative aspect?

Michael

I find that that part the most stressful I have to admit. Because one of the things is we recognize that one of our marketing strategies is we got to introduce new flavors ever so often because it’s a good way for people to come back. Wow I want to see what you’re doing next. But we set that kind of the standard so high on kind of taste level that we become very picky it’s like we don’t like something, most of the flavors we do just don’t end up getting made because we’re like it’s just not good enough.

Tim

The stressful part of that creative part of your business comes from the fact that you don’t want to get it wrong because when I say I love being creative but I also find it stressful but I actually rationalize it by saying it’s a creative tension in me. So, when I’ve got to write something or put an episode together I feel a sense of nervousness. But I actually have figured out that that nervousness makes me create better things.

Michael

Yeah, I can be. And for us the way I kind of start get around it recently is before it was kind of me and Victoria were the barrier for flavour to bottom it and so I was just like, so we get so many people come in this door. So, I start to be like hey you know what I just makes some new flavour you want to try. Let me get some external feedback. And objectify it. We have been just going off what we’re doing. And that’s how these sorts of date flavour came about.

Tim

Well good luck with that. You can send it over. Might be a bit difficult to send over but try nonetheless

Michael

Yeah, some dry ice.

Tim

Yeah that’s true. Let’s talk customer experience specifically transaction and reaction marketing, is something that you subscribe to. You talk about wowing the living daylights out of your customers. How do you go about doing that?

Michael

So, this is a really interesting concept and it basically what it says is that you and most people will let go about their daily lives and what we want is basically familiarity. We want to be able to know that if you’re going to a Starbucks you know that you can go to a Starbucks across anywhere in the world and you know what you’re going to get. You know it’s going to look like. You know what the product is going to be like. You know what the staff are going to be wearing. You know what the menu is. You know its experience. You know where you’re going to have to collect your coffee from. That is transaction management in its purest form.

Tim

Well that’s a franchise but these franchises are good at.

Michael

Yeah but that’s what people love and that’s what people buy into a franchise. With the small business and the difficulty for small business owners is how do I try that person who is build that into their daily lives to come to my store and try what I do. Because I do something amazing all my products are amazing and I’ve got this just getting to try it but you’ve got to break into that circle and that’s where this concept of kind of reaction management comes from. And it really says that as a small business owner the only way you can build sustainable faster business is that you’ve got to wow someone not just for your product but from the moment they will come to your door. And how do you greet them. What do they feel like when they open the door. How they feel when they come to walk towards your store. How they feel when they have your product. How they feel when you when they leave. Because studies tend to show that you actually need to get someone in four times in your store or restaurant for them to start becoming actually a regular consistent customer. So, using that for different kind of marketing experience, is that each time you’ve got to get them in and not you only get them in once but how like get in again and again and again and so reaction management is all about the small business owner going above and beyond and really focusing on what their customer needs.

Tim

Well I love this spoken about it a number of times on the show before. Josh Nichols from Platinum’s electricians is a past guest that absolutely nails it. He has a 21-step customer mantra that spells out every step of the way what you need to do to wow a customer. Do you have something similar. Is it in your head? What’s it looks like?

Michael

So, our focus is very much on, first of all we focus on environment. So, we have the store.  Its bright. It’s a very cheery environment. Then when we deal with customers, we try and start to be bright cheery how they welcome you know welcome to the store. Then we have a try and have an open conversation so we let people try anything they want. There’s only four flavors you can try all four of them. Which ones you like. Which one you don’t like and having that open conversation. Like what are you looking for. And then at the end, how we greet them, how we say goodbye to them, those is the kind of core things we focus on. It’s really kind of like how they feel when they come into the store. How do you greet them? What the product tastes like and how do you say goodbye in a simplified form. That’s what we focused on.

Tim

And is that an easy thing to do when you start to hand it over to other people?  I’m sure it’s okay when you in Victoria behind the counter. One of the regular gripes from business owners I speak to, is people as human beings are difficult creatures. So how are you main and I don’t how many staff have you got out of interest.

Michael

At the moment it’s me Victoria and then we have four other staff.

Tim

Okay so how do you get them to be completely embracing of the frozen fruit co brand.

Michael

A big part for us is that we try and lead by example. And I feel that’s a really key one because if starts to see us acting like that then they’re going to be like, why need to act like that. And we try and really encourage a positive environment. You know someone, if a staff member is not doing something like we want to then to we try not to criticize or condemn or we try and be like this is how we try and have an overall objective which is our goal is to make someone’s days better. It’s as simple as that. So as soon as someone comes in and their staff members like oh what do I do think what you can do to make this person’s day better. You know whether

Tim

Oh, I like that

Michael

It’s just, a treat that will make them happy or as a thank you or goodbye or how are you or  for example, so many people come in and they drop their cones or their tubs on the floor inside the store or outside the store. Well the policy is just give them another one because there’s nothing worse than that. I was not going to make someone day worse. They just paid for something and they get another one. So, we try and enforce this overarching policy of how you can make someone’s day better and time.

Tim

I love that. It’s not dissimilar to what Tony Shea at Zappos has been doing for years and he’s written the Bible on it really called delivering happiness. And that starts with the staff by the way not with the customer. And I think that’s a really interesting phrase that you’ve come up with which is you know how can we make someone’s day better. Because I think we could all adopt that. You could have adopted that when you were a lawyer. But you know I just really like it it’s a wonderful mindset to go in with because it can only lead to a positive outcome I guess for the staff member and for the customer. Tell me you have you’ve got a Kickstarter campaign underway because you want to start you wanted to get into the L.A. food truck scene.

Michael

Yeah. So, we bought a food truck. One of the questions we ask is I would love to have you in different parts of L.A. where you can make it. And you know opening new stores it costs money but more importantly the thing that scares us about new stores is kind of like is where it’s going to be the next location. So, a truck company is a nice medium. The food truck industry has really established. So, we kind of like, well it’s a nice medium to help us kind of increase kind of marketing perspective to help increase awareness. People can see the truck. We can have it around the store but it also means we can do events but we can go to another part of L.A. And see okay is it really busy here or is it not, is this a place that we could actually think about to start opening up another store. So that’s what got us really excited about wanting to do LA’s first completely vegan fruit-based ice cream truck.

Tim

I just find it amazing that this concept hasn’t been done before particularly in L.A.. I mean I love the it’s not often you come across a new idea in business.

Michael

Well that was another reason when we came up with it. We were kind of put off on it. Like well someone must have done this by now why it isn’t there. And you’re starting to see more of the industry move that way but is more kind of like woman milk bases or kind alternative based it’s no one kind of makes it purely from fruit pulp and natural food sugars the way we do.

Tim

What’s the best thing that’s happened to you both since starting frozen fruit cake?

Michael

That’s a really good question and I feel like I’ve learned so much just I feel like you can read a lot and kind of learn as much as you can about business but you just don’t experience and running a business are just two completely different things I might say. I’m so grateful that we’ve just done this process and I’m not the same person I was a year ago and I’m probably not going to be the same person next year.

Tim

What’s the big change in Michael Philippou since starting?

Michael

I think I feel starting a business is a lot harder than you think. I used to think, maybe a bit naïve, was just come up with an idea and it’s pretty easy. And that awareness is the hardest bit about starting a business is actually letting people know you exist. You think I now drive around the street and I see other businesses and I start asking myself how people know to go to this place.

Tim

I feel that every day of my life. That’s why, partly why do the show. I mean isn’t it a fascinating question where you go. How do they exist, how do they get found? How are they making a living?

Michael

And it’s so much more for appreciation of big businesses that done things like Zappos they’ve done things so great and you think well how they got to that point and kind of reconstructing and trying to think about that. It’s just I find that so fascinating in itself.

Tim

I would if I drove past your business I would have the same thought. Michael, because I look at an ice cream business not dissimilar to say a cafe. You got a cell and I know it’s an ice cream but you know it. Bear with me. We’ll use that as the overarching term. What. You know I’d look at your business how are they making money. You’ve got to sell a lot of cones and cups to cover rent, wages, utilities, marketing, everything else that goes with it I mean what does the business model look like for you and Victoria to lead a good life over in Santa Monica.

Michael

Yeah that’s a great one and to be honest to add to that I walked past doors and I count the number of staffs that were in the store now. To get an idea of, hold on right, what’s the staff cost. But to answer that question is you need more than one store. I mean if it was just me in Victoria and we were running the store constantly aside from kind of being burnt out we were profitable from day one which was great. But it’s about staying a bit busy and we can’t constantly be working in the stores so we need to build them. We need to build a model and it’s more than one store.

Tim

So okay. Leads to my final question then where are you to be in five years’ time is it a franchise is it a whole lot of trucks on the road. You going to wholesale. Maybe you do events. What’s it looks like?

Michael

this is what we’ve been talking about recently. I really like the idea of franchising but kind of scares me and it doesn’t at the same time. But I think we would like to have a few more stores in LA. A few more trucks and then we’ve kind of hammered and really nailed down the business operation model I think franchising could be a really good opportunity for the business.

Tim

Yeah well it probably that makes sense. Hold on to a few company stores and then hand out a few franchise licenses. I think it’s a great story Michael. I really do. I’m excited for you guys any time I hear what piqued my interest in getting on the show was oh you love my show so you know always about my fans but I also love the fact when people make big career decisions and move on from something that could have set them up for life but have instead gone and chased something that they loved to do so where can people find you. Give us the street address and the website.

Michael

Yes, you can find us in Santa Monica at 729 Montana Avenue Suite 2. And basically, it’s on the corner of Lincoln and Montana. And you go

Tim

Oh, what a great address

Michael

It took me a long time to work out with the cross streets. I’ll tell you. And then online you can find us. It’s frozenfruitco.com and then on Kickstarter you can find just search frozen food co.

Tim

Michael and Victoria congratulations on what I hope is a huge success for you going forward.

Michael

Thank you.