Texas CEO Magazine Q4 2022

Most banks would take years to complete what we did in a few short months. But we’re not most banks. From rebuilding our treasury services to launching a wholly new securities trading department, we’re using grit to do great things for our clients and our communities. And now we’re distinctly positioned to provide local expertise along with global access and reach to banking products at any phase of your business.

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• Golf facilities, including large artificial putting green, driving range, and golf simulator

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• Additional concierge services available on request

68 Rooted in Place

Texas wines have come a long way in the last five decades due to the tenacity of state winemakers—they are redefining the taste of Texas.

46 No Ask Too Big or Too Small

Chef Chris Shepherd shakes up the Houston culinary scene once again as he steps away from his award-winning restaurants to focus on his Southern Smoke Foundation.

52 A Little Bit of Everything

Food startups are growing fast. Find out what industry professionals are saying about funding, pitching, and growth environments.

60 A Year Like This

Texans who make a living off the land have had a challenging year. Meet farmers, ranchers, and state lawmakers who rise to those challenges year after year.

ON THE COVER

Sunrise over a vineyard in Fredericksburg, Texas.

Photo by Kenny Braun.

In Each Issue

8

LETTER FROM THE EDITOR

Meet Rebecca French Smith, Texas CEO Magazine’s new editor-in-chief, and learn why the business of feeding Texas takes passion and grit.

1 1 CEOs ON THE MOVE

Meet the movers and shakers taking new positions in the last quarter.

94 BOOKS

Discover 5 takeaways from Jerry Hodge’s new book, You’re On, Cowboy! Plus 6 business books worth the read.

98

SOMETHING TO HANG YOUR HAT ON

Dining out and consumer spending rises, plus other Texas economic indicators to note.

Texas Talk

16 THE CARIBBEAN COWBOY

Houston Area Safety Council CEO Luis Aguilar found a surprising path from Honduras’ to Houston. 22 INGREDIENTS

MATTER

For M Crowd Restaurant Group President and CEO Edgar Guevara, leading one of Dallas’ iconic restaurant brands takes the right mix of listening, learning, and service to others. 29

EMPOWERING EMPLOYEE ENGAGEMENT

MindHandle CEO Eric Harris emphasizes the need for a people-centric approach to combat employee turnover. 36

THE HARDER RIGHT VS. THE EASIER WRONG

Servant leadership defines 7-Eleven, Inc. President and CEO Joe DePinto's approach to leading the largest convenience store chain in the US.

Voices 80 CONSEQUENCES AND TRADE-OFFS

Startup advisor and author Gordon Daugherty navigates the opportunities, challenges, and outcomes when a service company builds a product. 86 MACHINATIONS

Perryman Group President and CEO M. Ray Perryman dives into the future of the Texas workforce. 92 SIMPLE AND TRICKY

Texas Tech University Associate Professor of Economics Alexander Salter explains where inflation comes from and how to fix it.

Q4 2022

PUBLISHER

Donna Bragg

EDITOR-IN-CHIEF

Rebecca French Smith

CONTRIBUTING EDITOR

Aaron Hierholzer

OPERATIONS

Tamara Trammell

GRAPHIC DESIGN

Michele Rodriguez

Ubisep Design

CONTRIBUTORS

Kenny Braun Carol Brzozowski

Gordon Daugherty

Deborah Hamilton-Lynne M. Ray Perryman

Alexander Salter Crowden Satz Phil Witte

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POSTMASTER

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© 2022 The American CEO, LLC dba Texas CEO Magazine. All rights reserved. The Content in this issue may not be reproduced, distributed, or otherwise used without the prior written consent of the American CEO, LLC. The various contributors own their respective Content that is published in this magazine.

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Your use of the Content is at your own risk. The Content is provided on an “AS IS” basis, without any warranties of any kind, either express or implied. Neither The American CEO, LLC nor any person associated with us makes any warranty or representation with respect to the completeness, reliability, quality, or accuracy of the Content. Without limiting the foregoing, The American CEO, LLC does not represent or warrant that the Content will be accurate, reliable, error-free, that errors will be corrected, or that the Content will otherwise meet your needs or expectations.

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By Joel Trammell 5-Time CEO & Author Of

Passion and Grit

FEEDING TEXAS TAKES MORE THAN FLEETING FANCY.

risks, continual learning, the right tools, and as with most business ventures, more than a little grit.

So, this issue is a special issue for me for a couple of reasons. First, it’s my first full issue as editor-in-chief. As a Texas transplant, I’m finding that business in Texas is BIG, and I’m looking forward to bringing you information you can use in your leadership role, interesting stories from across the state, and introducing you to Texas business movers and shakers.

about Texas vintners making Texas wine with Texas grapes. You’ll learn more about some Lone Star State vintages—one might even be the highlight at your next dinner party—along with the challenges and successes in that industry.

From farming and ranching to logistics to grocers and restaurants, the number of people and businesses involved in getting food on the table is exponential. Once upon a time, I was a part of that equation.

I grew up in a small-town familyowned restaurant—a diner, really. From the time I could walk, almost, I was bussing tables. By junior high, I was waiting on customers. In high school, I added bookkeeper and short-order cook to my list of duties.

After I left for college, I watched my mother run it for another 30-plus years. In the more than 50 years my parents owned it, we saw several restaurants come and go in our small town. Running a restaurant of any size is not for the faint of heart. To be in it as long as she was takes passion, being open to change, taking

Second, this issue centers on the business of feeding Texas, and we take a look at a diverse crosssection of this massive and complex topic to hopefully give you a sense of what it means to feed Texas.

The total economic impact of the Texas food and fiber sector totals about $100 billion, according to the Texas Department of Agriculture. By all accounts it’s been a tough year for anyone making a living off the land, growing crops or raising livestock.

To get a better understanding of how those in agriculture are faring, we reached out to farmers, ranchers and the chair of the Texas Senate Water, Agriculture & Rural Affairs Committee, Sen. Charles Perry. Check out the story on page 60.

Texas’ wine industry also caught our eye. The economic impact from this industry reached more than $20 billion in 2022, according to the National Association for American Wineries, so we traveled to the hill country (page 68) to find out more

To round out our issue, we reached out to restaurants and convenience stores, hunger relief organizations, and a new food and beverage startup or two. Think 7-Eleven, Mi Cocina, and robotic restaurant kiosks. There are some exciting things going on.

The things that all of the companies in the business of feeding Texas with which we spoke have in common is they have the passion, the risk-taking mindset, the right tools, and certainly the grit to keep moving forward.

While my path did not lead me back to the family business (give me a hot flat-top griddle, though, and I can still make a breakfast fit for a diner), I have immense respect for those who have a hand in providing the food I eat, whatever role they may play. I appreciate the longevity of so many businesses, large and small, that learned, pivoted, and succeeded in staying in business over the long haul and look forward to the new ones that are creating that next big thing.

Rebecca French Smith Editor-in-Chief Texas CEO Magazine

Learn more about Rebecca and the rest of the team online at TexasCEOMagazine.com/about

STOP ATTRITION IN ITS TRACKS

Voluntary employee turnover continues to surge in the US. CEOs and HR leaders know its cost — from half to two times the employee’s annual salary (Gallup) — plus a myriad of other cultural and motivational challenges it causes.

You can now download this FREE guide by Manager360 cofounders and Manager’s Playbook coauthors Joel Trammell and Alicia Thrasher. Check it out yourself or send the link to your HR head, so they can benefit from these quick, practical strategies to stop unhealthy attrition.

Effective economics, accessible analysis

Our in-house professionals bring expertise in economics, finance, statistics, mathematics, real estate, systems analysis, technical communications, and marketing. Dr. Ray Perryman, President and CEO, has more than 40 years of experience in developing systems, analyzing complex problems, and communicating effectively.

Our clients include two-thirds of the Global 25, over half of the Fortune 100, the 12 largest technology firms in the world, 10 US Cabinet Departments, the 9 largest firms in the US, the 6 largest energy companies operating in the US, and the 5 largest US banking institutions.

Economic Analysis

We have developed and continually maintain an extensive set of economic impact evaluation models that can be applied in a variety of contexts.

Expert Testimony

We help clients analyze and communicate complex information in common-sense terms through comprehensive, objective analyses and clear, concise expert reports and presentations.

Economic Data

We have published annual economic forecasts for almost 40 years and maintain a comprehensive set of national and regional models.

Visit PerrymanGroup.com for more information on our services, publications, and clients.

The Perryman Group provides the economic insights you need for the board room, the courtroom, the hearing room, or any other room where decisions are made.

Making Moves

HERE ARE A FEW RECENT CEO MOVES IN TEXAS. Do you have a CEO announcement you’d like to submit? Email us at info@texasceomagazine.com.

Jessica Becker Edinburg

South Texas Health System announced Jessica Becker as the next CEO of South Texas Health System Behavioral (STHSB). Becker, who started in June, served as the COO at Kingwood Pines Hospital prior to joining the team at STHSB. She also led Assurance Health as CEO in Wilmington and Cincinnati, Ohio. Becker replaces former STHSB CEO Sharon Pendlebury.

Kadir “Kai” Boysan

Dallas

Flix SE, the global transportation provider that operates Greyhound Lines, Inc., FlixBus, FlixTrain, and Kâmil Koç, announced the introduction of Flix North America, Inc. and named Kadir “Kai” Boysan as its CEO. Boysan is the former CEO of Kâmil Koç Buses, Inc. and has worked with Flix since the company acquired Kamil Koç in 2019. Flix North America will oversee operations for both Greyhound and FlixBus across North America. Greyhound CEO Dave Leach, who has been with the company more than 30 years, will remain with the company as a strategic advisor until his retirement at the end of 2022.

Kim Elenez Lubbock

Make-A-Wish North Texas announced Kim Elenez as its new president and CEO. For more than 20 years, Elenez has blended her expertise to grow organizations in nonprofits, communities, and businesses, including the University of North Carolina at Chapel Hill, D Media Partners, and Integer. She is also the co-founder of the Zambian Rural Women’s Empowerment Fund, which provides loans and supportive services to rural women entrepreneurs. She follows Charlotte Beattie, former CEO of Make-A-Wish Massachusetts and Rhode Island, who served as the chapter’s interim CEO.

Gautam Goyal Houston

Three Pillars Capital Group announced it has appointed Co-founder and Managing Principal Gautam Goyal as president and CEO. As CEO, Goyal will oversee high-level investment strategy and operations for Three Pillars and its portfolio of approximately 3,000 units, as well as the firm’s property management arm, Greenline Apartment Management. Prior to founding Three Pillars, Goyal worked at a hedge fund as an energy trader trading natural gas and crude oil. Three Pillars Co-founder Josh Welch, who had previously served as CEO, will transition from the role to serve as COO.

Nathan Loftice Dallas

EarthX promoted Nathan Loftice as its new CEO and executive director. His promotion came seven months after he joined EarthX as the executive vice president of sustainability events and services. Prior to joining EarthX, Loftice was director of sustainability and sustainable development at Berkshire Hathaway’s BNSF after serving as worldwide leader of environmental affairs and sustainability and senior manager global supply chains for FedEx. He follows former CEO Michael Fletcher who is currently serving as CEO at MGF Strategy, LLC.

Amar Maletira San Antonio

Rackspace Technology named Amar Maletira as chief executive officer. Maletira served as Rackspace Technology’s president and chief financial officer since November 2020. Prior to joining Rackspace Technology, he was chief financial officer at Viavi Solutions, and prior to Viavi, he was at Hewlett-Packard for 15 years where he held several roles, including CFO of Enterprise Services for Americas. Outgoing CEO Kevin Jones will take on the role of operating advisor with Apollo.

Constanza Miner Brownsville

Constanza Miner has been named interim CEO and executive director by the Greater Brownsville Incentives Corporation (GBIC). Previously, Miner held multiple leadership positions at the City of Brownsville before accepting a position as business development director at GBIC to serve both it and the city in that capacity. She brings more than 20 years of experience as a business executive and more than 12 years in real estate development to her new role at GBIC. Miner replaces Brownsville interim city manager Helen Ramirez who had been leading GBIC.

Bob Pragada Dallas

Jacobs President and Chief Operating Officer Bob Pragada was named Jacobs’ next CEO and will join the company’s board of directors in January 2023. Pragada joined Jacobs in 2006, holding several senior management positions over nine years. He returned to Jacobs in 2016 as president of the global Industrial and buildings and infrastructure lines of business and, in 2019, was appointed president and COO of Jacobs. He succeeds Steve Demetriou as chief executive officer. Demetriou will continue as executive chair of the board.

Eric Schwartz Dallas

CyrusOne named Eric Schwartz its new chief executive officer. For the past 16 years, Schwartz has been an executive at Equinix in several roles. More recently, he led strategy and development for Equinix. Schwartz succeeds Dave Ferdman, who has served as CyrusOne’s interim president and CEO. Ferdman, founder of CyrusOne, will continue to work with the company and the team in the role of board member.

Christopher Stavros Houston

Magnolia Oil & Gas Corporation named Christopher Stavros as its president and CEO. Prior to his appointment, he served the company as its executive vice president and chief financial officer. He will also sit on the board of directors. Stavros has 30 years of experience in the energy and financial industries, holding leadership roles at Occidental Petroleum Corporation and UBS with coverage of the oil and gas sector. Stavros replaces Stephen Chazen, who served as chairman, president, and chief executive officer since 2018 but stepped down recently due to serious health reasons.

Stephen Timms Houston

Sigga Technologies, a provider of enterprise asset management (EAM) software solutions, announced the promotion of Stephen Timms from chief revenue officer to chief executive officer in August. Timms joined Sigga in the role of chief revenue officer in January 2022 and brought with him more than 20 years in software sales, including a decade working in field services software. The change follows founder and CEO Warley Borges’ decision to transition from day-to-day operations of the business to chairman of the board of directors.

Chris Tranquill Austin

Khoros, a digital-first customer engagement software and services company, announced the promotion of Chris Tranquill to the role of CEO. Tranquill has spent more than 25 years in the customer experience industry. He has held executive roles leading global divisions for Fortune 500 companies and co-founded and led Topbox, a SaaS company that was acquired by Khoros in 2020, as CEO. Tranquill, who has been serving as the organization’s chief strategy officer, succeeded Jack Blaha, who became Khoros’s CEO in 2019.

Pablo Vegas Austin

The Electric Reliability Council of Texas (ERCOT) announced the selection of Pablo Vegas to serve as the president and CEO for the Texas grid operator. He previously served as executive vice president of NiSource and group president, NiSource Utilities. This is Vegas’ second time working in the ERCOT service territory. In 2008 he was president and chief operating officer for American Electric Power (AEP) Texas. Vegas’ early career included working with IBM, PricewaterhouseCoopers, and Andersen Consulting.

Mark Wade Dallas

Mark Wade has been named CEO for Bank of Texas effective January 1, 2023. Wade joined BOK Financial in 2001 as the Dallas corporate banking manager for Bank of Texas. He was named president and chief operating officer for Bank of Texas in 2008. Since 2020, he has served as executive director for the company’s commercial banking line of business. Wade will assume the role as long-time CEO Norm Bagwell transitions into a new part-time role after leading the Texas bank for more than 15 years.

Michelle Wheeler Dallas

Michelle Wheeler was named president and CEO at Jackson-Shaw, a national real estate development company. Wheeler has spent the last 17 years with the company in finance, development, and management positions, most recently as president and COO. She has also held leadership positions at the National Association of Industrial and Office Professionals, the Urban Land Institute, the TREC Foundation, and the Jackson-Shaw Foundation. Additionally, Wheeler was chair of The Real Estate Council—the first woman to hold that position.

Dr. Melva K. Williams Austin

Huston-Tillotson University named Melva K. Williams, PhD as the institution’s seventh president and chief executive officer in August. Previously, Williams held numerous positions within the Southern University System (Louisiana) including executive associate to the chancellor, assistant vice chancellor, and vice chancellor for student affairs and enrollment management at SUShreveport, vice chancellor at SU-New Orleans, and system chief of staff. Recently, she served as the senior director of programming for the Clinton Presidential Center. She replaces Dr. Colette Pierce Burnette upon her retirement.

WORKPLACE SAFETY GUIDE: SERVICE INDUSTRY

Whether your employees spend their days cleaning homes, responding to emergencies, or treating patients, their job is to serve others. You can serve them by providing a safe, healthful workplace. Here are some of the most common hazards in the service industry and controls to prevent them.

HAZARD: SLIPS, TRIPS AND FALLS

Wet, oily, muddy and icy surfaces increase the risk of slips, trips and falls. Workers might also be required to access platforms and equipment located high above the ground.

CONTROLS:

• Keep the job site clean and orderly, with walkways clear of clutter that can create trips hazards.

• Select, set up and use ladders safely.

• Use required fall protection when working from heights.

• Do not jump from truck beds or equipment.

HAZARD:

WORKPLACE VIOLENCE

Workplace violence is a pervasive problem across industries. It is especially relevant in service industries such as healthcare, firefighting and emergency medical services, where workers serve potentially violent patients. In fact, about 70% of on-the-job assaults happen in health care, according to the Occupational Safety and Health Administration (OSHA).

CONTROL:

Promote Awareness: Violence is such a high-profile hazard in health care that OSHA issued prevention guidelines specifically for hospitals, clinics and home health care settings. The rest of us can follow general preventive measures like taking note of customers who linger without buying, leave and come back or go to a part of the store where it is difficult to see them. If someone looks suspicious, make friendly eye contact with them. Most importantly, don’t be a hero, and don’t chase the robber. Your life is more important than merchandise or money.

HAZARD: STRAINS

Like workplace violence, strains are common in all sectors of the service industry, but they are a high-profile issue in the health care industry. Nursing aides, orderlies and attendants record the highest rates of back strains. Employees are at risk when they lift, transfer and reposition patients, especially from awkward positions.

CONTROL:

Practice Safe Lifting Techniques: Health care workers and emergency responders are at high risk of back strains when lifting patients. Employers should implement a comprehensive safe patient handling program. Everyone else can practice safe lifting techniques such as bending at the knees instead of the waist, keeping the load close to our body, and pivoting instead of twisting.

IZATION’S SAFETY RISKS?

HAZARD: HAZARDOUS CHEMICALS

People who work in nail salons, shoe repair shops, or house and pool cleaning businesses use products that include potent chemicals. Even everyday cleaning products can be harmful if not handled properly.

CONTROL: Comply With OSHA’s Hazard Communication Standard: By June 1, 2016, employers who use hazardous chemicals in their workplace must be in compliance with OSHA’s revised hazard communication standard. The standard helps ensure employees understand the risks associated with chemicals and know how to protect themselves.

HAZARD: BLOODBORNE PATHOGENS

Bloodborne pathogens are infectious microorganisms in blood that can cause hepatitis, HIV and other life-threatening diseases. Service industry employees are at risk when they give shots to patients, handle contaminated clothing or personal protective equipment, and clean contaminated surfaces.

CONTROL: Use Universal Precautions: Controlling bloodborne pathogen exposure starts with practicing universal precautions, which means treating all blood and potentially infectious materials as if they were infected. From there, use self-sheathing needles, sharps disposal containers, vaccinations and other preventive measures to control the risk of coming in contact with infected blood.

HAZARD: MOTOR VEHICLE ACCIDENTS

Motor vehicle accidents are the leading cause of workplace fatalities across industries. Emergency responders, bus drivers, taxi drivers and tow truck operators are just a few examples of service industry workers who log a lot of time behind the wheel, often driving at high speeds and maneuvering through congested streets.

CONTROLS:

Remember the Basics: You can reduce your risk of being involved in a motor vehicle accident if you practice these basic principles:

• Buckle up every time, and make sure passengers do the same.

• Put cell phones and other distractions away.

• Never drive while drowsy.

• Control your speed, especially when driving on slippery roads, hauling heavy loads and negotiating curves in top-heavy industrial trucks.

• Keep your cool, even when other drivers get aggressive.

CARING FOR TEXAS FOR MORE THAN 25 YEARS

As the leader of the workers’ compensation market, Texas Mutual is committed to building a stronger, safer Texas. We offer workers’ compensation insurance that protects employers, their businesses, and their employees from the consequences of an on-the job injury or illness. Don’t “go bare”—protect your employees and business with the company who does workers’ compensation bigger and better than anyone else. Whether you work in oil and gas, restaurants, construction, healthcare, auto repair, or any other industry, we’re here to help.

The Caribbean Cowboy

LUIS AGUILAR AND THE HEALTH AND SAFETY COUNCIL KEEP THE PETROCHEMICAL INDUSTRY SAFE IN HOUSTON AND BEYOND.

Luis Aguilar, hailing from Honduras’ Caribbean coast but stationed in Houston for 30-plus years, has always relished his outsider status. As a young man, Aguilar wasn’t aching to come to the United States, but through a curious series of events, he found himself as CEO of HASC—the largest safety council in the US, serving the petrochemical sector in the energy capital of the world.

Today, Aguilar retains a distinctively outsider-ish independence, verve, and entrepreneurialism. That mindset is reflected in HASC, founded in 1990 as the Houston Area Safety Council and recently rechristened as the Health and Safety Council. The name change reflects HASC’s

ambitions to serve members on a global level. HASC offers training and occupational health services to more than 2,000 people each day through multiple satellite locations in the US and the Caribbean. Its staff numbers more than 200.

It’s an evolution that Aguilar didn’t foresee in the late 1980s,

when he was asked to attend a meeting of a committee formed in the wake of a deadly explosion in the Houston Ship Channel—a meeting that would eventually lead to the formation of HASC. Aguilar details his journey from a childhood spent swimming off the Honduran coast to a career as a Texas CEO.

The Houston Ship Channel, part of the Port of Houston, is 52 miles long, and some 200 private companies call the port home. Petroleum and petroleum products lead import and export commodities.

Could you start by telling us about your early life? I’m from the north side of Honduras. Honduras is one of the poorest countries in the world but also one of the most interesting and fun. I grew up in Roatán, one of the Bay Islands, and La Ceiba, which is a port on the Caribbean coast that was developed by the banana industry, especially Standard Fruit Company and United Fruit Company [now Chiquita Brands International].

You probably know the term banana republic. Well, that describes La Ceiba. I grew up in the camps around United Fruit and Standard Fruit, and I was very Americanized by being around this industry. But I had a lot of fun, swimming with the dolphins and scuba diving in one of the best reefs in the world. I was entrepreneurial too. We used to sell coconut oil on the beach to tourists. We were poor, but I didn’t know because I was having a lot of fun.

My parents were schoolteachers, so we did have education. Very early on, I had a passion for reading and travel. We didn’t have college on the islands so I had to travel to the capital city, Tegucigalpa. It’s a mountain town with the temperature and elevation of Denver.

Latin American colleges during that time—this was 1976—were very socialist. I started to realize there was a lot of

support for Che Guevara, Fidel Castro, and so on. I didn’t like it. I ended up winning a scholarship to go to Rome. I was not the brightest light on the chandelier, but probably I tried the most.

Rome was good for me. I went to the University of Sapienza, then came back to Honduras and taught engineering as a professor of thermodynamics and fluid dynamics. Many of my students were older than me, and I looked even younger because I didn’t even grow a mustache then. Parallel to being a professor, I was working in the industry. My first job was in a sugar mill, which is a lot like an oil refinery. The equipment is very similar.

The big difference between being an engineer in Latin American and being an engineer in the United States is that in Latin America you have to build your own labor. There’s no head hunting. You have to get your hands dirty and train your own boilermakers, welders, pipe fitters, millwrights, all the other trades. Here in the US, shamelessly grab talent from other companies and put them on the field. It was a very good school for me.

Do you still use that mindset today?

I tell you what, that was a key to success for me and the Health and Safety Council, whose whole mission

is workforce development. When I came to Houston, I heard that the labor force was an issue. Over time, it became a mega issue. It was a blessing that that’s exactly what I was doing in Latin America: developing labor, making it safe, avoiding accidents.

How did you end up in the United States? I didn’t plan to be here. I came as a subcontractor and engineer on a project to build a hazardous waste incinerator in Laporte. I told my boss I’d go “for a short period of time.” I was also a techie and had my own software company—I was having fun—but I had no interest in being in the United States.

But then, in October of 1989, about a year after I got here, we had a catastrophic disaster in Pasadena: the Phillips 66 explosion. That explosion changed the lives of many people in my generation. It was like an atomic bomb in the Houston Ship Channel. Twenty-three people died and hundreds were injured. The Houston Business Roundtable created a task force to find a solution so this disaster wouldn’t happen again.

Back then, safety and environmental issues were done terribly. There was no centralized database. Everybody was operating on silos. Exxon was working by itself. Shell was working by itself. Everybody was isolated. My contract was about to expire, but I got the opportunity to be on that task force. My boss didn’t want to go to the meeting, so he sent me to fill me in. I was just a kid, 29 or 30 years old, with all these top CEOs in the petrochemical industry, working on resolving this situation.

Less than a year later, we had another catastrophic disaster with the ARCO explosion in Channelview, Texas, which killed 17 people. The commitment to safety became even stronger. Houston had the worst safety record in the world during that time. The mission was to go from the worst to the best. Our task force’s target was zero accidents. People laughed. The usual goal is: “we’re going to reduce accidents by 20 percent.” We said zero accidents.

COURTESY OF HOUSTON AREA SAFETY COUNCIL

A (young) Luis sits at a desk in garage office where it all began, the startup location located near the William P. Hobby Airport in Houston.

AS AN OUTSIDER,

DID REALLY WELL. THEY’RE THE COWBOYS; I’M THE CARIBBEAN GUY. OF COURSE NOW, AFTER 35 YEARS OF BEING HERE, I’M THE CARIBBEAN COWBOY. — Luis Aguilar

As an engineer, I asked for the companies’ centralized records. I thought that, being in America, they would have a database, algorithms to see trends, etc. They didn’t have any. I couldn’t believe it. I said, “We need to centralize.”

I would ask things like “How many people work in the Ship Channel?”

They would throw out a number that just sounded good: “25,000.” I said, “How do we know?” They didn’t. They’d just repeat it so many times, they’d start believing it. I wanted the data. I thought that’s how we would create better collaboration. That was the beginning of my involvement with what would become HASC.

Soon that little committee got filed as a 501(c)(3), and we started the official organization in a garage office, like many American companies. I was the first employee. I wanted to operate as a consultant, an independent, but because I was an immigrant, I had to be sponsored by a company. We got $80,000 to start, enough to buy a few pieces of equipment and develop the database.

I built the database by myself on dBase III and presented it to the committee. They loved it. We then began building a membership base of companies that would pay a small fee, basically nothing, to access our training and knowledge.

I went around in my Toyota Tacoma knocking on the door of every energy company in Pasadena, Deer Park, Galena Park. My accent was very heavy. Especially here in Texas, we have a lot of cliquey towns, so it was hard as an immigrant. I’m an outsider. I’ve always been a stranger in my own country; I’m half Hebrew and half Mayan. But I operate as an outsider really well. I think it’s an advantage.

How did you manage HASC’s growth from there? There were many challenges, starting with the first volunteers. HASC’s governance, our board leadership, are all volunteers, and interestingly they are competitors with each other. We had to teach them to take off the competitor hat and put on the collaboration hat. But because we all agreed on the mission and that “life has no price,” people grew more and more willing to share best practices, the good and the bad.

We had these very big companies represented, and I had to sit down with their leadership as a young engineer, a nobody, and oversee all these safety solutions. Together we created a curriculum around safety and environmental principles, including the essentials for sustaining human life in a refinery.

When you go inside the gates of a refinery, it’s like a war zone. Every step of the way, you can lose your life. From the freeway, you just see the pipes going from one side to another one, but inside it’s a different ball game. We create that culture, the awareness, and also the skills.

The curriculum committee worked hard to develop a curriculum that would keep people safe and that could hold up if there was an incident or litigation. I was not used to litigation before I came to the United States. In Latin America, we get away with a lot of stuff that you cannot here.

These committees were all volunteers, but I had to get them to follow my lead. What you do with a volunteer? Feed them. I would give them tacos and coffee and get them talking about solutions. It had to be fun, not boring. As an outsider, I did really well. They’re the

cowboys; I’m the Caribbean guy. Of course now, after 35 years of being here, I’m the Caribbean cowboy.

Who delivered this curriculum once it was developed? I initially got 72 volunteer instructors.

From where? Not the local community college but from the field. Our instructors were the people actually building the scaffolds and so on. It was a handson approach like what I did in Latin America. We didn’t have academics teach, no PhDs. It was blue-collar guys.

Because we’re not a high school or community college, we don’t have to ask permission to change the curriculum. We’re very nimble. If there’s a new best practice coming on the table, we can change it in a dime. A lot of organizations are structured to a point that they freeze and can’t execute. We execute day in, day out.

At the very beginning, it was just me in leadership at HASC. New organizations need a guru for a few years, and then you transition into a real team. Many people fail by trying to control the organization as it’s growing. I knew I had to stop being the guru at a certain point. Did I like it? No, it’s good to be the guru. But you have to be humble and pull other people to leadership too. You have to get the young bucks, like we say in Texas, to move forward. Now I’m just coaching. That’s my job now.

Today, we’ve made an impressive evolution from the garage office. In September, we’re going to celebrate 32 years in existence. Today we have a big campus and are the largest safety council in the United States. But we preserve that entrepreneurial identity. We know where we came from.

I

I can tell you now that the Houston area is the safest place in the world to operate in this industry. We went from the worst to the best. We have 2,000 people coming to this facility, day in, day out, to learn new skills and safety practices.

Starting out, you weren’t interested in being in Texas. What are your thoughts on the state now? I’m still a Caribbean guy, but I like Texas. It’s a great land. There is a lot of opportunities. And it’s a good fit for me because I’m conservative in how I think. I believe in absolute values. Like gravity—if I release a rock from my hand, we don’t have to argue about where it will go. Here, there are

a lot of people like that around me. Houston is a very cosmopolitan city too. I would say that Houston has become the new New York in that regard. I used to visit New York a lot as a kid because we had family there. Of course, in New York I was always a Puerto Rican. In Texas, I’m a Mexican. In Miami, I’m a Cuban!

What is your vision for the next several years of HASC? My job is to look for and handle coming interruptions, whether it’s from technology or something else. COVID is a good example. I heard the rumblings of the virus in January. We got the team together started looking at what we could do. Everyone was

still flying and dancing and having fun—the virus was in China! Then, 30 days later, Italy is upside down.

Fortunately, we had already built decontamination stations and were scanning people to enter. People called us crazy. But I met with the judges in Houston and told them that we were essential. I wanted the permits to operate every day—and this was before any schools or businesses closed.

We invested $480,000 in plexiglass very early, before anyone else. We have over 2,000 computers here and each one is needed for training. We couldn’t have people coming in dressed like astronauts. So we invested in plexiglass. Sixty days later, plexiglass was everywhere—and three, four times more expensive. That $480,000 we spent would’ve been millions.

At the same time, we’ll keep working on innovations. We have a strong track record of that. We built our own cloud in 2004, long before cloud technology was built by Apple. Our system is now the largest database for contractors in the world, with over 25 million records, all highly specific about the petrochemical industry.

COURTESY OF HOUSTON AREA SAFETY COUNCIL

Houston Area Safety Council staff stand outside the first HASC building located in Deer Park.

That innovation continues today as we build a robust system that can reach the whole planet. There are 24 safety councils in the US, but we are the largest, and we have the best technology. Our strategy is to license to regions across the world. That will also grow our database exponentially. There’s no limit to where we can go: Alaska, South America, the Middle East. They need safety solutions too, and we’re already spreading our wings beyond the Ship Channel.

How does a CEO become good at forecasting and seeing future disruptions? Do you read a lot? Do you follow the news? There’s a CEO bootcamp that I attend in

Washington, DC, organized by ASAE [the American Society of Association Executives]. We exchange a lot of best practices there. I’m always tapping into the wisdom of the committees I work with too. When you’re at a table with a lot of white hair or no hair, it’s good to pay attention. You have to be humble and willing to be coached. People in Texas are very humble and willing to teach.

I also get a lot of information from the Wall Street Journal and Bloomberg, not to worry but to see what the market is doing and anticipate the business climate. I’m very selective though. There’s so much information out there, and it can be distracting.

Do you have any observations about the future of the petrochemical industry? We’re going to have to make a drastic decisions in regard to green energy. Green energy will be good when it eventually comes. But it takes a lot of energy to power the planet in one day, and green energy is a long way off from doing it. Petrochemical is becoming much cleaner, and we have much smarter facilities. There’s a lot of emission control and carbon capture. The petrochemical industry is here to stay for at least the next hundred years. Everyone I know is in favor of green energy, but we are not in favor for the government picking winners and losers. I don’t think that’s the role of the government.

Luis Aguilar speaks a the Texas Chemical Council EHS Seminar at Moody Gardens Hotel and Convention Center last summer.

Ingredients Matter

M CROWD RESTAURANT GROUP PRESIDENT AND CEO EDGAR GUEVARA

FOCUSES ON WHAT

THEY DO BEST TO OVERCOME CHALLENGES.

The backdrop behind where M Crowd Restaurant Group President and CEO Edgar Guevara sits at a Mi Cocina in Dallas is a collage of artwork. This restaurant was recently remodeled, and the original piece of art was much bigger, some 14 feet tall by 5 feet wide. One of his goals when they do a remodel is to leave a sense of familiarity for regular customers to return to.

“There’s a favorite table people have,” Guevara says, “and when you remodel a restaurant, you may remove their favorite table, then you kind of ruined it for them. The large piece of art was cut up and converted to smaller pieces of art and put in the bar for those of us who remember it.”

The pandemic was especially tough on the restaurant industry. Industry sales overall

were down $65 billion in 2021 from 2019’s pre-pandemic level, according to research released by the Bureau of Labor Statistics and the National Restaurant Association. Industry employees were down one million from 14.5 million in 2019, nearly 7 percent. Nationally, 90,000 restaurant locations temporarily or permanently closed.

But 2022 has seen a gradual return to normalcy, with restaurant industry sales growing each quarter.

Through the turmoil, M Crowd Restaurant Group continued to grow, opening two new Dallas locations—one in Klyde Warren Park and a new Uptown location on McKinney Avenue— since 2020 through its tried-andtrue combination of business ingredients, and Edgar Guevara ensures there continues to be a sense of brand familiarity and continuity for its customers.

COURTESY OF M CROWD RESTAURANT GROUP

THE BIGGEST LESSON WAS THAT MOST PEOPLE WANT TO BE HEARD. — Edgar Guevara

M Crowd Restaurant Group President and CEO Edgar Guevara enjoys a Mambo Taxi, Mi Cocina’s signature margarita.

Tell us a little bit about your upbringing. I grew up in El Paso, Texas, single mom, one brother. We’re a small family, and my grandparents lived in Juárez, Mexico. My grandfather actually drove over every day, dropped my grandmother off, went back to work in Mexico, came back, and picked her up. So, it was great for me as he was my father figure. I didn’t recognize the sacrifice he was making to do that every day. He was very focused on ensuring that I didn’t lose the Mexican culture side.

I went to the University of Texas, and it was just too big for me, so I ended up graduating from UTEP [University of Texas at El Paso], which was great because that’s where I met my wife. And that’s where I met a couple of guys in the restaurant business. They owned a Cajun restaurant called Louisiana Kitchens, and I ended up working for them bartending, waiting tables, those sorts of things. The only experience I’d had prior to that was when I started washing dishes in Austin.

We did a couple of concepts together. Then unfortunately, like lots of small businesses, you run out of capital as you start to grow, and I went to work for all the big guys. I worked for Brinker. I worked for Darden. My entire career was spent in operations up until I got here, which served me well. My career in operations has helped me be a much better CEO because all the facets of the business are important. It all starts and ends in a restaurant, at the end of the day.

I remember being a young manager at one of the concepts, and the vice president comes in. He’s with a few other senior guys, and they’re spending time with the general manager running the restaurant. Not one time did they come and say hello or ask for any advice from a handful of us that were in the restaurant, and that left a big impression. I always said that if I ever get the opportunity to be in a leadership role, I’m going to make sure that I get the point of view of everyone involved, especially those who do the job.

That has served me very well.

Troy Aikman, left, and Edgar Guevara sample an Eight, Aikman’s light lager.

What was one of the most important lessons you learned in some of those lesser roles, and why was it important to what you do? The biggest lesson was that most people want to be heard. As a leader, whether you’re running a kitchen or running an organization, listening to people and hearing their point of view and taking the time to try to understand their perspective is important.

How would you define your personal leadership style? I really believe that creating a great culture and getting people engaged in the cause is super important. Most importantly, people have to be aligned with what you’re trying to do and why you’re trying to do it because there is a lot of hard work along the way.

You mentioned culture earlier when you talked about your grandfather and how he wanted to make sure you knew that part of your family. How have you woven some of your Hispanic heritage and culture into your leadership style? The Hispanic culture is a very service-driven culture. We’re here to serve others. That example of my grandfather driving an hour to drop my grandmother off to watch [us] as my mom worked, and then going back and coming back—I remember those things, and I try to be of service to people.

So, being of service to others and being genuine—and them knowing that you’re doing it for the right reason—is important because you have to be honest. You have to be genuine. I just turned 55, but my grandfather told me when you shake somebody’s hand, “You look them in the eye, and you tell me you’re going to do it. You do it right.” Those are the things that I really still believe in.

So many smaller restaurants didn’t make it through the closures and the restrictions and the new guidelines that you have to follow. Some of the larger brands did a better job

keeping some of the doors open. How did your brand pivot? As a leader of an organization, you know you’re responsible for the livelihoods of everybody, but not until you’re put in a position where a pandemic comes and you have to think about furloughing people and health insurance—How are people going to eat? How are they going to pay for gas?—not until then do you really realize what responsibility is. But as a leader and taking that responsibility, it gave me a lot of urgency.

When we furloughed people, we paid for everybody’s health insurance, 100 percent. If they needed food, we were there to feed them and anything we could do to help. But I have a great team around me. We’re very nimble.

We turned to online ordering and really ramped it up. We started to create some models around how we could execute that. We brought people back to help us. We quickly jumped on curbside. We quickly made sure we had plenty of people, more people than we needed, so that when you ordered something, we got it to you right away.

Governor Abbott was instrumental in helping us with the to-go margaritas, and the Mambo Taxi to go was a game changer for us.

The Mambo Taxi is a margarita? Yes, it is. It’s iconic here in Dallas, and the first day we were able to sell them, we sold them by the quarts. We might have sold 500, 600 quarts that day.

We hear Mick Jagger likes them. How did it make you feel that Mick gave you a shout-out at his concert? There are lots of people who like them, yeah. But Mick Jagger loves them. Obviously, anytime you have somebody like that who talks about your product, it’s exciting. It’s an amazing margarita.

There’s a rule: three’s the limit. Is there a story there? There is a story. The story is after you have one, you want to do the mambo. After you have two, you need to take a taxi home. And then the third one, there’s no story behind that,

SO, BEING OF SERVICE TO OTHERS AND BEING GENUINE— AND THEM KNOWING THAT YOU’RE DOING IT FOR THE RIGHT REASON—IS IMPORTANT BECAUSE YOU HAVE TO BE HONEST. YOU HAVE TO BE GENUINE.

— Edgar Guevara

but we normally say: three is enough. You’ve got to take a taxi home after the second one; the third one is probably where you need to stop.

Tell us about the Mi Familia Fund and the M Crowd Familia Foundation. Working for larger companies, they have similar funds, and so we thought that for our 30th anniversary, let’s launch this fund. It has been about a year-long project for us.

We’re all going to contribute through payroll deductions to this nonprofit fund. It’s not managed by M Crowd. It has its own board of directors, and our employees are on it so they can manage the funds. I’m really proud of that because I grew up in the restaurant business, and there are times when you have things that happen that are out of

your control and you don’t have any money for it. Although as a company we do that, there are many, many more opportunities where people need money, and they just don’t ask.

But we made it larger. We’re a collection of neighborhood restaurants, and when you say you’re a collection of neighborhood restaurants, you have to take care of things within your neighborhood. You have to make sure that you support your neighborhood cause. So, we opened [Mi Cocina on the Park] Klyde Warren Park up last year, and we donated $50,000 to the park. The money went strictly for free programming. It was important to me that if we were going to be part of this iconic park, that we contribute to things that support children and give them something to do.

Edgar Guevara shakes the hand of fourth-place finisher Peter King in the second annual Mambo Miles 5K held last July. King has participated in the event both years it has been held. All proceeds from the event benefited the M Crowd Mi Familia Fund that assists Mi Cocina employees in need.

We started with this: How do we take care of our own employees, and how do we make sure that they have a fund that they can use or need? And there’s this pillar that says when there are things in the community that we can do to support the community. How do we do that? Then the third leg is: When there are unfortunate situations that happen, how do we get involved and make sure that we help? And so, this little idea turned into this much broader thing.

You mentioned you had to furlough staff and go through some of those pains during the pandemic. How are you incentivizing and retaining employees, training the new ones, and finding people that want to want to work? Our employees are our biggest asset. We brought back as many people as we could early on, but we also paid them more through the pandemic because tips weren’t there. We had roughly 1,400-1,500 employees pre-pandemic, and we brought back 1,300 of those people.

Our restaurant directors and our multiunit directors all spend time with the new employees. We want to make sure that we embrace them because a lot of times when people join a new company, they’re joining it because they’ve heard something good, or they know somebody there. But what we try to create is trust. If you can get some key leaders in the business to meet these new employees, then they have a sounding board if they have a concern.

But we never deviated from how we did the model; people weren’t having to shift. There are restaurant

companies that went to to-go and robots and drones and ghost kitchens and selling this , and I think that’s great for some of those businesses. That’s not who we are.

Coming out of the pandemic, we were in restaurants every day, myself, my CFO, my VP of HR. We were all in restaurants to make sure we were checking in on the pulse of people. It helped us a lot because they had questions and they had some concerns, or they had some fears.

You mentioned tough things. What effect has inflation had on the way you do business, and how are you countering those issues? It has had a major effect. Wages have gone up. Commodities are out of control. What we’re paying for our ingredients today is significantly higher, in some cases 100 percent higher. We did

take a little bit of a price increase because we had to, but we thought we did it in a way that would be fair to the guests and fair to us.

A lot of it is just focusing on the things we can control. We can control the recipe execution, the way we make food, how we take care of our guests. There may be a group of people that maybe came in and used to spend $150 on their visits, and now they’re spending $100.

Every business is going to make less money during this time, unless you do things that potentially could compromise your long-term success. I’m not in a position where I want to compromise on long-term success. We’ll just figure out how to manage the today and make sure that we take care of the people who are with us and dine with us, so that as things get better, we’ll get to see them maybe spend a little bit more money in our restaurants or give us more frequency.

As a CEO, I’ve got to be the one that has to let the board know that “Hey look, unfortunately, this is the impact. Here’s how we’re going to mitigate it, and unfortunately, it just means that this year it might look like this versus like this.”

Those are tough conversations to have, but that’s why I’m in the position I’m in, because it’s my job to not only communicate down to our team but also make sure the board is aware of why we have to do the things we have to do. I’m looking at it as, look, we’re going to get through this no different than we did through the pandemic. We just have to be smart about how we get our way through it.

Brisket tacos are a favorite menu item at Mi Cocina.

What’s next for M Crowd Restaurant Group, and Mi Cocina? It’s taken us four years, roughly, to put ourselves in a position where we can start growing again. I’ve been a guest of this brand and a fan of this brand for 20 years. My kids grew up eating Mi Cocina. I grew up eating Mi Cocina. Now, I get to run the company, and I’ve always thought that Mi Cocina had great lengths to grow outside of Dallas. So we’re starting to put our strategy together to grow outside of Dallas. Texas will probably be the first place that we’re in, Houston or Austin, somewhere here near us so that we can prove it out, but we want to grow Mi Cocina. From a business standpoint, I’d like to double the size of the company over

the next 10 years or so if we can, and maybe five years, if we get it right. But we’re never going to grow just for the sake of growing. I have this saying: Sometimes more is not better; sometimes more is just more. We have to be smart about how we grow and where we grow and how we do this.

Is there anything else you’d like to talk about? The message that I always try to let people know is, this seat is a lonely seat sometimes, because sometimes you have to make the tough decisions. It’s also the best seat because when things are good, it’s easy for people. You really find out what people are about and what organizations are about when it’s tough.

THE TEST KITCHEN ON WHEELS

FOUR YEARS AGO, MI COCINA INTRODUCED A FOOD TRUCK. SCAN THE CODE WITH YOUR PHONE TO FIND OUT OUT HOW THESE MOBILE TEST KITCHENS HAVE BECOME COMMUNITY AMBASSADORS FOR THE BRAND.

Lightning Round EDGAR GUEVARA

FAVORITE TEXAS PRODUCT?

Brisket tacos, Mi Cocina. The Mambo Taxi. Both together.

WHAT DOES YOUR MORNING ROUTINE LOOK LIKE?

I wake up, have a cup of coffee, and then I do some sort of exercise, whether it’s the Peloton or go for a run. I take about 45 minutes in the morning to do “Edgar time.”

WHAT IS THE BEST ADVICE YOU EVER GOT?

Best advice I ever got was: Make sure you really listen to what people have to say.

WHAT WOULD SURPRISE PEOPLE TO KNOW ABOUT YOU?

I played the cello in high school.

WHAT’S YOUR CAN’T-LIVEWITHOUT-IT TECHNOLOGY?

I guess it would be my iPhone. It’s a lifeline, right? I’m still a talker on the phone, but my wife and kids text. I won’t respond to them because I’m a believer if you think something’s important, call me.

//

Empowering Employee Engagement

ERIC HARRIS

The Great Resignation was in the spotlight in 2021 as record numbers of employees left jobs, but the days of staying with a single company for an entire career had been diminishing well before COVID-19 arrived. Mid-year 2022, a new Gallup analysis found that nearly half of the American workforce was looking for another job, either actively or passively.

The Gallup analysis identified employee engagement as a prominent factor in the resignation rate. It found the global engagement rate somewhere between 20-34 percent. It also showed that the most important factor in determining whether an employee is engaged or

disengaged was the workplace and that an engaged manageremployee relationship was an important factor as “low engagement teams typically endure turnover rates that are 18 percent to 43 percent higher than highly engaged teams.” The cost to replace an employee: one-half to two times their salary.

Enter Eric Harris. Harris is the CEO of MindHandle, an agency specializing in internal communications. He is a self-professed people person who teaches others how to put employees above all else to effectively reduce the speed of the turnover bus and see positive effects on company culture and, ultimately, customer service.

Harris is also an executive education professor at Texas

Christian University (TCU) in Ft. Worth. He teaches Storytelling for Executives and Executive Communication and Presence through TCU’s Neeley Executive Education program.

We spoke with Harris about creating brand champions, the importance of aligning values and vision, employee-engagement strategy, and a buzzword of the season, quiet quitting.

MINDHANDLE CEO

EMPHASIZES THE IMPORTANCE OF A PEOPLE-CENTRIC APPROACH.

Eris Harris, Mindhandle CEO

Tell us a little bit about your upbringing. I was raised in north Texas. I actually live in my hometown, Richardson. My family was very nuclear: two kids, a dog, two parents. It was really the postage stamp yard in the suburbs. But my dad was a small business owner and still is a proprietor, and I was just so impressed with him. What I really appreciated was that he could be there for all the important stuff and also run a business. I watched him do that my whole upbringing, and it really spoke to me.

My parents were Yankee transplants. They were from Boston and New Jersey, and so it was kind of fun because we have Italian roots but bloomed in Texas. So, we did chicken cacciatore on Christmas Eve and then brisket and baseball all summer.

Why did you go into advertising? I went into advertising because I always wanted to. In fact, I wrote my first ad campaign with my uncle, my mom’s brother, when I was like seven years old. He challenged me to write a tagline for candy canes, and I wrote, “Stick it.” And he said, “There’s a bright future for you in advertising.”

How would you define your personal leadership style? Most importantly, I’d say my style is underpinned by a people-over-profit mentality. So, I prioritize people. You never really have to choose between one or the other, but I bring it back to that often. Like, “What would I do in this situation if I was prioritizing the people instead of the money?” So that defines a lot of it.

“WE’RE DOING FOR INTERNAL COMMS WHAT MINT DENTISTRY DID FOR ORAL HYGIENE. WE’RE MAKING IT SEXY.” — Eric Harris

Eric Harris takes great pride in how his team has shaped the MindHandle brand, sometimes quite literally. COURTESY

If you ask someone on my team, they’d probably say I’m a compassionate listener. I’m restless and impatient. I’m analytical, but I have rounded corners. And I’m really comfortable presenting. I have very little ego about it. I’m not modest. I have no problem standing in front of a crowd and saying, “Here’s what’s going on. Are you with me?”

Who or what had the biggest influence on your own leadership style, and what did you learn from them? I’m going to go back to Dad on this one. So, it’s not really even about business. It’s that he was my baseball team coach. He was at every single game, coaching for most. He was at every single band performance, marching band and garage band. He was at every single high school activity, banquet. He bought a table for most of them. He and my mom were always there for my sister and me. And that actually taught me how to define success in business because I am a big believer that work is to propel a happy life, not the other way around.

What does MindHandle do? Who are its clients? MindHandle is an employment branding agency. We like to call ourselves a recovering ad agency because we used to be in the business of commerce. We would do what a typical ad agency would: Super Bowl spots, social media campaigns, print advertising, and point of purchase.

And we had sort of an enlightenment over the last few years and veered courses because we work with primarily large complex restaurant retail brands that have distributed workforces. So, Nothing Bunt Cakes, Topgolf, Chili’s, Texas Health Resources, and Frost Bank are our clients with many thousands of employees. And we have seen—that just the advertising work being what it is—we grew up in that space, and we know how to write those emotionally charged messages and do inspired artwork to connect with people, connecting with consumers emotionally.

But there was a real void for that in internal comms. There are not a lot of advertising quality messages reaching company employees. And

we said, “We can help with that.” We always say, “We’re doing for internal comms what mint dentistry did for oral hygiene. We’re making it sexy.”

How would you define the mission or philosophy or ethos of MindHandle as an organization? We are on a mission to be the world’s most employee-centric ad agency.

And basically, what that means is we believe that a person’s relationship with their employer is a really big deal. We get a strong sense of purpose from what we do for a living. That just is a human truth. You can even look back at many of our last names, for example, come from what our ancestors did for their occupation: Smith, Potter, Trainer. So, an employment brand is way bigger than the logo on our paychecks; it’s how we define who we really are.

Describe an employee-first approach. What does it look like in practice? In most marketing assignments, the strategy starts with the consumer.

We talk to the people who are buying the product, and then we engineer messages to reach them so they buy with more velocity. With employment branding, we’re taking that mentality, and we’re kind of inverting it because what we’ve seen is that the most successful brands actually begin with the employee perspective.

For example, take REI. They believe and declare publicly that to work here you align with the idea that a life lived outdoors is better. And so, they said, “You know what? Employees, you guys deserve Black Friday off. You should go outside that day instead of being stuck in a retail box.” And that

became one of their biggest marketing campaigns of all time. One of the biggest marketing campaigns of all time, the opt-outside movement, was built on understanding their employees and what they wanted. That’s what we mean by employee-first.

If we always only listened to our customers, our brands would appear schizophrenic because the culture of consumerism changes. Cultural shifts happen on a macro scale, but a business’ values shouldn’t change much over time. And they should be reinforced by its employees.

What makes this approach effective in recruiting the right people? Let’s start with what a brand does. A brand protects price. A brand creates a sense of tribe. It creates an “I’m like that” mentality. But it also repels as well as it attracts. A great brand is going to tell some people maybe I’m not for that brand, just as well as it tells others, “Oh, I’m definitely for that.”

If you look at the convention on recruiting, especially in the retail restaurant space, when someone’s hiring, what do they do? They put up a sign that says, “Now hiring,” and that sign is right next door to another retail location in a strip mall with a sign that says, “Now hiring.” So, there’s literally no differentiation between one place and the other. If I’m an applicant and I pull into the parking lot, I don’t know the difference between the two. I just know both are looking for me. So, when you think about branding the employeeemployer relationship, those messages become much more targeted, and they become much more emotionally charged and much more poignant and meaningful to the audience.

IF WE ALWAYS ONLY LISTENED TO OUR CUSTOMERS, OUR BRANDS WOULD APPEAR SCHIZOPHRENIC BECAUSE THE CULTURE OF CONSUMERISM CHANGES. — Eric Harris

So, in recruiting, for example, like the work we did with Raising Cane’s, they weren’t looking for just your run-of-the-mill employee. They were looking for high performers. They wanted the captain of the swim team, first chair oboe. So, we defined and wrote a recruiting campaign centered around the idea of “Chickenthusiasts.” And if you are a Chickenthusiast and want more expertise in your life, like if you’re a high-performing individual, you would identify with that. You pull up at a Raising Cane’s; it says, “Now hiring Chickenthusiasts.” You pull up next door to a Jack in the Box; it says, “Now hiring.” So where are you going to apply?

How does that translate then, on the other end, given the Great Resignation and retaining the right people? Retention and communication just go hand-in-hand. Suppose you have an organization that communicates the culture meaningfully and consistently, every day. In that case, there are tons of opportunities for employees to reassess and to say, “What is it that makes me proud to work here? Do my values align with the company and where we’re going?”

For example, I’m a people-overprofit person, and if I woke up every day hearing my company communicate about profits and that was all we ever talked about, I’d be out the door. You’re not going to retain me if that’s what’s being communicated. So, it’s about that—the meaning and the consistency— and that’s what leads to retention.

In engaging employees to do their best work, if the conversation always centers on profit, that’s not engaging you. How do you engage someone to do their best work if you’re employee-centric? There’s kind of a fine line between engagement and retention. They’re

DISENGAGEMENT. — Eric Harris

really sort of shades of the same thing in reality, but engagement comes down to answering two questions: “Do I know what’s expected of me?” And “How am I doing at that?” It’s really simple.

When we talk about engagement, there are a lot of different tactics that can help answer those two questions. But do I know what’s expected of me? A strong employment brand answers that question by saying, “This is what we believe in as a company and where we’re going.” So, what’s expected of me aligns with what’s expected of the company.

Once we know the answer to what’s expected, we ask ourselves how we’re doing. If you have a strong brand that celebrates what’s important to the company, then employees can answer that question for themselves. Because employees will self-govern, holding their actions up to the company’s beliefs. They’ll ask “Do I feel like I’m doing that? If not, what’s in the way?” And if they are, they’ll continue and engage others.

Where quiet quitting is concerned, how can company leadership combat that trend? It doesn’t sound like something new, maybe just a new name? Quiet quitting is indeed real, but you might also call it a new name for a very common challenge in business: disengagement. The “quietly disengaged”—a collection of individuals who have elected to deviate from the cultural current, but who are not disruptive about it—has always comprised about half of the workforce. This group nestles between the actively engaged and the actively disengaged, the two most powerful, polar forces in an organization.

The biggest change, however, is in the increase in disengagement among younger employees. Gen Z and younger millennials (under 35) are showing decreases in engagement compared

to pre-pandemic levels and are more likely than ever to join the ranks of those quietly going through the motions and refusing to go above and beyond.

This is why the alarms are sounding. Disengagement is not new, but increasing levels of disengagement among a crucial demographic is causing leaders to pay attention and take action.

What is a brand champion, specifically in the retail restaurant space, and why are those kinds of employees important? Is everyone a brand champion? Is that the expectation? Yeah, boy, that would be awesome. I mean, there are certain companies that really over-index in brand champions. I would point to Chickfil-A as a great example. Frost Bank, one of our clients, has a very, very high concentration of brand champions.

These are people we define as individuals willing to stand up and defend the brand as important to their way of life. So, they are very vocal about the values. They’re very communicative on behalf of the brand. They refer people to it, whether as customers or as employees. It’s so important in the restaurant and retail space.

Just think about the last time you went to a restaurant. Did you have a server who was interested in conversing with you, proactively recommending new dishes, thinking about your desires, and refilling your glass when it was one-third full? Was your experience one that you could tell was facilitated by someone who was proud to be working where they were?

Or did you have the experience that a lot of us have, especially these days during staffing shortages, where you felt like the server acted like, “I’ll get to you when I get to you, and when I do, we’re not going to engage in conversation and it’s going to be really

transactional”? So, a brand champion in that role is critical because brand champions are defining the experience for you and for their coworkers.

How do you create a brand champion? Is it something that just happens, falls in your lap, or are there ways that you can work to instill that passion in your employees and create brand champions? It starts at the recruiting phase where, if someone was attracted to the brand for specific reasons and those reasons are reinforced throughout their experience, that’s only going to help get them to that championship level. But it’s really communications and branding. You ask anybody how they came to believe what they believe, whether that has to do with faith or finances. What shaped your perspective on this situation? And what that comes down to is story. We believe what we believe because of the way that we are communicated with and the tension in the world that we feel and the way that our stories resolve that tension for us. So, the fables of a brand, the anecdotes of a brand, that float around an organization— when those stories are shared with an employee, it’s more likely for them to reach that championship level.

You believe that a communicationrich employee journey is important. What does that look like? So, the employee journey is a pretty complex thing. It doesn’t really look like a line. It looks more like a tree. It’s always full of branches and returns. It’s a pretty intense thing if you map it out over time, especially depending on how long their tenure is. But let’s take one section of it, one common section that everybody goes through: benefits enrollment. When an employee joins a company, benefits can kind of be like the Crockpot of experiences. It’s like you get in the door and talk about it for 10 minutes, and then you set it and forget it. But benefits are a really important thing to underscore consistently.

So, the communication-rich journey says, every month, let’s highlight a different benefit, and let’s communicate

about it. Does our company have a gym membership? March is Gym Membership Month. Let’s go and interview employees about how they use the gym membership.

Maybe we have a certain health benefit, like an HSA. Maybe people are using it, or people aren’t. But if the company doesn’t communicate about it, then it might as well not exist. It’s not meaningful. Because we are what we communicate, and we cannot not communicate because our employees will fill the void. Employees hate a void, so they’ll fill it with whatever they want.

How do you align vision and values to retain employees? So, remember the engagement discussion. So, there are two questions. What’s expected of me? And how am I doing on that? And when you think about vision, vision should be motivating, but it should also be kind of big and scary.

We have a vision to be the world’s most employee-centric ad agency. That’s a big deal for a 20-person company. We’re looking inward and saying, “How do we deliver on that?” Because the world’s a big place. ... So how are we going to be the world’s best at this?

But the vision and the values work together because we say, if we’re going

to be that, then we need to believe in these things. And these things need to guide our actions. So, one of our values, for example, is curiosity with intent. So, we believe that we should be restlessly curious, but we should have an intention behind our curiosity; otherwise, it could lead to meandering. So curiosity with intent is a value of an employee-centric agency, and we align that value to the vision directly.

How can company culture sink or bolster business? Company culture is actually the most likely thing to sink a business. It’s the lack of attention to culture that sinks business. And I know it’s kind of a chicken-and-egg discussion in a lot of circles. It’s, “Does the business’ strategy fail, or does the culture fail?”

And I don’t see it as chicken and egg; I see it as very much cause and effect.

Strategy alone will rarely sink a business. If you look at the Circuit Cities and the Blockbusters of the world, they didn’t fail because of a losing strategy. Their strategy was not flawed. They failed because they did not create a culture that supported a winning strategy. We believe if you’re in a business powered by people, you’re in the people business, and the most important strategy is a culturefirst approach. Because if you empower people to win, they’ll find a way to win.

What do you often see CEOs get wrong when it comes to human capital strategy? I think there are a lot of things about human capital strategy that CEOs find themselves on the wrong side of, but I think the most important theme is we have to learn at some point—if we haven’t learned it in the last two years, I don’t know when we will—that people are not fungible assets. People are not replaceable. People are the reason why our companies are where they are. There are a lot of companies out there saying, “We’re a technology company empowered by people.” And I kind of want to grab them and shake them and say, “You’re a people business that happens to make technology products.”

And so, if we invested in our people as much as we invest in literally anything else and if we saw people as irreplaceable and said, “It’s not about replacing someone, it’s about making someone the best they could possibly be,” that’s where I think the biggest challenges are.

What was the experience of leading MindHandle through COVID? Did anything change permanently? Yeah, we’ve actually got a lot of habits and a lot of systems and processes and a lot of the boring stuff that I could point to and say this change was because of COVID, and it made us better. I think, like a lot of companies, we learned to innovate differently.

PEOPLE ARE NOT REPLACEABLE. PEOPLE ARE THE REASON WHY OUR COMPANIES ARE WHERE THEY ARE.

— Eric Harris

Eric Harris is passionate about teaching and has found his sweet spot as a professor at TCU’s Neely School for Executive Education.

We learned how important having a real process was as opposed to being more tribal about how we did work. But I think the most important thing was that we’re a culture built on a practice of gratitude. We deliberately thank each other and celebrate each other’s successes and point to how proud we are of the work that we’ve done.

And in the middle of the pandemic, there were two things that kind of jumped out to me, I guess, in the very beginning. I sat down every morning, and I wrote to the team. I wrote letters to the team for the first 90 days, just how much I appreciated them, explored our values, kind of talked about how to refer back to our values in this new paradigm and applications of those beliefs. The other tradition we started is called “Good News.” At that time, the world was full of questions we couldn’t answer, but we could also acknowledge that the world is full of good news, too. And there’s good news everywhere. So, we started every day with a roundtable discussion on good news. Some days the news was as simple as “my Bradford pear started blooming,” but we made it a point to share something good and talk about how that makes us feel. Then, once we had let that sink in, we got to work, and that became a tradition that stuck. We still share good news every Monday morning at our weekly, all-team meeting.

You’ve talked about helping brands bring in people that identify with their brand to apply for positions, how does MindHandle hire? What do you say to potential employees to have them already identifying with your brand when they come in the door to apply? We are always on a mission to drink our own champagne. So, it’s a practice for sure, but I think the biggest thing is we hire by values. We don’t necessarily hire by skill because you can train skills. You can’t train behavioral traits, but you can train skills. So, we deliberately center a lot of our interview questions around our values.

For example, one of our values is humble expertise. Those two things kind of sound at odds with one another because there’s a tension there, but that’s what we look for in a service business. We want experts who are prepared to put themselves second.

What’s on the horizon for MindHandle? What’s next? We’re pretty bullish about improving the tools our clients use to communicate with their employees. We’ve demonstrated that we’re very proficient with the messages, and now it’s time to aim for the medium. So, the messages are strong, and there are a ton of HR communications platforms out there, but none of them are perfect. We just think our clients deserve perfection.

HR people had to become marketers overnight when the pandemic started— and when the Great Resignation started—and we’re seeing things balance out. Still, HR has always been good at communications. Now they have to think like marketing communicators, which is a different expectation.

What’s the best leadership advice you’ve ever gotten? I don’t know who said it, and I don’t know in what context. I don’t even know if this is verbatim, but it’s some shade of this: Get used to holding up a mirror. Get really good at holding up that mirror because anytime something goes wrong; I have to say, “What could I have done to prevent it?” Otherwise, I’m not doing anybody any favors. And the challenge, honestly, with that for me is that the inverse is also true. So anytime something goes right, I need to take a minute to just celebrate that we created a culture where that could happen and that I have something to do with that. I’m notoriously bad at celebrating my successes because I’m really pretty focused on celebrating others. And so, it’s like those two things go hand in hand. It’s two sides of the same coin, but it’s all around this notion of like, look at yourself as the reason why things happened and then you’re empowered to either promote them or to fix them.

Lightning Round ERIC HARRIS

WHO IS YOUR MOST ADMIRED FELLOW TEXAS CEO?

Phil Green at Frost Bank. He’s our client, and he leads through people in a way that inspires me. Every interaction we have with that group helps me run my business better.

WHAT’S YOUR FAVORITE TEXAS PRODUCT?

Nothing Bunt Cakes’ Snickerdoodle, all the way.

WHAT IS THE BEST ADVICE YOU EVER GOT?

The best advice I ever got was from my parents, who said, “If you want to be respected, be consistent.”

WHAT QUOTE SUMMARIZES YOUR PERSONAL APPROACH TO LEADERSHIP?

There’s a story about Cliff Gardner, who was Philo Farnsworth’s brother-in-law, and Philo Farnsworth invented the television. Cliff Gardner looked at his brother-in-law one day and said, “I don’t have your head for science, but you’re going to need glass tubes.” I know it’s kind of a weird, random, out-there quote, but Cliff was a glassblower, and Philo was like an Elon Musk-type character. Cliff said, “Look, I don’t have your head for science,” so he expressed humility. But then he said, “But you’re going to need glass tubes,” and so he expressed expertise. The way those two things work together is how I try to lead.

WHAT’S YOUR FAVORITE THING ABOUT TEXAS?

What’s great about Texas is that you will not find a higher concentration of polite people anywhere else in the country.

WHAT WOULD SURPRISE PEOPLE ABOUT YOU?

I once played the bass drum in the Dallas Cowboys drumline.

WHAT’S YOUR CAN’T-LIVEWITHOUT-IT TECHNOLOGY?

Bluetooth, all the way, because I am constantly listening to music either through a speaker or through headphones. I cannot imagine life without music. Bluetooth has been the technology that changed things for me.

The Harder Right Vs. The Easier Wrong

SERVANT LEADERSHIP AND RESPONSIBILITY TOP 7-ELEVEN, INC. CEO JOE DEPINTO’S BEST PRACTICES LIST FOR THE ICONIC TEXAS BRAND.

In 7-Eleven’s 95 years of existence, it has had several firsts. It had the first self-serve soda fountain. It was the first to sell coffee in to-go cups and the first convenience store to sell gas. While 7-Eleven is named for its original store hours of 7 a.m. to 11 p.m., the retailer was also the first to operate 24 hours a day, 7 days a week. It also gave us the Big Gulp and the Slurpee, but perhaps most significantly, 7-Eleven is the world’s first convenience store—and it all began in Texas.

The story, as shared by 7-Eleven, Inc. President and CEO Joseph (Joe) DePinto, goes something like this: “In 1927, Southland Ice Company (now 7-Eleven, Inc.) took a chance on an entrepreneurial employee’s innovative idea: selling milk, bread, and eggs to customers in addition to the ice blocks they sold and delivered. This was in Oak Cliff, Texas, (a neighborhood of Dallas) before

there was refrigeration. At the time, customers would have to go all the way to the grocery store for these items. And while other grocery stores were closed on evenings and holidays, this idea from ’Uncle Johnny’ Jefferson Green to provide staple items after hours became an overnight success. Thus, the world’s first convenience store was born.”

Today’s convenience store market is filled with players, established brands and upand-comers. According to Convenience Store News research, in 2021 after 7-Eleven acquired Speedway, 7-Eleven, Inc. held the number one spot for total store count (7-Eleven, Speedway, and Stripes being the primary brand names). Alimentation Couche-Tard Inc. came in second with its Couche-Tard, Circle K, and Holiday stores. Casey’s General Stores Inc. slid in at third with Casey’s General Store and Bucky’s Convenience Stores, not to be confused with Buc-

ee’s, another Texas-born brand that has brought game since its establishment in 1982, expanding across state lines and carving a niche of its own in the market.

But arguably, few have stepped into the world of having their name as synonymous with convenience in the global market as 7-Eleven has. Pop culture is riddled with references to the convenience store, as well, both in locations and product placement. Some of the bigger references have been in movies like The Simpsons Movie and Deadpool and television series like Stranger Things, something DePinto says makes him proud in several ways, but more on that later.

DePinto took the reigns as CEO in December 2005 just after the company became a subsidiary of Tokyo-based Seven & i Holdings. We recently sat down with him to talk about his leadership style, successes, challenges, where the company has been, and where it is headed.

COURTESY

7-Eleven, Inc. President and CEO Joe DePinto

— Joe DePinto

7-Eleven has

When you were growing up, was there a 7-Eleven in your neighborhood? There was. There was a 7-Eleven probably a 10-minute walk or fiveminute bike ride, which is how most kids got around back then.

Where did you grow up? I grew up outside of Chicago, in a city called Des Plaines. I was recently back in the area picking up my wife from the airport, and we visited one of our stores. On our way, we drove by a Speedway store in my hometown, and there was all of this media out front. 7-Eleven purchased Speedway about a year ago, so I said, “We’ve got to go in there. What’s going on?” I didn’t know it at the time, but that store had just sold the $1.2 billion Powerball ticket the previous night.

What was it like growing up in Des Plaines? It was great. It was a midwestern town, with midwestern values. I lived in that city my whole life until I went to college. Growing up, I played a lot of sports, mainly baseball and ice hockey.

You went to West Point, correct? How did that—and your military career following that—how did that affect your leadership style? What kind of values did you gain from those experiences? I spent four years there. It was pretty foundational for me. I learned about leadership at West Point—it taught me first followership and then leadership— and it helped develop my value system, so it was very formative for me as a young man.

How would you define your leadership style? My style is very much one of service and support. I learned that servant-leadership mentality at West Point. I try to set clear expectations then provide resources and coaching to help others be successful, and then get out of the way.

My approach was really built from what I learned in the military, and many years later, I read a book called The Servant, by Jim Hunter. He also wrote a follow-up book called The World’s Most Powerful Leadership Principle: How to Become a Servant Leader. It’s really all about being customer-focused; having a purpose; being authentic, approachable, a good listener; treating people the right way. That kind of describes what I aspire to be and try to do.

In recent years,

added restaurants into some of its locations. Laredo Taco Company is one of the brands.

AS A LEADER, YOU NEED TO UNDERSTAND THE ENVIRONMENT AND THE PEOPLE THAT YOU’RE ENGAGED WITH, AND TAILOR YOUR APPROACH TO EACH SITUATION.

Have you had any mentors or role models? I’ve been very fortunate in that regard. At West Point and in the Army, it’s really hard not to have a mentor because you have so many officers around you. They were teachers and coaches who mentored me along the way, and I took a lot from them. Being authentic and having humility and empathy was taught all the time.

Growing up, I played a lot of sports, mainly baseball and ice hockey. Some of the things I learned from my best mentors, including my junior hockey coach, really focused on teamwork and what it means to be a productive part of the team.

These mentors instilled the idea of selfless service, always trying to improve and approaching every challenge

with a “can-do” attitude and mission orientation. I think the most important thing that I learned, though, was to always do the right thing.

How do you think people would describe your approach to the CEO role that you fulfill now? Would you say it differs in any way from a typical CEO? I think there are several aspects to my leadership style. I try to be very approachable and accessible. I spend a lot of my time in our stores talking to our operators about what’s working and what needs to be improved. They are closest to our customers and understand best how our customers’ needs are changing.

I’m also a big believer in situational leadership. Do I need to be more hands-

on and deeply engaged in a specific situation, or step back and let the team deal with the issue? As a leader, you need to understand the environment and the people that you’re engaged with, and tailor your approach to each situation.

What’s the best leadership advice you ever received? There is a cadet prayer at West Point, and part of it says, “Make us to choose the harder right instead of the easier wrong.”

Similarly, I once had a brigadier general tell me that true/good leadership is both hard and inconvenient, and that one always stuck with me.

Another piece of advice that I picked up and find myself saying all the time is, “The price of leadership is criticism.” You’re not always going to make

Above, in the late 1920s, the Thompson family purchased several ice houses in Oak Cliff, Texas, and renamed them Tote’m stores. They would later become 7-Elevens.

Left, in 1966, 7-Eleven opened its 2,000 th store.

Below, in the 1940s, the convenience store chain name was officially changed to 7-Eleven to reflect its hours of operation, 7 a.m. to 11 p.m.

everyone happy with the decisions that you make. How people respond is up to them. That’s the price of leadership.

Ultimately, you try to always do the right thing, to do your best. You’ll never go wrong that way.

Is that the advice that you would give to someone aspiring to become a CEO, or do you have other nuggets that you would share with them? It’s a privilege to be CEO of an organization like 7-Eleven, but it’s also extremely hard work.

I’m a big believer in reading as much as you can and learning from other leaders who are getting it right. I would tell folks who aspire to be a CEO, they should put themselves in that mindset starting now. Understand the role and responsibility and take an enterprise view … shift your perspective. Identify the many stakeholders pushes and pulls. Think beyond the specific function you’re in today. Instead, look at the bigger picture and how you would make decisions for the betterment of the entire organization.

At 7-Eleven, I’m always looking for enterprise thinkers because those are the folks that can impact beyond their function for the betterment of the entire organization.

Let’s move into 7-Eleven a bit. What got you into the world of convenience retail? What appealed to you about this industry that made you want to be a part of it? When I came out of the military, I went to work for PepsiCo in their KFC division. At the time, PepsiCo owned KFC, Pizza Hut, and Taco Bell. They also owned Frito-Lay and Pepsi, so they were a big company. We had an opportunity to hear from the CEO at the time and to decide which division to work in. He said, “If I was someone young, getting into business now, I’d go into the restaurant division because that’s where the growth is going to be.” So, I chose that.

Running multiunit operations was very analogous to the military. Never dull. Always a new opportunity or challenge. I really liked that aspect of it. Later, I was recruited to work for a

regional convenience store company that was trying to launch quick-service restaurants in convenience stores.

What sets 7-Eleven apart from its competitors in that space? 7-Eleven is more than a store; we’re a neighbor. This was even more evident during the pandemic. Not only are we convenient and accessible, but we’re also welcoming and reliable. We’re there when you need us. We know that our customers depend on us to meet their immediate needs, as well as anticipate what they don’t even know they need yet. We encourage store operators to cater their product assortment to their unique customer-base. For instance, a store next to a school will offer office supplies while a store next to an airport will offer travel essentials.

I would say our other biggest differentiator is our proximity to our customers. More than half of Americans live within two miles of a 7-Eleven or Speedway store. Not only are we nearby, but we are also able to deliver to customers through our 7NOW delivery app much quicker than other c-stores or retailers.

So, you’ve been in neighborhoods and helped fill some voids in terms of what are called “food deserts.” Has that ability always been a part of the mission, and how important is it in your role today? Food (and fresh food in particular) is a huge part of our business, and hunger relief is one of the cornerstones of our philanthropic strategy. I can think of some places across the country where there is nothing there but us, and since we cater to customers’ needs, we provide them with daily, fresh prepared foods. Since 2000, we’ve proudly partnered with Feeding America and their local

network of food banks to address food insecurity at the community level. In partnership with our generous customers, we’ve donated millions of meals to Feeding America.

In addition, we’ve added restaurants into our stores. You may have heard of Laredo Taco Company or Raise the Roost Chicken & Biscuits restaurants. We have about 800 of them now. It’s something that’s really important to us. We’ve been evolving our food and are also providing more healthy options. We’ll continue to do that, but it’s not just our stores. With our 7NOW delivery app, we’re also able to deliver immediateconsumption products to our customers when they can’t get to a store.

In terms of pop culture, how does it make you feel when you see 7-Eleven location and product placement on big and small screens? What does that say about your brand? Well, obviously I’m proud of our brand. I’m proud of the team and the recent work they are doing here. Our marketing department has done a great job. Our head of marketing, Marissa Jarratt, is phenomenal. When you see 7-Eleven in a TV show or movie, it says we’re integral in people’s lives, we’re part of the fabric of the country. Everyone I meet has a 7-Eleven story, regardless of their age, where they come from, or their unique life experiences. And of course, it also means we’re synonymous with convenience. When people talk about convenience stores, they talk about it in terms of 7-Eleven, even if it’s not a 7-Eleven.

Right. It’s almost generic, or used like that. It really is. We’ve been serving our customers for 95 years, and we’ve really become a part of the fabric of our society. Like I said, everyone has a

story about 7-Eleven and what it means to them. We’ve been in more movies and TV shows than I can name. For us, that’s really cool.

We heard that you were on the 2010 season of Undercover Boss. What was that like? Do you recall what made you want to participate in that show? Our head of strategy at the time, came into my office and said CBS approached her. She said, “This is something I think you should do.” Her feeling was: This is an opportunity to tell our story not so much for the people outside the company, but for the people within our organization to see what servant leadership is all about.

And while I admit I was being hesitant at first, it was outstanding! I met some incredible people: Dolores, who handled coffee for us on Long Island, and a gentleman by the name of Igor, who drove for us on the night shift. It was a privilege to experience our brand through their eyes.

What was your biggest takeaway from that experience? You ended up actually gifting an employee with a franchise, right? We did. That was Igor, who became a franchisee. Sadly, he passed away about eight years ago. But the silver lining is that his son now works for us in our finance department.

What it emphasized for me was something I already knew: how important our people are to everything we do. Dedicated men and women doing their job every day, and the culmination of all of that, is what the enterprise truly is. And taking care of those folks, treating them right, making sure they have opportunity… that’s how we keep the organization growing and enables us to continue to exceed our customers’ expectations.

DEDICATED MEN AND WOMEN DOING THEIR JOB EVERY DAY, AND THE CULMINATION OF ALL OF THAT, IS WHAT THE ENTERPRISE TRULY IS. — Joe DePinto

We’ve touched on it a couple of times, COVID-19. What was the experience of leading 7-Eleven through COVID-19 like? You mentioned pivoting really quickly. Did anything change permanently?

In March 2020, our team had to move quickly. We pulled together a command center that was meeting twice a day for six months. The thing I marveled at most were the folks that worked in our stores. We were designated as an essential business, and our store associates and franchisees came to work every day, not knowing the severity of the virus, but still showing up for their customers anyway. We invested a lot of money—more than

$300 million over the past two-anda-half years—to support them with PPE, masks, shields, cleaning supplies, financial support for franchisees, and more. They did an incredible job.

The labor challenges were huge. The driver shortages totally disrupted the supply chain, which still isn’t back to where it was pre-pandemic. The thing that I feel has permanently changed is the day-part shift at our stores. We used to see our highest volume of customers in the morning, and that’s now shifted more to afternoons and evenings because fewer people are going into offices. We’ll just have to see if that is permanent. I think

Joe DePinto gives remarks at the Enon Store Support Center at a celebration event welcoming Speedway to the 7-Eleven family.

what the last two to three years have taught us is that we always need to be agile and embrace change.

You’ve been with 7-Eleven since 2002. In the time that you’ve been with the company, what do you consider the company’s biggest achievement? I’m really proud of our growth and proximity to our customers. In the US alone, we’ve grown from about 5,800 stores to more than 13,200 stores today. Globally, we went from 29,000 to more than 82,000 stores. There’s been a ton of growth, and with that growth has been really strong financial performance. Our team has done an incredible job!

Were there any things that you could point to that paved the way that you did in the leadership level? The Southland Corporation went bankrupt in 1990 and when this leadership team took over in 2005, 7-Eleven was carrying a lot of debt. So, our team said, “Look, we’re going to pay down this debt. We’re going to get a clean balance sheet. Let’s spend several years doing that.” And we did. We funneled most of our free cash flow into paying down debt.

We were sitting there at the end of 2008 (when the financial crisis hit) having paid down a ton of debt over several years, with a good-looking balance sheet. This allowed us access to a lot of capital, which helped us accelerate our merger and acquisition activity, thus accelerating our growth and, ultimately, laying the foundation for our future success.

What, if anything, do you consider your biggest missed opportunity or regret?

Early in my time with 7-Eleven, we had an opportunity to move more quickly with some transactions and acquisitions, and we held off. In hindsight, I would say that was something that would have been much more helpful to our company in the long term if we would have done that a little bit sooner.

What keeps you up at night? Ensuring that the company is anticipating and keeping up with the rapidly changing environment. Things are moving so fast,

and COVID has accelerated that. We teach our employees about what we call a VUCA environment—volatility, uncertainty, complexity, and ambiguity. That’s what we live in today, and we’re working to prepare our people and our business to anticipate change so we can continue to meet and exceed the needs of our customers.

In teaching your leadership how to move in a VUCA environment, are there any key concepts that you can share that you do? The main one is to eliminate silos. People must work together crossfunctionally and over-communicate in a volatile and uncertain environment. We work to make sure communication channels are open and communicate as often and as transparently as possible.

The other thing we focus on is alignment. We meet every week for four hours to review our strategic objectives with a real understanding of how the environment is changing and how it’s affecting us: Are we on target? Are we meeting our objectives? Are we short of our objectives? What do we need to improve?

We also hold a bimonthly video call with approximately 2,500 leaders in our company. During this call, we review case studies and best practices allowing us to learn from each other. What was the situation? What was the change that was made? What did we do? Then verifying if the change was effective.

With 82,000 stores globally, what’s in the future for 7-Eleven? Our focus is always first on the customer. We want to continue to innovate to meet their needs and exceed their expectations. That includes growing our food-and-beverage business. We are also going to expand our global footprint. We’re only in 18 countries and regions right now, unlike some of the other large chain operators out there, which are operating in 100120 different countries. In the past, we have really focused on concentrating our stores where we go, which has left a lot of opportunity for growth. Of course, with all of that growth, we remain committed to leading the way in sustainability and continuing to be a catalyst for thriving communities.

Lightning Round JOE DEPINTO

WHO IS YOUR MOST ADMIRED FELLOW TEXAS CEO?

I have a couple of them. One was our former banker, Rob Holmes, who’s now the CEO of Texas Capital Bank. He’s a true Texan and a friend, someone that I’ve respected and admired a long time. The other is Doug Brooks, who was the longtime former CEO of Brinker International and one of the most authentic people I’ve ever met.

WHAT’S YOUR FAVORITE TEXAS PRODUCT?

Tex-Mex food. Chips and salsa. That’s my weak spot.

WHAT QUOTE SUMMARIZES YOUR PERSONAL APPROACH TO LEADERSHIP?

“People don’t care how much you know until they know how much you care.” —Theodore Roosevelt

WHAT’S SOMETHING YOU’RE AFRAID OF?

I once walked up on a rattlesnake during a field exercise in the Army. I can tell you that hissing sound is not good ... I don’t like snakes.

WHAT’S YOUR FAVORITE THING ABOUT TEXAS?

Texans are just friendly. Most Texans I’ve met approach people with arms wide open.

WHAT’S YOUR CAN’T-LIVEWITHOUT-IT TECHNOLOGY?

My iPad. I put everything on it.

Recent Headquarters Relocations to the Lone Star State

When the Fortune 500 ranking came out earlier this year, Texas hit a new milestone: We are now home to more Fortune 500 headquarters than any other state in the nation.

So far in 2022, we’re still welcoming more headquarters large and small. Here are some of the recent relos.

Presented by

New Location: Frisco

Origin City: Lisle, Illinois

ExteNet Systems, a leading privately held owner of LTE/5G wireless and fiber neutral host communications infrastructure solutions, is moving its headquarters from Lisle, Illinois, to Frisco, Texas. The move is projected to be completed by Q1 of 2023. Part of a longer-term business strategy to bring ExteNet to the center of the industry’s ecosystem, the move will foster further innovation and reignite corporate awareness of the brand and business. The new 37,000 squarefoot headquarters will be in Frisco Station, a 242-acre, mixed-use development that will be closer to major clients, industry partners, and places its employee base closer to the company’s largest percentage of owned and managed networks.

New Location: Fort Worth

Origin City: New York, New York

Oneworld, whose 15 members include Alaska Airlines, British Airways, Japan Airlines, Qatar Airways, and Qantas, is moving its headquarters from New York to Fort Worth in December. The company will move to founding member American Airlines’ 300-acre, state-of-the art Robert L. Crandall Campus adjacent to Dallas Fort Worth International Airport (DFW). The new headquarters in Fort Worth will enable the alliance to tap into the significant aviation talent pool in the Lone Star State. Ranked as the U.S. state with the most air transportation jobs, Texas is home to one of the largest aerospace and aviation labor forces in the country. Oneworld has been headquartered in New York since 2011. Prior to that, it was based in Vancouver, Canada.

New Location: Houston

Origin City: London, United Kingdom

As part of a broad-based re-organization, Solidatus has established its US headquarters in Houston, Texas. Launched in London in 2017, the firm’s initial focus was on helping make data easier to work with for businesses in the UK/EMEA, where they became entrenched in four of the top 10 Global Systemically Important Banks (G-SIBs). Solidatus’ growing global footprint, spearheaded by significant demand from US-headquartered enterprises, drove the need to establish a stronger North American presence. Headquartered in Texas with leadership in New York and North Carolina, Solidatus is positioned to continue expanding its service and on-the-ground support to mid-to-large data-rich and highly regulated businesses. Now employing more than 110 people and growing, Solidatus expects to triple its US presence in the next year.

NO ASK

TOO BIG OR TOO SMALL

FROM THE BEGINNING CHRIS SHEPHERD HAS APPROACHED FOOD IN A UNIQUE WAY, FUELED BY CURIOSITY AND A HUGE APPETITE FOR LEARNING. Starting as a dishwasher in a sushi restaurant led to the realization that he needed to go to culinary school. Culinary school in Houston led to legendary Brennan’s, where he spent seven years in the kitchen and two as sommelier. All the while, he was exploring the city, experiencing the different cuisines, and meeting the people who cooked the food in what is arguably the most diverse city in the United States.

“I spent days going to restaurants trying to learn about the culture behind the food,” Shepherd says. “I became like family. We would talk for hours and share stories about the love for food and the traditions behind the dishes, the stories, and the memories. It was a very symbiotic relationship.”

Shepherd soon realized that people in Houston didn’t really understand where they lived and all Houston had to offer. He decided to show the diversity of the city through food and in 2012 opened a restaurant based on where he lived— the underbelly of Houston—and Underbelly was born. True to his nature, the restaurant was a unique take on cuisine. He re-created Vietnamese and other cuisines through his interpretation as a gateway to the dishes, and he followed up with maps to and recommendations at the authentic restaurants that had inspired his dishes.

“I would tell people to go try at least two restaurants before they came back to Underbelly so they could understand the culture and where the food was coming from,” Shepherd says. “For me it’s not about the food. Itʼs about humanity and having a conversation. We live in a world full of preconceived notions, but not until you actually sit at a table and eat together and learn from each other can you share that humanity.”

Shepherd’s take was also unusual in that he went beyond the shop-local concept to whole-animal butchery, always drawing fresh seafood from the Gulf and fresh, locally grown produce. “Tuesday was steer day,” he says. “We would butcher a whole steer. Thursdays they would deliver two 250-pound hogs. Friday was goat day. Seafood came every day, and Saturday was poultry day. As you can imagine, accommodating that schedule and making that many menu changes throughout the week was exhausting.”

Underbelly was wildly successful, winning a James Beard Best New Restaurant nomination followed by being named best new restaurant by Bon Appétit and Esquire. More accolades soon followed with Shepherd being named to the 10 Best New Chefs by Food and Wine, the Best New Chef of

Aaron Franklin, a Southern Smoke participant since the inaugural festival, feeds Chris Shepherd brisket at the 2018 festival.

Deborah Hamilton-Lynne

Chef Chris Shepherd shakes up the Houston culinary scene once again as he steps away from his award-winning restaurants to focus on his Southern Smoke Foundation.

COURTESY OF SOUTHERN SMOKE FOUNDATION/CATCHLIGHT PHOTOGRAPHY

the Year (SW) by the James Beard Foundation in 2014, and Outstanding Chef 2019 by the Robb Report.

Ever curious and seeking challenges, Shepherd expanded his culinary empire to include One Fifth, ambitiously exploring five different cuisines in five years: Georgia James, named for his parents, which became one of the best steakhouses in America; Wild Oats, featuring Texas cuisine; Underbelly Burger, a casual burger joint; Georgia James Tavern; and the yet-to-open Pastore, a red sauce Italian restaurant based on one of the One Fifth annual cuisines.

Along the way, he partnered with MLB Capital Partners to help with the expansion.

“I realized that in order to be successful in the restaurant business that real estate was essential, and I had to partner with people who were in real estate to make it,” he says. “I had to decide whether or not to take a partner or close. I chose MLB.”

The partnership was successful, but the pandemic took its toll on Shepherd and the restaurants.

In order to stay financially sound, he says, the partners wanted to buy more real estate and put more restaurants on it.

“That wasn’t for me. I felt a strong desire to do something different,” he says, “something that would challenge me to do new things rather than just one thing. As I got older I realized that if I am not happy then I should do something that makes me happy. So I stepped away and left it in good hands to work on something that challenges me, and that was Southern Smoke.”

The Southern Smoke Foundation (SSF) began as a fundraiser in 2015 for Antonio Gianola and the National Multiple Sclerosis Society after Shepherd learned that his friend had been diagnosed earlier that year. What began as a relatively small party thrown by Shepherd and some of the local pitmasters and restaurateurs became one

the most lauded foundations

of

Charley Crockett Band performs at Southern Smoke 2019. Entertainment and music is an integral part of the festival each year.

COURTESY OF SOUTHERN SMOKE FOUNDATION/ ROBERT JACOB LERMA

FUNDS DISTRIBUTED SINCE 2015

Source: Southern Smoke Foundation 2021 Annual Report

FUN FACTS

FUN FACTS

in the country, having recently been named to the 2021 Robb Report Best of the Best List for nonprofit organizations.

According to research from Georgetown University Health Policy Institute, food service and accommodation workers are at the top of the list of industry workers working as low-wage, uninsured workers, which emphasizes the need for the work the foundation does.

SERVED POPULATIONS

In 2017 in the aftermath of Hurricane Harvey, which devastated Houston and left many in the industry without a place of employment and basics such as housing, food, water, and transportation, Shepherd changed the focus of his Southern Smoke Foundation to supporting workers in the food and beverage industry who “felt the heat firsthand.” That year, the Southern Smoke Festival, which featured chefs and pitmasters who volunteered their time and talents, raised $501,000, which was distributed to 139 individuals.

Latinx • 41.3% White • 32.8% Black • 16.3% Other • 6.0% Native American • 1.8%

FUNDS DISTRIBUTED IN 2021

On November 29, 2020, Celebrity Chef David Chang became the first person to win the million dollar prize on Who Wants to Be a Millionaire and donated the entire prize to the Southern Smoke Foundation.

On November 29, 2020, Celebrity Chef David Chang became the first person to win the million-dollar prize on Who Wants to Be a Millionaire and donated the entire prize to the Southern Smoke Foundation.

“When Hurricane Harvey came through Houston we were in a bad spot,” Shepherd says. “I asked people, ’How do I help the staff get money directly into the hands of the people who need it?’ With all of the other relief efforts, not one penny was going to get into the hands of someone working the drive-thru or someone working the fryers at Denny’s, at that time, the only ones that were open. People who lost their homes or their cars were four feet underwater or basically lost everything— jobs, houses, restaurants. They weren’t getting taken care of. We were two months out from the festival, and I knew that although we would contribute to MS, we had another need. We took applications for asks big and small and started to verify in a three-step blind process and then award grants, directly into people’s hands. Applicants were anonymous. That year we took in 250 applications and granted 135 families half a million dollars. We stopped evictions. We paid for medicine and food for them and their families. We took care of medical emergencies when they didn’t have insurance or when the insurance ran out.

distributed in Emergency Relief 112 CASES

to victims of Hurricane Ida 89 CASES

Texas Winter Storm 23 CASES = $5,000

Source: Southern Smoke Foundation 2021 Annual Report

The 2021 Robb Report named Southern Smoke the Best of the Best Organizations that served Food and Beverage Industry.

The 2021 Robb Report named Southern Smoke the Best of the Best Organizations that served Food and Beverage Industry.

Source: Southern Smoke Foundation 2021 Annual Report

Source: Southern Smoke Foundation 2021 Annual Report

Source: Southern Smoke Foundation 2021 Annual Report

“This is my favorite story: There was a guy who had been in a motorcycle accident, had extensive brain trauma, and his insurance had maxed out. His mother had been told that her choices were to let her son die in hospice or move him into very expensive rehabilitation, which she couldn’t possibly afford. Thankfully a nurse had just seen a story on Southern Smoke, and when she realized he was in the industry, she suggested that they contact us. We were able to get them a check for $100,000 the next day. He still has brain trauma, but he was able to come to the 2019 festival, and that mother still has her son. What we do is life-changing and lifesaving.”

$10,062,252

SERVED POPULATIONS

SERVED POPULATIONS

$3,604,331

FUNDS DISTRIBUTED SINCE 2015

Source: Southern Smoke Foundation 2021 Annual Report

Shepherd realized that Southern Smoke needed to be there at all times—24/7—for aid. The Southern Smoke Foundation began an emergency relief fund to aid workers with the most immediate, pressing, and life-threatening needs. Funded by donations large and small and by the annual Southern Smoke Festival, the foundation has to date distributed more than $10 million in funds. The only qualifications are that the applicant has worked in hospitality for six months and works 30 hours a week. What started as an entirely volunteer operation has grown from two employees to now 12 employees, still aided by a large contingent of volunteers, who sift through 35,000 applications a year. Applications are ranked by need: what’s life or death, whatʼs keeping you off the street, what is a phone bill or car payment, medicine for your children, food for your family. Caseworkers help verify and sort out the need, and Southern Smoke makes direct grants large and small.

The foundation has grown organically in outreach, funding, and services. Outreach is currently in all 50 states. Mental health services are provided in several states—Texas, Illinois, California, Louisiana, Pennsylvania. The goal is to provide mental health services in all 50 states by 2028.

In 2021 in partnership with Mental Health America and the University of Houston, SSF began to provide mental health care for food and beverage employees and their children through the state of Texas. The Restaurant Workers' Community Foundation named SSF as its largest beneficiary of funds totaling over $3 million. Also in 2021, David Chang donated his $1 million win on Who Wants to Be a Millionaire to SSF—the first charity in the show’s history to win the entire prize.

In 2022 after a two-year hiatus due to the pandemic, the Southern Smoke Festival returned to Houston bigger and better than ever. The three-day event was highly anticipated and featured culinary royalty, more than 60 chefs, including top chef favorites, James Beard Award winners, and local heroes like Texas pitmaster Aaron Franklin, a cook-off with Chris Shepherd and Top Chef’s Gail Simmons, a very limited gala seafood extravaganza, and a finale East End Throwdown with live music, all-star chefs and pitmasters, and memorable food, wine, and spirits. The 2022 festival raised $1.62 million and was attended by a record crowd of 3,882 over three days.

ETHNICITY

Latinx • 41.3%

Latinx • 41.3%

White • 32.8% Black • 16.3% Other • 6.0%

White • 32.8% Black • 16.3% Other • 6.0%

Native American • 1.8%

Native American • 1.8%

$3,604,331

FUNDS DISTRIBUTED IN

GENDER

GENDER

Male 54.2% Female 44.6% Non-Binary 1.2%

Male 54.2% Female 44.6% Non-Binary 1.2%

NUMBER OF CHILDREN AT HOME

$160,967 distributed Emergency 112 CASES $112,417 to victims Hurricane 89 CASES $48,550 Texas Winter Storm 23 CASES = $5,000

FUNDS DISTRIBUTED IN $160,967 distributed Emergency 112 CASES $112,417 to victims Hurricane 89 CASES $48,550 Texas Winter Storm 23 CASES = $5,000

Source: Southern Smoke Foundation 2021 Annual Report

Source: Southern Smoke Foundation 2021 Annual Report

Source:

Source: Southern Smoke Foundation 2021 Annual Report

Smoke

SEBO

So what’s next for the eternally curious and outgoing Shepherd? He hopes to continue to grow the foundation and the festival. He has returned to his love of and curiosity about wine through his new wine column on CultureMap Houston, and he has found a new passion in public speaking. Shepherd recently was a keynote speaker at the annual meeting of the State Bar of Texas, where he challenged attendees to do pro-bono work for those in the hospitality industry—to help negotiate leases and partnership agreements, deal with immigration issues and tax problems, help in times of need with evictions, and handle other legal issues. His goal is to expand both legal counsel and mental health services through spreading the word about the foundation, the need, and the people it serves.

“I’m going to keep going with what needs to be done,” Shepherd says. “We have barely touched the tip of the iceberg. I won’t be successful until Southern Smoke isn’t needed, and honestly I don’t see that happening anytime soon. Challenge yourself to break your own rules, build team structure, get people to buy into something, believe in what the process is. Underbelly was never just a restaurant—it’s a way of life. Explore your surroundings. Learn about people, where they’re from. Share stories when you sit at the same table. Learn from anyone and everyone—any race, religion, ethnicity, age, or gender. Understand that everyone has a story to tell. We are always learning. It’s time for me to challenge myself and start a new chapter.”

Although his announcement in July may have rocked the Houston culinary world as he stepped away from the empire he built, Chris Shepherd was just being true to his authentic self. Heeding the call of curiosity and feeding his appetite for learning something new, he stepped into his bigger and better purpose— helping his fellow workers, one ask at a time.

COURTESY OF SOUTHERN SMOKE FOUNDATION/CATCHLIGHT PHOTOGRAPHY, UBISEP DESIGN/DAVID SEBO

Southern Smoke founder Chris Shepherd shows off the Southern Smoke smoker, made by Pittmaker. The foundation auctions one off each year.

A Little Bit of EVERY

Innovative

food and beverage startups and industry professionals talk funding, pitching, and growth environments.

Carol Brzozowski

THING

ZIKI uses a state-of-the-art modular kitchen. Each kitchen is 32 feet by 8 feet, a total of 256 square feet. Orders can be placed using an on-site, touchscreen kiosk, which is attached to every modular kitchen, or via an order/delivery platform such as Toast, Uber Eats, or Grubhub.

COURTESY OF ZIKI

— SKU Managing Director Emily Kealey

Food startups are growing in Texas as people are embracing entrepreneurship and following their passions more than ever, says CS Freeland, co-founder and executive director of the Austin Venture Association, which organizes venture capitalist (VC), accelerators, university incubators, corporates, growth equity, studios, angels, family offices, and other accredited investors.

Food is a big part of Texas culture, and Austin is a mecca for startups looking to make their stake. Austin has “a highly entrepreneurial ecosystem, meaning we have a pretty good concentration of consumer package goods [CPG] in the region,” she says.

There is a great deal of food industry innovation in the Austin area that encompasses “a little bit of everything”— grocery stores like H-E-B and Whole Foods Market with their own culture and affinity within the community. Also in the mix are ghost kitchens that help restaurants launch the market. “We’re leading in food trucks. Our farmers’ markets are great testing points for founders to get reach and consumer feedback. Even Texas gas stations are interesting, like 7 Ventures for 7-Eleven,” she says.

Of the prevalence of small food company startups, Charles Haseman, professor of practice in marketing and director of the Center for Retail Innovation and Strategic Excellence at The University of Texas at Dallas, says, “Coming off the impact of lockdowns, pandemic peaks, and the economy, we are seeing activity for startups.”

By definition, a food business includes the handling of food intended for sale or the sale of food. The most common food business outlets include:

• Fixed: physical building or location, such as cafes and restaurants.

• Mobile: food trailers, vans, and ice cream trucks.

• Home occupation: low-risk cooking activity in a residential kitchen.

• Temporary: food stalls, such as markets or events.

• Food transportation: transporting food, such as ingredients, to clients.

• Commercial kitchen: partially utilizing (such as a pre-arrangement with main leasee) a fixed building for a medium-risk cooking activity upgrading to operate from a commercial kitchen.

According to Haseman, data shows that despite there being thousands of food and beverage startups, there exists only a 10 percent success rate.

Food delivery has spiked since the pandemic-related lockdowns.

“It will be interesting how the economy impacts the growth,” he says. “Will we stay at the peaks or see a dropoff back to pre-COVID March 2020 levels?”

IT’S NOT ENOUGH TO HAVE RISING SALES IF YOUR MARGINS ARE TOO LOW TO MAKE A PROFIT.

FINDING FUNDING

Funding for the food and beverage industry was on the rise in 2020. It had reached a new high with food and beverage companies raising $5.9 billion in equity funding in 2020, up 82 percent from $3.2 billion in 2019, reports CB Insights, which provides market intelligence on private companies and investor activities.

The report, released in February 2021, said the acceleration was viewed as a sign that the industry was working to diversify supply chains after the onset of the COVID-19 pandemic exposed weak spots in the food system.

Financing across the industry has focused on “sustainable food practices like alternative protein development and food waste prevention, reflecting increased consumer demand for sustainable and eco-conscious products,” the research firm indicates.

The majority of the most active investors in food and beverage over the past five years have been VC funds. Top investors by unique deal include AF Ventures, SOSV, CAVU Venture Partners, S2G Ventures, and Unovis Asset Management. Investors are backing companies across multiple segments working to create a more sustainable food system, led in deal volume by the alternative and sustainable proteins category (31 percent), packaged foods (27 percent), non-alcoholic beverages (21 percent), other (17 percent), and meal kits and delivery (4 percent).

ZIKI, an Austin-based fast casual Greek and Mexican fusion restaurant, recently closed its seed funding round, raising $6.7 million, with $5 million coming from Gigafund, known for putting more than $1 billion into SpaceX.

Since Gigafund is one of Musk’s core backers, it indicates that “Elon Musk sets the bar, and they won’t go near a company if they do not believe it will become one of the world’s most significant,” says Nicholas Nanakos, ZIKI founder and CEO.

Nanakos has been immersed in the restaurant industry since he was five, working with his grandfather, a Greek immigrant seeking to fulfill his dream to become a restaurant entrepreneur. Nanakos’ immediate and extended family operated several successful Greek restaurants called Tzatsiki throughout the New York region, and he observed “the crazy high cost of time and capital with traditional brick and mortar.”

He knew he could do better.

He focused on restaurant unit economics and launched ZIKI with a new expansion model in mind: manufacturing modular restaurants from the company’s factory and operating the ZIKI brand out of them.

ZIKI touches a range of industries, Nanakos says, including food, brand, real estate, agriculture, manufacturing, supply chain, software, logistics, and technology as part of what he describes as a “large, globalscale, multi-decade conquest.” That includes re-thinking restaurants from the ground up, things like modularity, kitchen layout, windows, how the restaurant feels inside and outside, chef and ordering flow, how people order, and how they pick up.

Nanakos’ team spent “an enormous amount of time on building scalable systems, making key hires, wise investments, and as a result we have seen explosive growth across every aspect of the business.”

Nicholas Nanakos, founder & CEO, ZIKI

COURTESY OF ZIKI

To that point, his team has been a driving factor in ZIKI’s success to date.

“I have a remarkable team around me that serves as enormous inspiration, bringing the vision closer every day,” he says. “ZIKI is on path to become the fastest-growing restaurant company on the planet, and the most significant company to ever exist in food.”

While ZIKI is currently “hyper-focused” on the Austin market, Nanakos says, plans call for expansion into new markets.

Another Texas entrepreneur, Adam Lloyd Cohen, is founder and CEO of Now Cuisine, the first highly scalable restaurant that is an AI-enabled robotic “restaurant-in-abox” kiosk. It exists as a decentralized sales, fulfillment, and marketing platform for restaurant brands, allowing them to scale “incredibly fast, become ubiquitous, and operate 24/7,” he says.

Now Cuisine kiosks are stocked with fresh ingredients to rapidly make-to-order healthy, delicious, fully customized hot and cold meals such as burrito bowls, Mediterranean bowls, grain bowls, and breakfast bowls, among other options. The kiosks can be placed in an office or multifamily building, hotel, hospital, or college campus to provide people with a dining option “that’s faster and more affordable than delivery, and far more convenient than driving to a restaurant,” Cohen says.

ZIKI employees, from left, Rodney Keller, Shade Youseef, Mo Alkhdour, Dom Primerano, and Anthony D’Apolito use PREP ATX, the largest commissary kitchen in Texas, to receive ingredients and prep them before the ingredients are transported to the modular kitchens to be cooked for customers.

COURTESY OF ZIKI

The plan for Now Cuisine is to initially roll out commercial kiosks in Dallas/Fort Worth and perhaps Austin and grow first within Texas before expanding to other states.

Now Cuisine has been mostly self-funded to date, although the company has brought in some angel funding. “We’ve focused less on fundraising than on preparing the company for fundraising, including putting together the right team, demonstrating the technology in public, and establishing traction with customers through partnership agreements and purchase orders, such as with Freebirds World Burrito, and letters of interest or intent [LOIs],” Cohen says.

“We’re in the process of building relationships with investors that may be great fits, and then will begin raising our first major funding round.”

He points out there are inherent hurdles.

“There are quite a few investors, which may be ‛allergic’ to companies like ourselves that are hardware-enabled,” Cohen says. “Some of these only fund startups whose offering is purely software.”

Cohen believes his company’s approach overcomes most of those concerns in that Now Cuisine uses a robotics-asa-service (RaaS) model, with recurring revenue and high projected margins comparable to software companies.

“Our machines are designed for cost-effective production in high volume,” he adds. “We won’t be producing the machines ourselves—rather, we design them and develop the associated software.”

Now Cuisine will use lease financing rather than pure equity to fund most capital expenditures. “Unlike most software companies, we have IP that differentiates us and creates a competitive barrier to entry,” Cohen says.

Additionally, “having a physical presence among potential customers, such as people working in an office building, makes for a very visible and ’sticky’ offering, compared to a business whose only presence to the consumer is virtual/ online and merely one of thousands of others,” he adds.

Successes to date have included establishing a strategic partnership/purchase order for a pilot with Freebirds, the number-two burrito chain in Texas, Cohen says. Additionally, Now Cuisine has received signed LOIs for piloting kiosks with a major real estate-related company with nearly 9,000 locations and LOIs for pilots with a major Mediterranean chain, among others.

Now Cuisine has also brought in Charles Studor, “an amazing CTO and the pioneer of robotic foodservice kiosks,” Cohen says. Studor had been founder and chief technology

officer of Briggo Inc., which introduced the first fully autonomous, remote order and pay robotic barista in 2011, acquired by Coca-Cola/Costa Coffee.

Other measures include partnering with highly experienced hardware engineering/manufacturing and software firms that built foodservice robotics and creating a seven-member advisory board with expertise ranging from restaurants to business development, and from robotics to IP, Cohen says.

Now Cuisine has run a successful public beta with a firstgeneration robotic kiosk. “It proved our technology, excellent food quality, and enthusiastic consumer response,” Cohen says.

WHAT MATTERS MOST

“Any investor always looks at the team’s capability, and if they show progress,” Freeland says about a food and beverage startup. “Obviously, the product has to be novel and either ahead of the taste buds for the mass population or a new take on branding. Healthy options are what the more educated consumer wants and needs.”

As for venture capital firms, “one of the main things they look at is the founder,” says Emily Kealey, managing director for SKU, an Austin-based consumer products accelerator with SKU accelerators in Dallas, Atlanta, New York, and Minneapolis as well. “Do they have what it takes to grow their business? Do they understand their strengths and weaknesses?

“They also want to see an innovative product in a hot category. Is it just a me-too sparkling water or does it have flavors and branding that make it stand out?”

The founder and brand’s story matters as well.

“If there’s a story there in a hot category, that’s when it gets exciting,” Kealey says, “but story can only get you so far.” A VC firm wants to see category traction and velocity and revenue growth with healthy margins, she adds. “It’s not enough to have rising sales if your margins are too low to make a profit.”

The management team, business concept and plan, market opportunity, and risk judgement with heavy review of customer and product excitement and innovation are the factors a venture capital firm seeks in funding a food-andbeverage company startup, Haseman says. The basic funding process starts with an opportunity introduction, followed by an initial screening, due diligence, and funding negotiations.

“There’s an extreme focus on customer experience and innovation,” Haseman says.

THE BEST INVESTORS ACT ON INTUITION AND CONVICTION AND TRUST THE FOUNDER TO GET THE JOB DONE REGARDLESS OF WHAT THE PATH OF GETTING THERE LOOKS LIKE. — Nicholas Nanakos

THE PITCH

For a startup looking to pitch to a VC firm, Cohen recommends that entrepreneurs:

• Do the homework: understand customer needs, unit economics, manufacturing if applicable, and test the product.

• Assemble a team with the right background.

“A really great founder story, especially in CPG startups, always allows a potential investor to make a connection, understand the need, and/or really feel the product in an impactful way,” Freeland adds.

“As with any startup, you want to highlight why you’re different, why things are changing, know your numbers, and have solid projections,” she says. “I might even recommend watching Shark Tank as those are more consumer-type companies that get tons of questions and in general, perspective of what that experience would be like.”

From an execution perspective, a startup pitch deck must be focused, intriguing, and credible, Haseman says. “Tell a story. A pitch should open with something relatable about why you’re passionate about the opportunity or why others should be.”

Good investors appreciate authenticity, Nanakos says. “I never changed my style to appease a specific investor. For example, if I knew a specific investor was particularly versed or focused on SaaS, I did not try to pitch myself or the company as SaaS.

“I remained raw, authentic, true to my vision, with my own opinions. Be honest, bold, and confident. Confidence comes from knowing your business better than anyone and outworking your competition while they sleep.”

One best practice is to “know your numbers inside and out,” Kealey says. “What’s your velocity? What are your margins? What is your COGS [cost of goods sold]? What are your terms with your copacker if you have one?

“Get your deck and visuals branded and the content tight,” she adds. “What you say verbally should complement visually what’s on your deck. The title of each slide if taken out and stitched together should give an outline like a table of contents for your story and your brand.”

Kealey recommends finding a friend or family member with whom to practice a pitch. “Get as many people to grill you on as many things as they can so you can be prepared.

“Also, be prepared to be told no a lot and know that’s okay,” Kealey says. “This goes back to looking at the founder first. Do they have tenacity? Being told no is hard, but you have to keep going.”

Rejection had been his greatest challenge in starting ZIKI, Nanakos says. Entrepreneurs should understand that the fundraising process is an art of storytelling to be mastered through repetition.

Each “no” he received—and there were more than 100— brought him closer to a “yes.”

“Each conversation forced me to sharpen my narrative and see things through an enhanced lens,” he says.

“Another key point is that the founder-investor relationship is a two-way street. Oftentimes, founders see it through the scope of ‘I need their investment.’ If you’re that good, remember that while this may be true, they need your company as well. Find alignment of values and vision within the investors you meet.”

In Nanakos’ experience, the best investors act on intuition and conviction and trust the founder to get the job done regardless of what the path of getting there looks like.

A RESOURCE-RICH ENVIRONMENT

Business incubators and accelerators provide startups with tools, expertise, and targeted financial assistance to launch and grow. There are 1,400 incubators and 500 accelerators in the US according to the International Business Innovation Association.

A business accelerator provides startups with resources and support to help launch their growth, such as access to expert mentors, funding and investors, peer mentorship, workspaces, and marketing technology. Significant factors of a business accelerator include fixed duration, growthbased approach, seminar-based education, an intense mentorship model, and a competitive and cyclical selection process. An accelerator uses set cohorts of businesses and may help with assembling a board of directors. The company provides an accelerator’s investors with equity.

A business incubator helps new startups refine and build from the idea stage, assisting with management training, office space, and venture capital funding. It is differentiated from an accelerator in that it has an open-ended duration, is fee-based, does not take equity, educates when necessary, and has a minimal but tactical mentorship model.

The incubator is based on a non-competitive selection process. It is done at the earliest stages of business development. Incubators often provide access to the resources needed to launch a business, Haseman says. “This may include office space and equipment, utilities (including internet service) and discounted or free professional services, such as accounting and legal help.”

They are usually nonprofit organizations, often associated with universities, such as the University of Texas at Dallas and business schools that extend invitations to students and alumni to take advantage of the program, he adds.

Sometimes a food startup with enough traction and promise can—after some level of bootstrapping—go through incubators or accelerators, such as SKU, which started in Austin, Freeland says.

“There, they receive education and get some mentorship about a variety of aspects of the business tailored to their situation,” she says. “Investors—or at least potential investors—and even lawyers can guide the founder through the process. I know some corporations have a venture or accelerator program such as 7-Eleven and Whole Foods, respectively, and that can really help with distribution.”

According to the Grocery Manufacturers Association, one in 10 jobs is in CPG.

“These small emerging brands in Texas have exploded over the past 10 years—think Siete, a SKU alum, to Yeti,” Kealey says. “Through groups like SKU, Naturally Austin, and DFW CPG, there are a number of resources to founders to help them grow their brands.”

Eighty-five percent of companies that have gone through SKU— many of them based in Austin—are still in business and generate more than $5 billion in annual sales,” Kealey says.

Other statistics show that the CPG industry provides 1.7 million jobs, of which 145,000 is direct employment; $87.7 billion in total income, of which $7.9 billion is direct labor income; and $159.7 billion GDP contribution, of which $19.3 billion is direct value added, according to the Consumer Brands Association.

“We’re seeing a wide range of categories, including plantbased chicken, functional beverages, and beauty products,” Kealey says. “Nearly each has comprehensive channel strategies, including wholesale club stores like Costco, supermarket chains, e-commerce/Amazon to food service.”

As an accelerator, the three phases of the SKU experience start with the application and onboarding process.

“What can feel similar to a VC firm experience, when you apply, you might be told to come back when your margins or revenue are at X,” Kealey says. “We’ve seen many times a company apply one year, not make it, and turn around the next year and get selected.

“Once selected, you are onboarded with the SKU crew and meet your group of hand-picked mentors that are there to meet you and your company’s unique needs for the duration of the track and beyond,” she adds. “Our mentors are truly the secret sauce to our founders’ success.”

The SKU process also entails a 12-week course, which focuses on everything from mission and vision to channel strategy to learning the ins and outs of fundraising. It culminates in a virtual showcase day where each brand gets to present its company to the “who’s who” in the CPG industry. Beyond that, SKU offers ongoing support from a mentor team and SKU crew as well as Continuing Founder Education, which is educational programming.

“We want to ensure our alumni are taken care of years after their track has ended,” Kealey says.

In mitigating his challenges, Nanakos says, money was not his primary focus—whether he needed it or not. “My main priorities were momentum and execution. The results will speak for themselves. Your progress becomes undeniable, and fundraising becomes easier. While I was excited to have conversations with potential investors, I had zero expectations.

“I understood the time would come when we would get lucky,” he says, “but I also understand that luck is just when preparation meets opportunity.”

Adam Lloyd Cohen shows off a Now Cuisine beta takeout station at Venture X Dallas by the Galleria.

Gay Gaddis walks through her hay barn at Double Heart Ranch near Burnet, where she and her husband, Lee Gaddis, harvest about 400 acres of hay in a good year with ample rain.

IF YOU DON’T TAKE CARE OF YOUR BUSINESS, NO ONE WILL.

— Texas Farm Bureau President Russell Boening

A YEAR Like This

Drought, inflation, and supply chains throw wrenches in Texas agriculture.

Rebecca French Smith

KENNY BRAUN

Water weighed heavy on the minds of Texas farmers and ranchers last summer as the heat bubble that had stationed itself over most of the state diverted rain elsewhere. Drought loomed large, but water worries exist in most years in the Lone Star State.

In mid-October, the US Drought Monitor indicated more than 93 percent of Texas remained at some stage of drought conditions. By contrast, a year ago, that number sat around 53 percent. It’s a moving target from day to day, month to month, but available water is always a topic of concern for Texas State Senator Charles Perry, the chair of the Senate Water, Agriculture, and Rural Affairs Committee.

“Droughts are inevitable,” Perry says. “We get through one, and we may not have another one for 10 years. We may have one in five years. Weather patterns continue to change, and they’re going to change. It’s the natural evolution. So, Texas relies on the water plan to actually direct what happens when those drought events come.”

The state water plan is updated every five years, most recently last spring. It is the overarching umbrella for all of Texas, both rural and urban, but what happens in urban areas can affect the business of agriculture.

“Texas has a water issue,” Perry says. “It’s probably the least urgent in the minds of my members because when taps turn

TEXAS HAS A WATER ISSUE. IT’S PROBABLY THE LEAST URGENT IN THE MINDS OF MY MEMBERS BECAUSE WHEN TAPS TURN ON THEN WATER’S NOT A PROBLEM.

— Texas State Senator Charles Perry

on then water’s not a problem. But the truth of the matter is the water gets the least attention, and it’s probably the biggest issue Texas faces long term.”

In a year like 2022 with widespread drought, Perry says, traction can be made on water issues because water is top of mind for many. For example, of the 7,000 municipal systems in Texas, roughly 57 percent have gone beyond their useful lifespan. Old metal pipes need to be replaced. As a result, it is estimated about 143 billion gallons a year goes back into the ground via water leakage from these expired systems, according to Perry. The problem is funding to replace the pipes. He estimates it would take $190 billion to replace all the systems that are 40 years old or older.

The benefit of working municipal water systems for agriculture is that 143 billion gallons of water would remain in aquifers and be available for food and fiber production, he says. He is working on a fund that would help alleviate costs for smaller municipalities to fix their leaky pipes, which may get consideration in a year like this.

In the 1990s, Gay Gaddis spent six years as a board member at the Lower Colorado River Association (LRCA) and chaired its water committee. She saw then what Perry is seeing today and echoes his sentiments.

“Water’s the big thing,” she says. “It’s something we continually beat the drum on because it’s that critical.”

On Gaddis’ Double Heart Ranch near Burnet, the hay crop was dismal this year after a bumper crop last year. Gaddis and her husband, Lee Gaddis, harvest about 400 acres of hay in a good year, but without rain, grass doesn’t grow.

This is the sort of thing that trickles down to livestock ranchers, she says, without water and hay, it’s hard to raise cattle. (In addition to growing hay, she also raises Texas Longhorns.) Texas cattle ranchers sold off more of their herds earlier than normal this year, too, due to drought, input costs, and not being able to feed their cattle, the effects of which will be felt for the next two to three years in the markets as sell offrelated shortages manifest.

STATISTICS AND STAKEHOLDERS

On a Tuesday afternoon in mid-June, Russell Boening’s farm got an inch and a quarter of rain. It was the biggest rain he had seen since October 2021. It doubled the total rainfall since November 1, 2021, on his farm. Boening raises traditional Texas crops—corn, grain sorghum, cotton, and on occasion, watermelons, though this year, due to labor shortages, he didn’t plant watermelon—and dairy and beef cattle near Poth in Wilson County southeast of San Antonio.

Boening’s family farm is one of the 247,000 farms that dot the Texas landscape. Texas has more farms than any other state, according to the US Department of Agriculture (USDA), and the Texas Department of Agriculture sets the

COURTESY OF TEXAS FARM BUREAU

total economic impact at more than $100 billion. The state is ranked first in the US in the number of cattle and calves and a top producer of cotton, hay, sheep, goats, mohair, and horses.

Agriculture also employs one out of every seven working Texans. Yet, despite the large numbers of agricultural workers, farmers and ranchers themselves make up less than 2 percent of the population.

As the sitting president at Texas Farm Bureau, Boening is well versed with these statistics. He has been working for the ag industry since joining the organization’s ranks in the late ’80s as Wilson County Farm Bureau president. He has also served on the state Young Farmers and Ranchers Committee and as a state director before running for president of the state farm organization in 2014.

Both his grandfather and father served at the county Farm Bureau level, and he recalls his grandfather saying, “If you don’t take care of your business, no one will,” and that he needed to be on the county board. “How do you tell your grandfather no?”

As president, challenges aren’t few, he says. Making sure they do what they’re supposed to be doing for Texas agriculture is his biggest charge, with the magnitude of diversity in agriculture stakeholders and balancing the interests of those producers.

“The general public can get cynical about our political process and things that are going on,” he says. “We see it

right now. The country is more … divided, or you can use the word polarized. It’s more so than it was 15, 20, 30 years ago, but there are people in Austin, there are people in DC, there are people in other state capitals that are trying to do really what they feel is right for their communities, for their country. You may not always agree with their opinions on things. That doesn’t mean that they’re bad folks or that they’re not trying to do the right thing. They just maybe look at it differently.”

Balancing those differing opinions benefits Texas agriculture, he says. With voices from Dallas to Brownsville, Beaumont to El Paso, 13 state board members from across the state, “as the leader of the board, I feel like it’s my job to make all that flow together,” he says. “Somehow you have got to come together. … When we get done and we take that vote—the vote may be 10 to 3, it might be unanimous, but it might not be—as leaders, we have to go out and be united. You have to support that decision you made in conjunction with other leaders.

“I was told early on, be yourself, be real, be honest,” Boening adds. “Then people will disagree with you at times, but if they know that you’re always being honest and real with them, they may not agree with you all the time, but they’ll respect you.”

BRIGHT SPOTS AND CHALLENGES

Over the last three years, and counting some would argue, COVID-19 has had a hand in disrupting the flow of agricultural products to market. In production agriculture, however, cows

Russell Boening raises beef cattle along with other traditional Texas crops on his family farm near Poth.

got milked and fed. Crops were planted and harvested. With precautions in place, life went on in rural Texas for the most part. Supply chains and other pieces of the equation in getting products to market suffered.

“You don’t want folks to go hungry, but when people went to the store and couldn’t find that certain kind of beef that they wanted, maybe that was a little bit of an eye-opening experience. Because there’s still plenty of food there,” Boening says, “maybe it’s just ground meat, maybe it’s just some eggs and bread, but you weren’t going to go home with an empty grocery cart.

“The bright spot for me is that it just seemed like there’s a better appreciation for agriculture,” Boening adds. “We have a saying around here, ‘It’s not about the Boenings.’ It’s about our industry. It’s about what’s important to this country. Food security is important. We understand that a strong military is important for our security, for national security. Food security is national security as well.”

I WAS TOLD EARLY ON, BE YOURSELF, BE REAL, BE HONEST.

—Texas Farm Bureau President Russell Boening

Perry agrees food security is national security and is concerned about agricultural land loss. “We continually have land pulled out of production,” Perry says. “But when you start seeing that in the food industry, specifically, I’m concerned that we’re going to wake up with such a reduction in production land and agriculture production that we put ourselves at a very insecure place in the world as far as depending on our enemies for our food and our fiber.

“As we go through these conversations about what does ag look like 25 years from now, because of the cost of getting into ag, because of the generational farmer, the third and fourth generation are saying, ‘That life’s not for me,’ ” Perry says. And as production land decreases, “our food and our opportunities to produce what we need to live on is being transferred to some foreign source that we can’t depend on. So I think that’s a broader conversation that it’s time to start having that as a real conversation about what does 20 years look like on our food supply.”

Those concerns are reflected in the data. According to the 2017 Ag Census, Texas had more than 127,000,000 acres in agricultural production; the 2021 USDA State Agricultural Survey cited 1,000,000 less acres in the state being used to produce food, fiber, and fuel.

But on the farm, “challenges really never change a whole lot,” Boening says. Inflation has fallen and risen many times. The supply chain issue is particularly prickly right now. “It’s not only the cost of things, but it’s the availability.”

—Texas Farm Bureau President Russell Boening

WE’VE SEEN DROUGHTS, AND WE’VE SEEN INFLATION. YOU DON’T LIKE TO SEE THEM AT THE SAME TIME, WHICH SEEMS LIKE WE’RE GETTING A DOUBLE DOSE.

It’s been 40 years since Boening returned to farm with his family, which includes his dad, his brother, his brother's wife, and his wife, Margie. He has learned to pivot. He was fresh out of college when his uncle sold his interest in the family farm to his father and provided the opportunity for him to come home. This was in the 1980s, a decidedly difficult decade for farmers and ranchers. Interest rates were through the roof, running 15-18 percent. Sounds familiar.

Fertilizer costs begged for caution as this year’s planting season began. Boening says they switched and planted grain sorghum in some fields instead of corn because it is more drought-tolerant and needs less fertilizer. The harvest isn’t as large. But the gamble is: Do you plant that or risk higher costs in fertilizer and irrigation than harvesting corn would net?

Farmers and ranchers are resilient, though, he says, and notes they’ve been here before. “We’ve seen droughts, and we’ve seen inflation. You don’t like to see them at the same time, which seems like we’re getting a double dose. But is it going to hurt bottom line? Big time. Yeah. It’s going to hurt the bottom line.”

Crop insurance will be crucial this year to keep those affected in business for another season, he says. “It’s important to production agriculture, and it’s important to consumers.”

FOOD BANKS, FARMERS, AND FOOD-INSECURE FAMILIES

Feeding Texas, the largest hunger-relief organization in Texas, works with 21 food banks across 254 counties to feed more than five million Texans each year. One in eight Texans—or 13 percent—are food-insecure.

Some of the resources used to feed people come from a regional initiative called Collaborative for Fresh Produce that partners with Texas growers to capture surplus produce and distribute it through the food bank network.

“It’s kind of that win, win, win,” says Feeding Texas CEO Celia Cole. “It helps growers who need an outlet for that surplus.

“That’s a great example of a public-private partnership.”

We sat down with Cole to talk about hunger relief, ongoing need, and strategic partnerships. Scan the QR code to read the full Texas Talk article with Feeding Texas CEO Celia Cole online.

The sun sets over the Cabernet vines at Fall Creek Vineyards in the Texas Hill Country.

IN PLACE Rooted

Texas winemakers are redefining the taste of Texas.

Donna Bragg

COURTESY OF FALL CREEK VINEYARDS

COURTESY OF TORR NA LOCHS VINEYARD AND WINERY

These Estate Malbec vines were planted in 2014 at Torr Na Lochs Vineyard and Winery. This image was taken the day the grapes were harvested.

No discussion about the business of feeding the Lone Star State would be complete without consideration of how we quench our Texas-sized thirsts.

It’s doggone hot here. We love our iced tea, our Waco-born Dr Pepper, refreshing margaritas, and tall, frosty beers. (You may need to throw a nod to Austin-born Tito’s vodka, too.) But one drink category currently growing faster than a tumbleweed in a hurricane is one not usually associated with Texas. Wine. Good wine. World-class, award-winning wine, in fact. Sure, many understand and enjoy Cabs from California, Pinots from Oregon, or Champagnes from France. But have you tried Tempranillos or Tannats from Texas? Viogniers? Mourvedres? If your answer is no, Texas winemakers want you to understand, you are missing out on something special. Today’s Texas wines are not the wines you may have tried years ago

A LITTLE BACKGROUND

Fifteen native grape species grow wild in Texas. That’s more than anywhere in the world, but it wasn’t until Spanish missionaries planted grape vines from Mexico near what is now El Paso that Texas had its first vineyard. That was around 1650, 100 years before grape vines were planted in California. Fast-forward to the repeal of Prohibition in 1933, and it still took decades for the wine industry to gain any sizeable roots in the Lone Star State. Dry counties remained a challenge for legitimate alcohol businesses. Nonetheless, in 1971, Dr. Bobby

WE ’ D ALL LOVE TO USE NOTHING BUT 100 PERCENT TEXAS WINES. BUT RIGHT NOW, WE JUST DON ’ T HAVE THE ABILITY TO DO IT BECAUSE WE DON ’ T HAVE ENOUGH GRAPES BEING GROWN.

—Glena Yates

Visitors enjoy wine and a Texas sunset on the patio at Torr Na Lochs Vineyards and Winery. COURTESY OF TORR NA

Smith planted a vineyard, and the state’s first winery since Prohibition was born, Llano Estacado outside Lubbock.

Smith and a small group of other early wine enthusiasts were instrumental in influencing Texas legislators to pass the Texas Farm Winery Act of 1977. It allowed grape growers to produce wine in a dry county as long as they only distributed it in an area where alcohol sales were legal.

Attorney Ed Auler and his wife Susan were among that early group. Called by some the “first family of Texas wine,” they are the owners of Texas winery permit number three, having founded their Fall Creek Vineyard in 1975 following a fortuitous trip to France. They took the trip to learn whether French breeds of cattle might be more profitable on the family’s fourth-generation ranch, but Susan suggested a driving tour of the country’s wine regions while they were there.

“We just became infatuated with the wines and foods and culture of France,” Susan says. “But we noticed, as we were driving from Rhone across the South of France through Provence to Bordeaux that there were geographical similarities. We said, ‘It looks a lot like the Hill Country. I wonder if anybody’s thought about growing grapes in Texas?’ ”

Visitors share a toast at Fall Creek Vineyards at Driftwood in the winery�s indoor tasting porch. COURTESY

“We were the first in the Hill Country,” Susan says. “Llano Estacado was on the high plains. We had a lot of collaboration from the very beginning because it’s lonely out there when there’s only two or three of you.”

A GROWING INDUSTRY

It wasn’t until the 1980s that Texas wines began to win positive national recognition. Wine & Spirits Buying Guide listed Fall Creek’s 1982 Chenin Blanc atop its list of all Chenin Blancs in America. Llano Estacado’s 1984 Chardonnay won a double gold medal at the San Francisco Fair and Exposition’s National Wine Competition, which was an enormous feat for any winery and an unprecedented win for Texas’ wine reputation. Then, the following year at the Atlanta International Wine Festival, Messina Hof Winery’s 1986 Chenin Blanc received a gold medal, one of only 45 awarded to wineries nationwide.

Skeptics began to take notice. George Fuermann’s popular Wine Talk column, which appeared in the Houston Post from 1984 to 1995 told the story of Karen MacNeil, a New York wine consultant who was tapped to judge a Texas wine competition. When she was asked her opinion of Texas wines, she responded, “I was prepared for sagebrush juice but was bowled over by the quality of Texas wines.”

GETTING TEXANS INTERESTED

Getting buy-in from inside the state wasn’t easy though. From 1982, the first year Texas wine data exists, through 1995, Texas wine represented less than two percent of the wine consumed in the state. Regardless, the total volume of wine being produced increased exponentially during that time, from 50,000 gallons in 1982 to 750,000 gallons in 1986. Additionally, Texas wineries grew from one in 1975 to 20 by 1986. By 1993, Texas wine sales had doubled, and the number of wineries continued to expand.

Then, in 2001, a new law went into effect that helped Texas winemakers dramatically improve their profits. Susan Combs, then-commissioner of the Texas Department of Agriculture, was instrumental in its passage. The law allowed wineries in dry counties to sell wine in their tasting rooms and to ship wine to or from dry or wet counties. Naturally, that led to more tasting rooms, more wine clubs, more wine shipments, many more Texans taking a taste.

Blake DeBerry, president of Texas Wine Growers and co-owner of Torr Na Lochs Vineyard and Winery in Burnet, says one of the industry’s early mistakes affecting Texas wine’s reputation and sales was that “we were trying to be California.”

DeBerry, his co-owner and wife Karen, and other winemakers like Chris Brundrett of William Chris Vineyards agree: Today’s winemakers have learned from mistakes of the past.

“I think the wine 10, 15, 20 years ago did put a bad taste in a lot of people’s mouths, and what’s sad is most of it wasn’t even from Texas; it was just bottled in Texas,” Brundrett says.

ENTERTAINING TOURISTS

The Texas Department of Agriculture breaks out the state’s grape growing regions into five key areas, all dry and sunny, growing varietals often compared to the wines of Portugal.

Within those, the federal government has designated eight American Viticultural Areas (AVA). AVAs are regions with specific, distinct geographical or climactic features that affect how grapes are grown. Almost 80 percent of the state’s grapes (more than 75 different grape varieties) are grown in the 3,000-plusacre High Plains AVA surrounding Lubbock. That’s thanks to the area’s higher elevation, mineral rich soil, and cooler evenings.

By contrast, the much larger Hill Country AVA (third largest in the country, forming a rough triangle between Austin, Fredericksburg, and San Antonio) accounts for only 18 percent of the state’s grape production, but it provides almost all the wine tourism. More simply stated, if the High Plains is the workhorse, the Hill Country is the show pony.

With upscale tasting rooms, beautiful vineyards, live music, lovely food, and barrels full of Texas hospitality, the Hill Country, specifically Fredericksburg, has helped the Texas wine industry become a major contributor to growth in state tourism, generating more than two million tourist visits each year and almost $690

WE NEED RESEARCH TO ELEVATE THE QUALITY OF ALL WINES GROWN IN TEXAS AND TO GAIN MORE AWARENESS IN THE UNITED STATES AND WORLDWIDE, BECAUSE WE HAVE WINES THAT CERTAINLY COMPETE ON THE WORLD STAGE.

—Susan Auler

American Viticultural Areas (AVAs)

A minimum of 85 percent of a wine’s grapes must be grown in that particular area in order to be labeled from that area.

Texoma AVA 1992

Texas High Plains AVA 1993

Texas Davis Mountains AVA 1999

Fredericksburg

TEXAS WINE REGIONS

Texas’ grape-growing regions are broken out into five key areas, which include, to date, eight American Viticultural Areas.

TEXAS

HIGH PLAINS AND PANHANDLE

High elevation with long, hot summers and cool nights. Mineral-rich soil. Produces savory, mineral flavors. Seventy-five varietals grow here.

NORTH TEXAS

Emerging wine region. More humid. More prone to pests and disease. Produces bold reds and crisp whites.

WEST TEXAS

Dry and hot. Highest elevation with calcium-rich, volcanic soil. Lush, robust reds and acidic whites.

HILL COUNTRY

Home to the third-largest AVA in the US. Humid and warm. Limestone soil. Produces juicy, aromatic grapes. Includes the Llano Uplift, north of Fredericksburg.

GULF COAST

Smallest region, but large in population. Includes Houston. Warm breezes. Big potential.

Sources: Texas Department of Agriculture, Texas Wine and Grape Growers Association, US Alcohol and Tobacco Tax and Trade Bureau

Mesilla Valley AVA 1995

in the Texas Hill Country AVA 1988

Bell Mountain AVA 1986

Escondido Valley AVA 1992

Texas Hill Country AVA 1991

million in annual tourism spending. Travel and Leisure named the Texas Hill Country one of the 50 best places to travel in 2021, largely because of its ample winery-related activity options. Texas now boasts 17 wine trails and more than 490 wineries.

The Texas Almanac says, “The wine business in Texas is as much about tourism as it is about the grapes on the vine or the wine in the bottle.” Winemakers may disagree with the second part of that sentiment, but they do agree they rely heavily on tourists for support.

Winemaking is really a hospitality industry, says Glena Yates, president of the Texas Wine and Grape Growers Association (TWGGA) and owner of Spicewood Vineyards and Ron Yates Wines.

“If you go to a tasting room and just sit and talk to people, people love it,” Yates says. “They love going out. They love the experience. And when they walk in the door, you want them to feel like they’re at home.”

THE CHALLENGES

Yates, like other winemakers, is ecstatic to discuss the exponential growth and the improvement of the Texas wine industry, and like others, she is also quick to point out, winemaking is a serious and challenging business.

“Everybody thinks it’s a very romantic business to be in the wine business. They don’t realize quite how much work it is until they get into it,” Yates says.

DeBerry agrees. “You don’t do this if you don’t have a passion for wine,” he says. “You have to have a passion for the process. When you’re sitting there drinking wine and doing a wine tasting and looking at the view, it’s very romantic, and people say, ‘Oh, you’re living my dream.’ I never discourage anybody, but I just tell them, it’s a business. Like any other business, it has its challenges, and it’s a lot of work.”

Winemaking is expensive and risky. It usually takes years to develop strong enough vines to produce good wine. Many wineries close as a result. And of course, growing grapes requires farming— no easy task in gritty, hot Texas, where drought, unexpected hailstorms, and occasional freezes come calling.

“The weather,” Susan Auler says. “That’s the number one challenge. When you get hail or you get devastating freezes, I mean, it cuts your crop back. That hurts. I don’t care if you’re in Mendoza, in South America, or if you’re in Bordeaux, France, or if you’re in the Rioja. It’s all about the site and the soil. We all suffer from the same thing; heat spikes or rain at the wrong time or a hailstorm, those are the things that are problematic for growing grapes.”

This year, winemakers statewide report anywhere from a 30- to 50-percent loss in their harvest, largely due to Mother Nature, but also, they say, largely due to another challenge, the use of the herbicide Dicamba on cotton farms located near vineyards in the High Plains. Dicamba is used to control weeds in cotton fields, but grape growers say it is drifting over onto their vineyards, crippling sensitive vines. The matter is currently being litigated between the

makers of Dicamba and the owners of 57 vineyards who filed suit against them last year seeking $560 million in damages.

Meanwhile, TWGGA and other industry leaders are doing what they can to help find a solution they admit won’t be easy.

“We had a meeting this past week with the producer of Dicamba and some of our grape growers and also the cotton growers and nothing came out of it,” Yates says. “Other than everybody walked away understanding everybody’s position. If a farmer is spraying his cotton and the wind is blowing, it can go several miles from where he’s spraying. And he’s doing everything he’s supposed to do. But the problem is the volatilization of the product. We don’t know where it’ll end up, but we’re working with our growers trying to help them solve this problem.”

It will be an important one to solve because the state’s wine industry now faces a Texas-typical problem: astounding growth. There just aren’t enough grapes to meet the demand.

THE GOOD NEWS

Though this year’s grape harvest is significantly smaller, there is some good news for oenophiles (a fancy name for wine lovers). Winemakers say the resulting wine, though harder to find, will burst with flavor.

“The grapes we do have are going to be fabulous, because they’re very concentrated,” Yates says. “The vine has the ability to give flavor to a number of grapes. When you lower the count of grapes, then the ones that are there get a whole lot more flavor.”

DeBerry notes the same. “The fruit’s very concentrated, smaller berries, same number of clusters, but smaller berries, so lower count, which means less wine, but it also means more skin contacts, so it’s going to be a little more tannic. It’s going to extract a little more color. So, from that standpoint, I can’t argue. I’m never going to argue about what we get from the vineyard. God gave it to us, so we’re just going to do our best to make the best wine out of it we can.”

A CEO & WINEMAKER

Texas native Chris Brundrett is described by some as the driving force behind the growth of the state’s modern wine industry. At 21, much to the dismay of his parents, he dropped out of school in New York and started classes at Texas A&M University, not sure what he wanted to do until, one weekend, he took his girlfriend to a winery because “somebody told me there was wine in the Hill Country.”

Brundrett came back to A&M the following Monday and changed his major to horticulture with an emphasis on viticulture and oenology and never looked back.

“My dad just called me a dumbass, and was like, ‘You just want to make booze for a living,’ ” Brundrett says. “But I thought, ‘There’s something really cool going on here, and I don’t want to miss it.’ And so I stayed in Texas and made wine and grew grapes for several different people until I met my business partner, Bill Blackmon.”

Brundrett and Blackmon were frustrated about the status of the industry. “There wasn’t an emphasis on the vineyards or terroir or beautiful winemaking,” Brundrett says.

So, Brundrett and Blackmon both quit their winemaking jobs, and with $40,000 on an American Express card, they started William Chris Vineyards in Hye, Texas, in 2008. They built it on the philosophy that great wines are not made but grown in the vineyard.

The company made 400 cases that year, and they have grown exponentially every year since. Today, a family of five brands, William Chris Wine Company produces about 65,000 cases a year, ships mostly direct to consumers in 44 different states, and employs 134 people. It is also the largest producer of 100 percent Texas-grown wine, a passion Brundrett unapologetically champions.

As the first Texas winemaker to be featured in Wine Enthusiast’s 40 Under 40 list, Brundrett helped formed Texas Wine Growers, a nonprofit organization “dedicated to promoting and protecting the integrity of Texas wine by making wines solely from grapes grown in the terroir of Texas.”

Terroir is the character a wine gets from the particular place where the grapes were grown to make it—how soil, topography, and climate affect the taste of the wine. Brundrett says no ingredient is more important in wine than location. In fact, he says, 80 percent of the resulting wine’s taste happens in the vineyard.

“So much of the soulfulness is cultivated throughout the vintage and the previous vintages too ... of all the work up to this point to have the vineyard as healthy as possible.”

TEXAS ONLY

Brundrett believes the only way to elevate the credibility of Texas wine and to become a world-class wine region is to define for the world what it means (and tastes like) to drink wine made with 100 percent Texas-terroir. To that end, he and other likeminded winemakers were instrumental in the 2021 passage of a labeling law, requiring any wine label using a Texas county, AVA, or vineyard designation to follow stringent rules, the bottom line being, they all must contain 100 percent Texas grapes. This is in keeping with wine regions like California or Oregon.

Before that, consumers may not have realized the wine they were drinking was not really a full-fledged Texan.

Brundrett says some large winemaking companies fought hard against that standard because their business models were based on blending finished wine from out of state with their wine to make more money. That practice takes away from the terroir of the state, he says, and is a short-term fix to a long-term opportunity.

But Yates says there are two sides to that argument.

“We’d all love to use nothing but 100 percent Texas wines. But right now, we just don’t have the ability to do it because we don’t have enough grapes being grown,” she says. “We have six or seven huge, gigantic wineries in Texas that buy up all the grapes they can

buy up. It doesn’t leave a lot for the others. They have to get their grapes somewhere else.”

RESEARCH & HEAT SHOCK GENES

One issue that unites Texas winemakers is the need for more state funding for grape research. Susan Auler is leading an effort to launch the Texas Grape and Wine Institute, a collaborative partnership between the University of Texas at Austin, Texas A&M University, and Texas Tech University to enhance the economic development and growth of Texas wine by fostering research, education, and entrepreneurship. In addition, TWGGA is currently leading a legislative effort, the Texas Wine and Grape Initiative, to get money appropriated in the state budget dedicated to the continued growth and improvement of the state’s wine industry.

“We need research to elevate the quality of all wines grown in Texas and to gain more awareness in the United States and worldwide, because we have wines that certainly compete on the world stage,” Auler says.

Brundrett is more direct. “Virginia is kicking our butts in state funds, to say the least. And so is Oregon, Washington, New York. Texas lags way behind, even though we have a much higher economic impact than most any state. I mean, not California, but we have a huge economic impact and the amount of dollars our state puts behind our industry is a big opportunity because it’s not very much.”

One research study that is taking place at the University of Texas is focused on a phenomenon known as heat shock genes, which are inherent in grapes and many other plants. They basically limit cellular damage from stressors like high heat, but their mechanisms are not entirely understood. In Texas, Auler says, the genes benefit grapes when the temperature gets in the upper 90s or higher in the springtime, naturally kicking in to produce proteins that protect vines throughout the sweltering summer. Grapes grown in cooler climates don’t enjoy the same protection.

“Grapevines that are planted, say, in Napa or Sonoma, don’t have the hot spring and early summer temperatures to activate the genes,” she says, “and this makes vines in cooler climates vulnerable to a sudden heat spike. Because cooler climate plants don’t know to prepare themselves for the heat spike, they will suffer heat damage.”

Auler’s winemaker, Sergio Cuadra, believes when this study is published, it will lend validation to Texas wines, putting the spotlight on Texas techniques, particularly since the wine world is intensely concerned about global warming.

“I think it would be very interesting for the tables to flip,” Auler says. “We’ve always gone to France and the Old World and then to California and the New World for winemaking techniques. It would be fabulous to have this research validating the wines that we’re making in Texas and to offer the findings internationally for the wine world to better understand the effects of heat on vines.

“We haven’t done a good enough job of telling the story that

William Chris Vineyard Manager Tate Gregory does a barrel tasting for a winery guest.

COURTESY OF WILLIAM CHRIS VINEYARDS

the Vitis vinifera grapes grown the world over, were born in the Middle East thousands of years ago in a climate even hotter than here, and therefore, these grapes also grow well in the heat of Texas.”

CURRENT CONDITIONS

Today, Texas is the fifth-largest wine-producing state in the country, following California, New York, Washington, and Oregon.

According to The National Association of American Wineries, in an economic impact study released this September, the Texas wine industry has a $20.35 billion economic impact, employing more than 141,000 people, generating almost $7 billion in annual wages, and contributing almost $390 million annually to state and local taxes.

Now, compare Texas’ $20.35 billion to California’s $88 billion economic impact. California has 4,795 wine producers. Texas has 443, according to the study. Winemakers readily point out that Texas is not only larger than California in total acres, but also larger than the mega-wine-producer, France, which currently grows grapes on two million acres, compared to Texas’ 9,300.

What do winemakers see there? Potential. Heaping acres of it.

SO, WHAT’S NEXT?

Industry leaders are working together to win federal designation of a new sub-AVA in the Texas Hill Country called the Llano Uplift. The uplift is an ancient geological area about 90 miles in diameter that features large granite domes and outcroppings. Growing grapes in this significantly different kind of soil, DeBerry says, makes a different outcome in the fruit.

“What distinguishes the Llano Uplift is primarily the soil, the decomposed granite. Outside of that, it shifts more to a limestone and caliche, so it changes. The pH of the soil is slightly different, a little more acidic in the granite and sandstone. That acid has an impact on grapes,” DeBerry says.

Brundrett and Auler both believe we have not yet discovered all the growing regions around the state that are unique and special, but they look forward to the discoveries because each designation will define additional characteristics for the grapes grown there.

Those terroirs—the cola taste from the Llano Uplift, the herbal note from the High Plains, the violets in the Pedernales River Basin—are what distinguish Texas wines from those made anywhere else in the world. And that’s what gets winemakers excited about their craft.

Brundrett calls it “letting the vineyard speak.”

“When you buy a bottle of our delicious wine,” he says, “You can not only create an amazing experience for your family and your friends, but it means something for the people in the Texas wine industry who are growing these grapes, who are working for these vineyards. We are telling their story.”

It’s a story still being written, and one every Texas winemaker wants to improve. Yates says everyone involved is spending 150 percent of their time to increase the quality of the wines they’re making. “We’re winning best red wines. We’re winning best white wines. We’re competing on the same level [as California]. We’re just not as old as they are. Give us a little bit more time, and we’ll win everything.”

Back at Fall Creek Vineyards, a.k.a. permit number three, Susan Auler echoes that sentiment. “We’re always looking for any way we can squeeze out that last little ounce of quality. Not everybody’s on the same level. That’s our challenge, to get everybody on the same level, because a less than good quality bottle of Texas wine is not good for anybody in the industry.”

The Business of Feeding Texas

Tim Lee, Consulting CFO, vcfo

Feeding Texas oversees food banks in 251 counties grouped across 21 districts, each with a central food bank responsible for managing regional food acquisition and distribution. A far-too-familiar rash of recent disruptions (COVID, inflation, etc.) has made it increasingly tough for them and other organizations like them to meet the needs of food-insecure citizens. To sustain their missions moving forward, it’s important that food banks reflect on the contributors to the current climate and what needs to change in how they operate.

Not Business as Usual

Texas food banks receive limited government funding and have mostly relied on private donations to support operations and procure needed food. One of the largest food sources historically—donated near-end-of-shelflife food from grocers—has dwindled due to supply chain challenges. This deficit has compelled many food banks to purchase higher volumes of food themselves, typically at higher-than-historic costs. As a result of this and other operational cost increases, their financial reserves have been weakened.

Like other organizations, food banks have also faced significant staffing challenges as they’ve been unable to adequately maintain critical volunteer levels in light of various requirements and recruiting difficulties. With employees forced to work overtime to bridge the gap, many leaders enacted financial incentives designed to retain these employees so that sufficient staffing remained in place.

Food bank leadership would be wise to recognize that these and other recent disruptions will likely not be one-time occurrences. Experts expect another global pandemic at some point. The impacts of climate change are increasing in frequency and severity (highly significant to agriculture and food production). Economic volatility is expected to persist. And while food products will continue to be available, the cost of acquiring them may become prohibitive for low-income individuals and most food banks.

Adapting to Meet the Mission

Food banks need to adapt if they are going to continue to meet the needs of Texas’ food insecure. In part, this means a stronger and more proactive emphasis on financial planning and investments in the future.

As members of the Feeding America and Feeding Texas networks, Texas food banks must maintain a minimum level of reserve funds to enable them to purchase food should donations be insufficient to meet their needs. To do so amid more disruptions, greater emphasis must be placed on forecasting and maintaining adequate reserve levels to help offset the corresponding financial impacts that disruptions bring.

New technology investments and applications can also help food banks reduce costs and increase productivity in the long-term. For example, warehouse and fleet management applications can save money by improving labor and fuel efficiency. Technology is also changing how food is produced, especially in regions where nature is no longer providing adequate resources. Hydroponic farming in warehouse settings is one means of food production that is becoming more cost-effective and could prove to be a vital resource should global warming worsen.

Larger food banks have also proven the benefits of investing in commercial kitchens. These settings enable them to process food that is approaching the end of its shelf-life and then flash-freeze and package it, thereby extending the utility of the food by many months. Additionally, investment in freezers throughout a service area would allow food banks to distribute more food less frequently, thereby reducing the cost of food distribution while providing more meals.

While food banks are known for serving the food insecure in the communities where they are located, they haven’t necessarily financially invested in those communities in other ways. Recently, some larger food banks have invested in the construction of community gardens. Not only can these gardens produce much-needed produce for the food insecure, but they also operate without reliance on the supply chain and have the added benefit of enhancing the community and bringing people together.

Change for the Better

Texas food banks play a vital role in meeting the needs of the food insecure in the communities they serve. However, recent events have highlighted the need for these organizations to elevate their financial planning and investment in operations to ensure they are prepared for major events moving forward.

Food banks can start by shoring up their reserves, investing in technology and capital improvements, and investing directly in the communities they serve. By taking a proactive approach, food banks can ensure they are in a stronger and more sustainable position to meet the needs of Texas’ food insecure.

Tim Lee is a Consulting CFO with the financial consulting firm vcfo, founded in 1996 and headquartered in Austin. Lee is also the former Treasurer for the Central Texas Food Bank Board of Directors. vcfo is

its 26th year serving over 5,000 clients nationwide, providing an integrated suite of Finance, Accounting, and HR support.

celebrating

Consequences and

Gordon Daugherty

Service companies traditionally have low gross profit margins as compared to tech companies, especially software. That is because services require human bodies to deliver most of the value for which their customers are paying. Scaling a service company requires a mostly linear scaling of those bodies. In other words, tripling annual revenues requires roughly tripling the number of company employees. That lack of scalability leverage, as compared to tech companies, causes lack of investment

interest on behalf of the venture funding industry.

A PRODUCT GETS BUILT

Some service companies end up building custom technology to make their revenue-generating human resources more efficient and/or more effective. Over time, the technology matures to the point of resembling a minimum viable product (MVP) that, with further refinement, could possibly be sold separately at high gross margins and with attractive scalability leverage.

Taking the leap to build, sell, and support the technology product comes with a variety of consequences and trade-offs that should be understood in advance.

DEEP DOMAIN KNOWLEDGE

Let’s start with the biggest benefit of this scenario. The company’s executives and employees have deep knowledge of the industry they serve and the buyer persona to which they sell. They’ve learned how to operate a company,

hopefully with a strong culture. They might have even developed a reputation and general awareness of their existence in their industry. All of those are things an early-stage tech startup would love to have already accomplished.

should be created. Unfortunately, most service companies don’t do enough of this planning and strategy work, perhaps due to the way the technology was gradually developed and evolved inside the company. It doesn’t seem like a start-from-scratch business venture, and in many ways it’s not. That’s due to the way the tech product came into being.

The business plan for the new product should not just be in someone’s head. Instead, it should be documented and debated with the other company execs. While doing so, the team should pretend they’ve separated from the service company and are on their own with only the technology product that was developed. How should they proceed from that new starting point? That mindset will best enable them to develop a full business plan for the new product-oriented business, even if it is ultimately incubated inside the service company.

IS IT REALLY A PRODUCT?

In the early days, the new technology is usually so specific to the needs of the company’s service-delivery professionals that it couldn’t reasonably be sold to others. Elevating to that level requires defining and creating a real product. You might think of it in a similar way as research projects that work in a semi-controlled environment versus commercial-grade products that are widely sold on the open market. There are big differences along multiple lines.

Creating a real product requires going all the way back to the beginning of the startup idea development stage. A business plan that includes a huge list of initial assumptions and aspirations

The good news is that the company has lots of existing and prior customers that can be approached for the required customer discovery, related to the new product. The rapport with those customers should help them be more honest with their feedback on the product. And the company’s knowledge of other aspects of their operations and priorities will arm them with better questions and better enable them to achieve the highly desired “aha” moments that are sought during customer discovery.

COMPETING PRIORITIES

Service companies in the position being described are often profitable and cash-flow positive, but usually not highly profitable. That means the investment needed to further develop the tech product and prepare for its launch drains valuable resources, both financial and human, from the core services business.

Service companies make very slow progress on developing their tech product due to this dilemma. That serves as a double whammy.

THE BUSINESS PLAN FOR THE NEW PRODUCT SHOULD NOT JUST BE IN SOMEONE’S HEAD. INSTEAD, IT SHOULD BE DOCUMENTED AND DEBATED WITH THE OTHER COMPANY EXECS.

The length of time that profits are diverted and resources are multitasked lengthens. Additionally, if the product idea is a good one, there are probably other venture-funded startups working on something competitive, which introduces the risk of getting left behind.

Raising new funding for the product-related venture is an obvious alternative, but there are some common challenges there, too.

POTENTIAL CONFLICTS OF INTEREST

The sale of the new product might cause customers to pay less, or nothing, for services. It is possible that the business strategy actually calls for cannibalization of service offerings as the business progressively evolves into just a product company over time. If not, the likelihood of cannibalization should be considered, and decisions should be made whether to plan for it in financial projections.

The other conflict that can arise relates to other competitive service companies. They could be the best possible customers for a new technology product, especially in the early days. Should the product be sold to them? Even if the desire is to not have a product used against its original developer, the sales model employed for the product might not allow for that level of control. In other words, if the product is sold through a distribution channel, who purchases it cannot be controlled.

RUNNING TWO BUSINESSES

A service company and a tech product company couldn’t be more different in the way they are run—everything from the way revenue and expenses are accounted for to the systems and processes that are used, the sales and support model, the pricing strategy, and on and on throughout the business plan. As the new product gets launched and that aspect of the company starts to mature, the company basically becomes two different businesses under the same brand name.

Because of this, many service companies eventually decide to split into two different legal entities: one for services and one for the tech product. Often, this action follows the validation of important aspects of the product-related business plan.

The relationship between the two entities can take on different forms, including parent/subsidiary or sister companies of sorts. The word sister is more of a layman’s term, but implies there is some commercial and/or legal relationship between the entities. Maybe it’s a license to the technology that was created; maybe it’s a reseller relationship; or maybe it involves the sharing of resources. In the early days after the split, there might be significant sharing and resource overlap. If so, that probably changes over time, until the new product company is self-sufficient, but still with a commercial or legal relationship with the original company.

On paper, creating two entities to best optimize the opportunity might seem easy, but in practice, there will be issues and challenges to face. Basically, think of it like starting a new startup, but with a couple of jump starts in certain areas.

FUNDRAISING CHALLENGES

Venture-style investors tend to shy away from investing in service companies that are building a tech product. Even having the product launched with paying customers might not be enough to excite them, especially if half or more of the company’s revenue still comes from services.

ON PAPER, CREATING TWO ENTITIES TO BEST OPTIMIZE THE OPPORTUNITY MIGHT SEEM EASY. BUT IN PRACTICE, THERE WILL BE ISSUES AND CHALLENGES TO FACE.

Venture investors won’t like the following things about the hybrid business you’re trying to get funded:

• lack of uninhibited scalability and possibility for explosive revenue growth,

• complexities of running two different businesses under the same brand and same leadership team, and

• risk that the product-related aspect of the business doesn’t succeed enough to either completely cannibalize the service business or dramatically reduce it to a 20 percent or less mix of total revenue.

Often, the best remedy for this fundraising challenge is to split off the product business as a separate company. Investors will require the new product company to have an exclusive, perpetual, and irrevocable license for the intellectual property (IP) that was

invented and developed inside the service company. In fact, maybe the IP ownership fully transfers to the product company. Outside of the IP ownership issue, investors should be able to review the investment opportunity like they do with any other startup.

Gordon Daugherty is a seasoned business executive, entrepreneur, startup advisor, investor, and the best-selling author of Startup Success: Funding the Early Stages of Your Venture. A proud native Texan, Daugherty graduated from Baylor University. He has vast experience with early-stage fundraising from both sides of the table, making more than 350 investments and raising more than $100 million in growth and venture capital as a company executive, fund manager, board director, and active advisor.

Machinations

LABOR SHORTAGES, DEMOGRAPHIC PATTERNS, AND THE FUTURE OF THE JOB MARKET CREATE A LONG-TERM PICTURE OF THE WORKFORCE.

M. Ray Perryman

The workforce is always evolving, with demographic patterns and economic conditions leading to shifts in the types of workers and jobs available. The pandemic sped up the pace of some long-term trends on both fronts, intensifying worker shortages and hiring challenges.

Job openings in many parts of the United States, including Texas, are exceeding unemployment. While potentially beneficial for those looking for work (assuming they have the requisite skills), the shortages present notable challenges. Businesses unable to fill positions are often forced to respond by reducing operating hours or even closing locations, and the economy is functioning at less-than-optimal efficiency.

For perspective, prior to COVID-19, the number of job openings across Texas had never topped 623,000 and was generally well below that level. In February 2020, just before the pandemic, there were 534,000 openings. With the ensuing disruptions, openings dropped as low as 302,000 (April 2020) before beginning to rise.

By the end of 2020, they were back in pre-pandemic ranges. As the Texas economy continued to gain momentum

through 2021, the number of open positions started trending toward 900,000 or higher. In July (the latest data at press), they stood at 985,000. This record escalation comes despite rapid hiring in recent months. Texas regained all of the jobs lost during the shutdown in only 19 months (15 months or less in some urban centers), compared with 27 months for the nation as a whole. The pace of expansion and number of openings may moderate given challenges such as inflation, higher interest rates, and greater uncertainty on many fronts. In fact, it would be difficult to find enough bodies to fill positions at the recent rate over an extended period. Nonetheless shortages will persist.

Many factors are contributing to the current labor shortages. Simple demographic reality is one major culprit. Texas is reflecting national trends, with the retirement of the baby boomers coinciding with decisions by younger people to start working later. The so-called Great Resignation, where millions of Americans purportedly left the workforce, is also contributing modestly, although far less than some

WHAT WE HAVE SEEN BY AND LARGE IS A “GREAT RESHUFFLING” AS WORKERS HAVE CHANGED JOBS TO SEEK BETTER ALTERNATIVES.

headlines imply. In fact, the workforce participation rate in the working-age population is only slightly below prepandemic levels. What we have seen by and large is a “great reshuffling” as workers have changed jobs to seek better alternatives. Much of this current problem would exist even if COVID-19 had never happened, and it will be with us for the foreseeable future.

The bottom line is that we have seen

these labor shortages coming for a long time, although the pandemic accelerated things moderately. The underlying demographic patterns are the driving force. Strong economic expansion in Texas is also raising labor demand.

DEMOGRAPHIC PATTERNS

Born after World War II between about 1946 and 1964, the baby boom

generation of an estimated 73 million is second in size only to the millennials, born from 1982 to 2000. The oldest boomers are now in their mid-70s, and by 2030, all boomers will be 65 or older.

Birth rates across the nation have also slowed, and the US population is hardly changing. In fact, the US population under age 18 was about one million lower in the 2020 Census than just 10 years prior.

TEXAS IS BETTER SITUATED THAN MOST OF THE COUNTRY GIVEN OUR YOUNGER POPULATION, OPPORTUNITIES RELATIVE TO OTHER STATES, AND HIGHER BIRTH RATES.

Texas is better situated than most of the country given our younger population, opportunities relative to other states, and higher birth rates. Fortunately, Texas is also seeing more growth in younger age ranges than many parts of the country. The under 18 age group actually increased by more than 400,000 in Texas even as it shrank nationwide.

The Census Bureau’s population

estimates by state for the period from July 2020 to July 2021 further illustrate this point. While the total US population scarcely changed, there were seismic regional shifts. The Northeast lost nearly 366,000 residents and the Midwest lost almost 94,000. The South increased by over 816,000, and the West gained 34,000.

The Texas population grew more than any other state, up over 310,000

for the year. Florida (211,000), Arizona (98,000), and North Carolina (94,000) also saw substantial rises, as did Georgia, South Carolina, Utah, Tennessee, and Idaho (all up at least 50,000). The states with the largest shrinkage between 2020 and 2021 include New York (down over 319,000), California (-262,000), and Illinois (-114.000). Populations declined in 18 states, including Massachusetts, Louisiana, and Pennsylvania.

One obvious factor is that Texas ranks only behind Utah among states with the youngest populations (tied with Alaska) with an average household size well above the national average. The result is a higher natural rate of increase from patterns in births over deaths.

In addition, people are moving to Texas and the other states gaining population in large numbers. Reasons for the movements are many and varied, but there are some common themes. Destination states generally have higher economic growth rates and, hence, greater opportunities. In addition, they tend to have lower tax rates. Tax burdens clearly affect household budgets and are particularly problematic with the pandemic still causing financial stress and inflation rising. There is, of course, a point at which taxes are insufficient to support adequate investments in infrastructure, education, health and safety, and other public priorities essential to maintaining quality of life and prosperity over time. Texas faces long-term challenges in this regard.

FUTURE JOBS AND WORKER SHORTAGES

Looking ahead, The Perryman Group’s projections call for longterm growth in the US and Texas economies, though short-term cycles are inevitable. While the economy is currently slowing by some measures and will likely continue to moderate in the wake of aggressive Federal Reserve actions to bring down inflation, a deep or

lengthy recession is not expected. The Federal Reserve policies will almost certainly lead to negative fallout for the pace of expansion, as will the natural maturing of the post-pandemic expansion. Nonetheless, underlying fundamental characteristics remain strong.

The nature of the economy will continue to evolve. Business activity will become increasingly servicesoriented, an inevitable outcome given the sophisticated nature of the industrial base. A shift toward services is a pattern common to every highly developed economy.

Twenty years ago, services comprised approximately 63 percent of employment and almost 55 percent of real gross product (RGP) in Texas. In 2021, we estimate that it had grown to 69 percent of employment and about 60 percent of RGP. Twenty years from now, our projections indicate that it will be nearly 73 percent of employment and still about 60 percent of RGP. These categories are expected to continue to generate large numbers of jobs. The flip side of that fact is that there will be ongoing demand for workers and little long-term relief from shortages.

As shortages become more acute, rising wages will be complemented

by added benefits. Ensuring potential workers have access to methods to enhance their employability is also worth exploring, whether that takes the form of literacy initiatives, English language classes, or basic skills of other kinds. Investment in public education is also imperative. Sensible immigration reform for individuals of all skill levels is essential, simply because Texas and the United States need the workers. The solution to worker shortages is “all of the above”—and then some.

GOING FORWARD

Over time, jobs will continue to be created at a more rapid pace in services-producing industries. The composition of occupations will certainly change as the economy evolves and technology alters the character and skills requirements of every job, but the overall pattern is well established.

As an outcome of this strong performance as well as overall trends, labor shortages will continue to be a challenge. It will be an employee’s market for the foreseeable future, and firms will need to respond with compensation, benefits, and other enticements to hire and keep quality workers.

Dr. M. Ray Perryman is president and chief executive officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.

BUSINESS ACTIVITY WILL BECOME INCREASINGLY SERVICES-ORIENTED, AN INEVITABLE OUTCOME GIVEN THE SOPHISTICATED NATURE OF THE INDUSTRIAL BASE.

So much for “transitory:” Inflation isn’t reverting to normal anytime soon. Although there were promising signs during the summer, new data show pricing pressures remain strong. The Bureau of Labor Statistics reports 8.2 percent year-over-year inflation for September. Core inflation, which excludes volatile food and energy prices, was 6.6 percent.

Wages are growing at 6.7 percent, only now catching up with inflation. Households have suffered declining purchasing power for almost two years.

Preserving the dollar’s value is one of the Federal Reserve’s most important tasks. Our central bank has a mandate from Congress to pursue full employment and stable prices. Unfortunately, monetary policymakers

are lousy at both. The Fed has been on the job for more than 100 years and still can’t get basic monetary policy right. We should seriously reconsider how much latitude we permit the Fed to police itself.

Inflation is tricky to predict yet simple to understand. It’s caused by too much money chasing too few goods. In the language of economics,

Alexander William Salter

the purchasing power of money falls whenever the money supply persistently outpaces money demand. This is precisely what happened over the last two years. In March 2020, the money supply totaled about $15.5 trillion. By the end of fiscal year 2021, it rose to $21 trillion—a 35 percent increase. Markets were certainly hungry for liquidity due to COVID-19-induced uncertainty, but the Fed’s monetary expansion far exceeded our appetites.

Other explanations for inflation don’t withstand scrutiny. Yes, the federal government ran massive deficits in 2020 and 2021: $3.1 trillion and $2.8 trillion respectively. But deficit spending by itself doesn’t cause inflation. If Uncle Sam consumes more of the economy’s output, someone else must consume less. The spending binge only became inflationary because it was supported by the central bank. Over that same time period, the Fed added $3.3 trillion in government bonds to its balance sheet. Monetary policy, not fiscal policy, is the determining factor.

Nor are global supply problems the primary culprit. To be clear, when supply conditions worsen, prices rise. But this is a secondary factor in the United States. Unlike in Europe, where the lion’s share of inflation can be explained by energy prices, American inflation is broad-based. Supply-side troubles make inflation worse, but price hikes would still proliferate without them.

Milton Friedman said it best: Inflation “can be produced only by a more rapid increase in the quantity of money than in output.” Heed the Nobel laureate. The blame for inflation rests with central bankers. They are undoubtedly clever, credentialed, and compassionate. They unleashed the inflation conflagration nonetheless. It’s time to stop fiddling with personnel and focus on policy. We need major structural changes to the Fed to prevent this from happening again.

The Fed ultimately lacks discipline. Its authority derives from Congress, yet legislators have not provided concrete instructions. The dual mandate is pretty ambiguous. How much employment is “full” employment? How slow do

prices have to rise to qualify as “stable?” Absent Congressional guidance, the Fed answers these questions for itself. Worryingly, this makes the Fed a judge in its own cause. “We investigated ourselves and discovered we did exactly what we were supposed to.” This isn’t a recipe for responsible policy.

Congress should step in to fix this problem. The Fed has the expertise to conduct monetary policy given some objective. It’s up to the representatives of the people to determine what that objective is. The best, and most likely, option is to focus on price stability alone. Employment is subject to a host of economic factors outside the Fed’s purview. The dollar’s purchasing power, however, it can control.

There are two leading options for a Congressionally imposed monetary policy rule. The first is a price level target: The Fed commits to keeping the value of money steady. The second is a nominal GDP target: The Fed commits to keeping total spending on final goods and services, what economists call aggregate demand, steady. Each has its merits. Dollar stability is great for long-term planning but could make the economy more vulnerable to supply-side holdups. Total spending stability is nimbler in the face of productivity changes, but the value of money is harder to predict over time. What’s important is that both rules can control inflation better than the highly discretionary procedures the Fed uses now.

There should be a lively public debate over the costs and benefits of each rule. But either rule is better than no rule at all. It’s clear the Fed, as currently constituted, is a poor steward of the dollar’s value. Let’s tell Congress to change that.

Alexander William Salter is the Georgie G. Snyder Associate Professor of Economics in the Rawls College of Business at Texas Tech University, a research fellow at TTU’s Free Market Institute, a senior fellow with AIER’s Sound Money Project, and a senior contributor with Young Voices.

HEED THE NOBEL LAUREATE. THE BLAME FOR INFLATION RESTS WITH CENTRAL BANKERS. THEY ARE UNDOUBTEDLY CLEVER, CREDENTIALED, AND COMPASSIONATE. THEY UNLEASHED THE INFLATION CONFLAGRATION NONETHELESS.

You’re On, Cowboy!

JERRY HODGE SHARES LESSONS LEARNED FROM TAKING RISKS, TAKING NAMES, AND KNOWING WHEN TO FOLD.

Jerry Hodge has had many titles—CEO, cattle rancher, investor, mayor, politician, husband, father, friend, opponent, mentor—but the one that suits him best is cowboy. While the term “cowboy” in popular culture has come to be associated with being reckless, aggressive, and independent (and Hodge admits to living life his own way), make no mistake that the founder and CEO of the multi-million-dollar pharmaceutical company Maxor has much to say about the value of integrity, trust, and giving back to his community as a formula for success. His life has been an interesting amalgamation of those traits along with the subsequent assets and liabilities, and Hodge doesn’t hold back on talking about any of them.

When a cancer diagnosis sent him reeling, Hodge stepped back and took

an honest look at his life. Having seen both success and failure, Hodge set out to share his story and life lessons, and his book, You’re On Cowboy!, is filled with tales, both inspiring and cautionary. It is a book you will want to read once, then read again to take notes. Yes, this is a book filled with business acumen and tips, but it is also a story about wisdom gained by living life to the fullest, taking the hits, and getting back up to start again in both personal and professional arenas.

From humble beginnings in Amarillo working in high school in the local pharmacy to buying the local pharmacy to building a multi-million-dollar empire, Hodge recounts the journey in a very engaging manner. Throughout the book, Hodge takes you along on his journey in business and finance as he became the youngest mayor of Amarillo,

bought a cattle ranch with the turn of a high card, and sparred with the likes of Oprah Winfrey, T. Boone Pickens, and Bill Clements. There are also tales of women, baseball, politics, and the open skies of West Texas and New Mexico and what they all have meant to him.

The life lessons punctuated by Hodge’s authentic style of storytelling resonates no matter the stage of career— startup to CEO.

5 TAKEAWAYS TO TAKE TO HEART

1. Living life without recognizing that it is going to end can make people lethargic. Don’t put off mending fences because you never know when it may be too late.

2. Take care of your customers. Develop a relationship with them. Let them buy instead of being sold to, and don’t get too pushy.

3. Anybody can sell hamburger meat, but you have to work hard to sell T-bones. The right guy with the right work ethic can make it work.

4. The best deals are those where everyone wins.

5. No matter how dark things get, there is always a light at the end of the tunnel. You can’t stop searching for the light. Don’t quit.

Archway Publishing, 218 pages, hardcover, $27.99

Deborah Hamilton-Lynne

COURTESY OF JERRY HODGE

Margaret and Jerry Hodge enjoy horseback riding at High Card Ranch near Amarillo, a ranch he acquired with the turn of the high card.

If you’re new to the fundraising game, fear of the unknown might be keeping you awake at night. This book will help you navigate the fundraising journey while also helping make sense of the chaos and frustrations you will likely face during the process. The long list of valuable insights and genuine aha moments you’ll discover should dramatically improve your odds of fundraising success.

Exits, Equations, & Playing the Game

6 NEW & UPCOMING BUSINESS BOOKS YOU DON’T WANT TO MISS

A great CEO never passes up a chance to learn. Here are six books recently published or coming out soon, each with lessons for how to think about innovation, growth, and personal success.

John Rovani

Ace Your Exit: A Step-byStep Guide to Selling Your Business

Simon & Schuster

February 2023

208 pages

Founder and managing partner of Ponterra Business Advisors, John Rovani has spent decades advising software, data, and B2B business owners on how to set up their exit plan and sell their company. In his upcoming book, Ace Your Exit: A Step-by-Step Guide to Selling Your Business, he takes readers through what can be a complicated process, navigating the nuances of each step. He also emphasizes the need for an exit advisor as he outlines the pitfalls and focus areas to which a business owner should pay close attention.

Philip Jalufka

Leading With Your Life Equation: How to be Indestructible, Indispensable, and Unstoppable Tomball Press March 2022 219 pages

Austin-based author, former Army special operator, and CEO of international real estate firm Legacy International Philip Jalufka has written a guide that helps readers identify what motivates them and what hinders them, map an action plan, and hold themselves accountable. Jalufka brings his personal, military, and business experience to bear in his approach to life and winning. Leading With Your Life Equation also features insights from billionaire philanthropist Red McCombs, former major league pitcher Roger Clemens, real estate training guru Myers Barnes, and University of Texas Golf Coach John Fields, among others.

Dougal Shaw

CEO Secrets: Advice, Insights and Stories from the Popular BBC Video Series

Bloomsbury Business

January 2023

272 pages

Don’t you love to be in on a secret? The title alone of this collection of them is enticing. Journalist Dougal Shaw has made a career out of interviewing top thought leaders and celebrities for BBC Business News, where he founded the series CEO Secrets. In his book of the same title, he compiles them into a collection that draws together hundreds of CEO interviews he has done in the international business community. The book provides insights, inspiration, and motivation from leaders across an array of industries.

Ron Adner

Winning the Right Game

The MIT Press

February 2023

280 pages

Are you fully aware of the business game you’re in? With the competition landscape changing on the daily, the players are shifting—think traditional broadcast television vs. Netflix or Amazon Prime Video. With competition coming from newer evolving places, it’s important to understand the new rules of engagement. In Winning the Right Game, Ron Adner shows businesses how to meet the threat of “ecosystem disruption” head on and develop a proactive game plan. He makes the case that simply winning is no longer sufficient—you must be winning the “right” game for long-term success.

Marc Gravely

Reframing America’s Infrastructure: A Ruins to Renaissance Playbook

Sutton Hart Press

January 2022

555 pages

Is America’s “cheap and fast” approach to infrastructure progress putting it at risk? San Antonio-based author, lawyer, and infrastructure specialist Marc Gravely explores the historic importance infrastructure has had on successful civilizations and illustrates the power of innovation and the risks of inaction. From highways, buildings, and waterways to ecosystem resilience and space engineering, Gravely projects the current condition onto a backdrop of patterns circling the rise and fall of leading civilizations that came before us. Reframing America’s Infrastructure examines global infrastructure history, present-day issues, and opportunities to advance the US society, economy, and position as a world leader.

Perrine Farque

TheSuccessfulHybridTeam: WhattheBestHybridTeams

Know About Culture that Others

Don’t(ButWishTheyDid)

Wiley October 2022

336 pages

The COVID-19 pandemic gave rise to increased hybrid and remote work, and the shift created a new reality for business leadership to navigate. Diversity and inclusion expert Perrine Farque takes a look at modern workplace culture and what differentiates the successful hybrid work teams from the rest, along with the permanent changes leadership should embrace and the new normal for teams working in different spaces. Perrine also suggests a new framework for hiring, leading, and retaining a top hybrid team.

Texas Economic Indicators

FROM THE FEDERAL RESERVE BANK OF DALLAS

DallasFed.org

Texas economic activity accelerated and dining out and consumer spending continued to rise in September. While job growth picked up, sentiment remained pessimistic, according to the Texas Business Outlook Surveys. Here is a closer look at these and other economic indicators.

LABOR MARKET

Texas Employment Growth Resumes Texas employment expanded an annualized 4.3 percent in September after posting no growth in August. Most major Texas metros saw strong gains, except for Fort Worth and El Paso. Houston took the lead at 6.6 percent. Payrolls climbed an annualized 4.1 percent in Dallas and 2.6 percent in Austin. Year-to-date employment growth in nearly all Texas metros was positive. The Dallas Fed’s Texas Employment Forecast is for 4.4 percent growth this year (December/December), up from 4.2 percent in September.

TEXAS BUSINESS OUTLOOK SURVEYS

Perceptions of broader business conditions remained negative in September’s Texas Business Outlook Surveys. The general business activity indexes for the manufacturing and retail sectors were negative for the fifth consecutive month. The manufacturing business activity index dipped 4.3 points to -17.2, while the retail index fell 1.9 points to -20.5. The service sector business activity index was negative for the fourth consecutive month and held steady at -5.4.

DINING OUT

The number of seated diners at restaurants across the OpenTable network remained at or above 2019 levels both statewide and nationwide, based on a seven-day moving average. The US figure moderated throughout October and was 1.2 percent above 2019 levels on Oct. 22. The Texas figure was above 2019 levels for the 36th consecutive week, reaching 19.4 percent above the benchmark on October 22. Austin led major Texas metros at 32.1 percent above 2019 levels. Dining out was up 17.7 percent in San Antonio and 7.2 percent in Houston. Dining-out levels in Dallas have been consistently at or below 2019 levels since September 1 and are currently 3.8 percent below the benchmark.

CONSUMER SPENDING

Relative to January 2020 levels, consumer spending in Texas continued to increase amid high inflation. As of the week ending October 2, total debit and credit card spending was 9.5 percent above January 2020 levels. Accommodation and food services spending rose to 7.9 percent above January 2020 levels.

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The Federal Reserve Bank of Dallas promotes a strong financial system and healthy economy in the Eleventh Federal Reserve District, which includes Texas, northern Louisiana, and southern New Mexico. Through our offices in Dallas, El Paso, Houston, and San Antonio, we work for and with the people of our district to build an economy that works for everyone.

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Model citizen.

Introducing Zero from CBRE, a transformative partnership to help you plan, deploy, and measure your efforts to decrease your carbon footprint. Our global intelligence, compelling insight, and data-modeling informs ways for you to meet your environmental sustainability goals and decarbonization efficiencies on the journey to net zero. Impact everything. Realize anything.