#380 - Paul Hedrick - Founder @ Tecovas - How Tecovas Became A Western Wear Empire

Chris Powers: Paul, thanks for joining me. Welcome to the show today. 

Paul Hedrick: Chris, thanks for having me. 

Chris Powers: I wanted to start kind of going back in time a little bit. Do you remember when you decided that you were going to start a Westernware boot company? Like, was it a moment? Was this something that built over years and you finally had to do it? Or like, how did you come to this conclusion? 

Paul Hedrick: Yeah, I do remember. It’s funny, I don't have one of those like entrepreneurial stories that a lot of people have, which is I was selling stuff in middle school and high school, I started a t-shirt business. I don't have that. I didn't do that. I was really, I was a creative kid, did a lot of art, music, theater, etc., in addition to kind of my normal schoolwork. And when I went to college, I wanted to get into business. And I figured, honestly, I kind of went into business thinking that business would then set me up to be free later. And I had this idea that, oh, I can make a bunch of money in business and then I can go be creative. And then, yeah, so the moment was after college, I worked at a consulting firm. I worked at McKinsey & Company, and then I worked at a private equity firm in the consumer retail universe, was really interested in consumer retail brands, was interested in restaurants, retailers, CPG, wasn't sure what I wanted to do exactly, but knew I wanted to work, help operate those businesses. And the actual moment that sparked the entrepreneurial journey was rejection. I applied to Harvard Business School and Stanford Graduate School of Business, and I didn't even get an interview at either, which is like a... They only let in, I don't know, a third to half the  people they interview, so I wasn't even considered. So that was a little bit of a wake-up call. But then it took something- I mean, listen, a lot of people would get rejected from there if they applied. I'm aware of that. But for me, that was a wake-up call, and it was a big enough wake-up call to be like, what do I want to do with my life? And I thought about that notion of being creative and having freedom. And I realized that I have a high risk tolerance. Why don't I use that to my advantage? I looked around at my colleagues and I tried to be self-aware. It was really the first time in my life, maybe I was, I tried to be self-aware at 24. And I realized I had a high risk tolerance and I had a proclivity to be creative and I had a desire to be creative, but I also have this burgeoning business skillset. And why don't I try to put all of those together? And the equation kind of equals entrepreneurship. And as far as the idea itself for Tecovas and Western boots, I was a homesick Texan living in New York. I had started wearing cowboy boots in college. I went to the college in Northeast and that's, I started to feel homesick then. And that was sort of my connection to Texas. And I continued that trend in New York, and I would wear them out. I loved getting weird looks, compliments, whatever. I had a pair of ostrich boots that I wore all the time. And yeah, I realized like for me personally, that was the most notable thing I owned in my closet. It was maybe the most high quality, expensive thing that I had bought as an early 20 something guy. And there was a story behind it. And I just felt really compelled to dig into the industry. And hindsight's 20/20 now, I know a lot more about like where Tecovas fits in the universe and where the opportunity was. I don't think I had the full vision for that, but I did have a simple enough vision that there was something missing. And the brand that I wanted to exist was missing. And it was a big enough category to be interesting and to take that risk and to leave a lucrative career path, to bet on myself and go after. So yeah, that was the long story short. And so yeah, summer, summer 2014, I left my job in private equity and moved to Texas, moved to Austin, moved back to Texas, but I'd never lived in Austin. And Austin is where Tecovas was born about a year later. 

Chris Powers: Okay, a few things there. Did you realize the brand, like you said, this thing needed to exist. Did you go around and look at data and see it that way, or was it just like a feeling inside that the thing that you wanted to give birth to or bring to the world wasn't there yet, or was the data saying it? 

Paul Hedrick: It was a little bit of both. I did look at some data. I'm not, maybe ironically, a very data-oriented person. I'm a little bit more of a gut-feeling guy, for sure. I think I was biased in that I was looking for confirmation that there was something to do. But the data did say that the category was bigger than I thought. So, I assumed that cowboy boots was a sort of niche, Western boots in the US was sort of a niche category. I maybe would have predicted it to be a 500 million, maybe a billion dollar category, sort of retail sales. And it's like 3 or 4 billion. Today, it's probably 4 billion. Back then, maybe it was 3. So, reasonably bigger than I thought and bigger than a bread box, big enough to even if I could go be the number three, four, five player, could build a pretty big business. And then, yeah, when you looked at the mapping of where people sat, there was very clearly- the only large brand that existed that had scaled was pretty mass market and made a lot of work boots and was sort of in that sub $200 price point. And there was just a really big playing field, I thought, in the price point, and the quality, and the style, and the sort of contemporary nature of the use case, of like the lifestyle wear use case that I didn't think was big filled. And you could see, not necessarily in the data, but you could see in the storytelling and in the history of the last 20 years of the category, a lot of the brands had been compiled and sort of left to stagnate. And it just felt like the category was so behind all the other apparel and footwear categories. Everyone else had adopted online, had modern brands, had brands oriented toward millennials. And this brand, this category just seemed to be dusty, seemed to be stagnant. And I'm like, there's got to be at least a handful of other people like me who would want a new brand, who could buy, who as long as they- it was a good brand and they followed the rules that you're supposed to follow in terms of respect for the category and the heritage, the quality of the product had to be up to snuff, the style had to be authentic but appealing broadly, and the messaging had to be authentic. And I'm Texan. I felt authentic enough as a genuine boot wearer to be the one to fill the gap. You got to have a little bit of that confidence. You got to have a little swagger to come in and create something. And I felt like I had it. Yeah. 

Chris Powers: Real quick, what does Tecovas mean? How did you come up with the name? I feel like that's a big decision when you're building a Western wear company. 

Paul Hedrick: I think it's a big decision no matter what you're creating, especially a consumer brand. Man, naming is tough, I will say. I really like where we ended up. I did not like it at first. It felt like I was forced to pick an obscure word, just because nothing was available. I hired a lawyer to help look up names. I came up with so many names. Oh, no, some old hat company has that trademark. Oh, no, that's a related apparel brand. And I mean, I tried a lot. And what actually ended up happening was the branding agency that I hired and I, we decided that we wanted the name to have connection to Texas. We wanted it to be real. We didn't want to make up a word, which is what, by the way, lawyers will always tell you. The lawyers will say, just make up a word. It's way easier to trademark. And I didn't want to do that. I couldn't think of any. Maybe I wasn't creative enough. I couldn't think of a made up word that I liked. And we did a review of all, of a bunch of sort of obscure but real geological and geographical references, and Tecovas stood out. So, to answer your question, it's the name of a rock formation, like a geological formation within the Palo Duro Canyon. For people who don't know what the Palo Duro is, it's the second largest canyon formation in the U.S. after that one in Arizona. It's very beautiful. It looks very similar to the Grand Canyon. It's got more reds and oranges and really cool hues. And it's in Texas. It's one of our most beautiful natural landmarks. And if you want to have a tie to Texas and you want to reference something beautiful and timeless, you couldn't look at a better place. And that's what they told me. My agency convinced me to name it that. And I was like, man, no one's going to know how to pronounce that or spell it. Everyone's going to think it's plural or singular. They're going to chop off the S. And guess what people do? People call it Tecova, and that's really annoying. It's always got an S. It's Tecovas. 

Chris Powers: Well, maybe nobody's ever asked. I don't even know if you can remember. Do you remember what second place was? What'd you want to go with? 

Paul Hedrick: Oh, yeah. I thought about naming it Bandera, which is the cowboy capital of the world. Really cool city about an hour and a half from Austin. We actually had a style, we discontinued it, we had a style booth called the Bandera. That was one. We had plays on that. I thought about calling it Walker. I don't know, it just felt- it reminded a little bit of Walker Texas Ranger, but I also knew comfort was such a big part of our story that I wanted there to be almost a literal tie to it. And that one just got universally panned by all my- none of my friends liked that name. I still have a pitch deck, actually, that says Walker on it saved to my hard drive from late 2014, early 2015. Yeah, those are the ones I considered, but it's tough to trademark. 

Chris Powers: We'll work our way there. I'll say something and then we'll work our way backwards. You have over 40 retail locations. When we were talking the other day, and we'll talk a lot about it today, we talked about one of your moats being the model, the retail model and the radical hospitality kind of culture that you've built. But my question really starts from day one, should the mission be- like the product obviously has to be great, was it to build the best boot or was it to build the best brand within the Western wear? Does that make sense? 

Paul Hedrick: A little bit of both, but definitely, my orientation at the beginning, which I think really played to our advantage, to my advantage, was I was obsessed with product. So yeah, it was definitely to build the best boot. I took an inordinate amount of time with the factories to design the first pair. We launched with four styles, two for men, two for women. And I went to them and I said, I don't know what this is going to turn into, but my goal is for us to create effectively the perfect boot and only have different styles because I want to serve men and women, and we think there's enough of a split between roper and cowboy for men, for example. But essentially, the goal was to create the perfect boot. It was to create the highest quality boot in the market and then sell it for whatever we could with a new business model, certainly, direct-to-consumer model, which we can talk about. But yeah, I went down and I took all my favorite pairs with me and I said, I like this about this, I like this about this, I really don't like this about this. You had to learn. I had to learn about- I didn't use a sourcing agent, a designer, or a developer. It was just me and factories. I learned a ton, obviously, but the goal was to change a few things that I thought would make it actually more consumer-friendly. Notably, for us, it was relatively simple. It was how the leathers were tanned. Let's tan them to feel broken in on day one. And it was the underfoot comfort. Most of the high-end brands had very low underfoot comfort. They were just a straight veg-town footbed. And you could arguably not mess with the quality of the boot by just adding a little bit of a cushion in there. And so that kind of became our thing and uncompromised quality everywhere else. So, the goal is always to make the best, to make the most appealing, and then be really good at merchandising. So be really good at merchandising is just product market fit. It's having the fewest SKUs, the fewest number of styles that can be appealing to the most people and knowing when to split, how many to split it into. And I realized without knowing it until doing it, that those were skills of mine. And that was things that we had to be really good at if we wanted to win and get product market fit. So yeah, it all comes- it starts with a product, starts and ends with a product. If you don't have- you don't know who your consumer is and what product they want, then you're never going to succeed, doesn't matter what your marketplace strategy is. It doesn't matter if you want to sell online or to brick and mortar, if you're wholesale or international, it doesn't matter if you don't have something that people are really compelled to buy and to love and to buy again and to talk about once they buy it. So yeah, that was always the main focus. 

Chris Powers: Where were the factories? Were they down, were they in America or down in Mexico or overseas? 

Paul Hedrick: León, Mexico. So that was one of the early learnings/easy parts, honestly, of the entrepreneurial journey was, if I started in apparel and was trying to figure out where to make the best shirt, man, the answer could have been 15 different countries, a thousand different factories, and luckily, it didn't take a whole lot of research. But when I started doing the cold calling and the industry integration, the industry research, pick up the phone, it was very clear that it was only one city in the world that high end, good year welted, exotic and not exotic cowboy boots were being produced. It was luckily an hour, 40-minute flight from Austin or from Texas. Unfortunately, still no direct flights from Austin to León. But yeah, León, Guanajuato, Mexico, has been a leather and shoemaking capital of the world since the Second World War, almost 100 years, over 100 years of leathermaking, really got into the shoemaking business in World War II. And so, yeah, that's where everyone was already making them and they weren't really talking about it. And so there was, in addition to a really high quality production opportunity there and an obvious place to go, there was an opportunity to tell their story and to kind of elevate the story of Mexico, which is really where the best boots in the world were being made. In our category, at least, there was sort of a misinformed perception that USA was where the best were made. The truth is, I mean, USA manufacturing had been carved out almost completely in the 80s and 90s especially. And it was actually really hard to find a high-quality boot made in America. Not to say that there aren't, but there's none being made in any sort of high quantities. You'd have to have a really niche brand if you were committed fully to making it in America, or you'd have to downgrade it, the quality that we were looking for, for better or for worse. 

Chris Powers: Okay, real quick, so you found out it was in León, or León? 

Paul Hedrick: Yeah, León, yeah. 

Chris Powers: And maybe this could be applicable to any market, but I'm assuming you called a few factories around, made a few contacts, and they were like, yeah, come on down. If I was sitting here, let's pretend I'm going to go make a boot or anything really, what's like important to have flushed out before you proverbially like fly into that city and start meeting with factories? Or is it- like, how do you know you're not going to, it's not a big scam when you get there, I guess? And you hear all these stories of like Tom shoes, and he went down and met somebody. And I know people that have started stuff in Asia. But like if I wanted to manufacture something, how would I know the day that I'm arriving, I'm going to have like a very productive few days ahead of me? 

Paul Hedrick: You will not know. You will not know and you probably won't be productive. Yeah, I mean, listen, every country that I- we manufacture in a few different- we manufacture apparel all over the world. We manufacture accessories all over the world. We manufacture footwear in both Mexico and Vietnam now, primarily in Mexico still, especially kind of the core of our line, but every country has a different personality and a different kind of way of working. And I mean, I was going in there as blind as you could get. So, the truth is I didn't, I don't think I found- you work with who's willing to work with you at first. And the chance that the person is willing to work with you on day one is the person that you want to be working with on day 1000 or 10,000 is pretty low, I would say. The factory that we first started with actually doesn't exist anymore. They made perfectly fine product for us to get started in, but I'd be lying if I said they were as good as the people that we work with now. I think Mexico has their personality from just my sample experience would be they're relatively low risk. They don't like taking big risks. They'd rather have regular sort of, they'd almost rather have regular business, regular revenue than to grow revenue and take a lot of risk from growing revenue. So yeah, there weren't that many people who wanted to take a risk. I actually had what I would consider to be a top factory contact down there that I'd gotten, and they took a meeting with me, and they did not agree to make the boots because they were making a couple of key competitors at the time and they thought that would put their business at risk, and they sent me across the street. Yeah, I mean, and then you earn it. You earn your reputation. I was determined from day one that, I had so much confidence that what we were making and what we could make and the brand that we were creating was going to have so much firepower, staying power, growing power, that as long as we paid our bills on time, as long as every time we gave them a forecast, we hit it or beat it, that we would get better and better stature within the city. And now we're by far the most well-renowned brand in town. Factories want our business, and we've built up a 10 year reputation of doing what we say we're going to do, growing, paying on time, not screwing people over, and it just takes time. 

Chris Powers: So awesome. When you showed up the first time though, and you said you brought some boots, did you already have some like sketches done, or like, what was your- what did you have already complete by the time you literally arrived in Leon the first time? 

Paul Hedrick: Yeah, it was November 2014. And I mostly was coming with a pitch deck. I was taking my consultant and sort of investor operator hat and trying to convince, and I was like, this is going to be really hard work convincing them to work with me, which by the way, it was, but they did not want to see a deck. I'll say that much. 

Chris Powers: They didn't care that you worked at McKinsey, did they? 

Paul Hedrick: They did not care. No, not at all. I had a beautiful deck, by the way. It was not very long, but it was really well formatted. But anyway, no, they mostly just want proof. They want proof. But yeah, I did come with sketches as well. I had a pretty clear idea for what I wanted the brand to be. I talked about price point and quality and specs. I didn't know a whole lot about shoemaking and bootmaking then, but I knew enough to be dangerous, to have an opinion, have an opinion on where I wanted mine, where I wanted Tecovas to fit in the market. Actually, the first time I go, it wasn't called Tecovas. That's when I brought that Walker pitch deck. We didn't come up with a name until December 2014. But yeah, anyway, it's just a, hey, I know a guy that might want some business over there. Yeah, maybe he'll make you some shoes. I convinced someone to work with me, and they're mostly concerned about minimums and payment terms, and I was willing to pay half up front and that was all they needed to hear to get started. They gave me a 2,000 pair minimum, which I didn't blink at because I had the unrealistic confidence of a new entrepreneur and I had set a million dollar revenue budget for the first year and said, oh, so we'll blow through two or three times that number for sure in our first year, so we'll take on the inventory. I just argued to spread it out over four months. I asked if they would let me spread it out over four months, which they did, and lo and behold, we actually sold it. We sold 2000 pairs in four months. And we had placed the reorder right when we were running out, and it was kind of perfect. And we ended up selling that almost $2 million of boots in the first year and exceeded my estimate by almost 2x. 

Chris Powers: You said something, you said D2C, we can talk about that, D2C. So you started out selling online only, correct? 

Paul Hedrick: Yes. 

Chris Powers: How long did that last until, was that always a stepping stone to get to retail, or did the vision to get into retail just kind of come organically as you were moving forward? 

Paul Hedrick: So, yeah, part of the obvious positioning story of Tecovas, especially in the first two or three years, was the fact that we were a D2C brand. We were the first D2C brand and... this was coming at a time when that sort of wave of D2C brands was crashing into the shore in a good way, in a fun way. And it felt like every brand targeting millennials was talking about a story of quality and value and delivering it to consumers because they're online only and they're not selling to middlemen, so to speak. So yeah, we latched onto that language. It was definitely something that I considered to be an important part of our story. The truth is, well, twofold answer to your question. One, it became pretty clear over a few years that that's just another leg of a marketplace strategy. That's just one way to sell and that ultimately consumers want you to meet you where they want to be met. They want you to meet them where they want to shop, whether that's online, offline, your website, someone else's store. And ultimately, even from day one, it was clear that the thing that people liked the most about Tecovas was not the value proposition, so to speak, or the fact that we were approachable, affordable, even though we were, I think, significantly lower in retail price than the equivalent quality competition. And we still are today, for what it's worth. Value is important to us. It always will be. I think delivering really good quality per dollar is important for any brand, no matter what their marketplace strategy is. And I would firmly stand behind any of our boots as the best bang for the buck out there still. Although, maybe some haters out there would argue against me, but I happen to know a little bit more about the product than they do probably, and I'm going to stick with that. Anyway... of course, yeah, the bigger you get, definitely the more haters you get. Deal with it and it can be fun. But in any case, yeah, that became very quickly something that was just part of our strategy long-term as opposed to the strategy long-term. And the other thing for me was, I don't think it was on day one, I'd be lying if I said that I had this vision on day one, but certainly in the first couple of years, I was so hell bent on making the best experience, the best brand. We were really experienced. From day one, I always said, I called our customer service team customer experience team, come day one. And the whole idea was we over hired that team and just like be able to say yes to everything. We want to have the absolute best net promoter score, absolute best customer service reputation in the business on day one. We want everyone's experience with the brand to be left, right, up, down, better than any other brand that ever experienced. It was pretty clear early on that that wasn't going to happen in a FedEx box or UPS box or whoever we're using at the time. I think we started with FedEx. No offense to them, great carrier. But listen, I mean, I don't- personally, I would rather shop in person for a cowboy boot. And most of our customers, I think, would too. And there's a number of reasons for that. I mean, it's a dead fit product, unlike a running shoe, there's no laces, and the boot is a boot. It's a handcrafted product. There's very minor differentiations in each pair that as much as we can work to make them fit exactly the same, you're never going to- I mean, at the end of the day, some guy's hands is sewing something together at some point in the product and you want to get it right. So the dead fit is a huge part of the experience. The education is a huge part of the experience. Because we were really shouting from the rooftops the message of Western, we happened to be attracting a lot more first-timers, I think, than other brands may have. And as a result, there was a higher need for education and get that education in person, obviously, a lot more real-time, a lot better. So anyway, all of that to say, I got really excited about creating a full end-to-end physical experience for Tecovas pretty early. And even, we actually opened a showroom not even a year into the brand. Arguably the fact that we had a lease on a little house on the east side that I was paying two more years of rent on, that probably added to the decision, east side of Austin. We had a little about 400 selling square feet of retail in a little bungalow on the east side that we opened for five hours a week, 12 to 5 on Saturdays only. We were a small team at the time, three to eight people through that year that it was open. You'd be voluntold to show up on Saturday for five hours. I was there every Saturday, like maybe except for two or three weekends when I had to go to a wedding or something. I mean, I would go to H-E-B, pick up a 12-pack of Topo Chico and a six-pack of beer and I put it in the cooler and we'd sit in the showroom, and people would come to meet us. And this was when no one knew about the brand. This shop was not like a foot traffic shop. You had to Google it, you had to know exactly where it was, you had to drive there. And we, in just five hours a week, so what is that, 250 hours a year, with no physical inventory that people were walking out with, only fit sizes, we were doing about half a million run rate and at a 400 square feet. So, if you divide that to hours, if you divide the revenue and the hours and the square footage, probably like 2x Apple numbers, whatever. It's some crazy number. So very clearly there was demand for physical. And so we shut that down when we knew that we couldn't really keep up, keep it going. And it took about a year and change, and we opened our first retail store. After we shut it, we shut that down maybe end of ’17, and then we opened our first retail store in March 2019. And actually that year, I was so certain that retail was going to be important to us, I signed five leases for the first year. We opened all of them. It really changed the course of the company for sure. They all worked, big surprise. 

Chris Powers: We're going to get there in a second. You got five stores open just in time for COVID? 

Paul Hedrick: That's right. I also signed ten more leases. Between the end of ’19- by February 2020, we had five stores open and ten leases signed for new stores to open in 2020. 

Chris Powers: All right. We're going to talk about that part in a second. We're not getting away from that. But real quick, so you're good at building boots, you've now built apparel, you have clear demand for your product. Is building out the right, and we'll get to hospitality in a second, but is designing the store and getting that vibe right the same kind of creativity and thought process that goes into making an actual piece of apparel, or do you have to think differently? 

Paul Hedrick: It's equal in importance, very different process. Luckily, yeah, luckily I had a strong interest and I like to shop, and I loved architecture and design. And so, there was a strong- we didn't need to outsource too much when it came to the thinking and the strategy of, at least to have an opinion on the thinking and the strategy of our stores. I had a pretty clear vision in my head for what I wanted the store to look and feel like. We had done enough of selling in person, never in a full end to end retail environment, but we had done enough to know what it was like to fit people for boots, what they might want to come in for, what they might want to do, what they might want to sit, how they might flow. So yeah, luckily, similar to when I went down to Mexico, we didn't really get a lot of- We hired a great architect. I loved architecture, so I hired the fanciest architecture firm in Austin. They were great. They designed beautiful stores for us for our first few years. But other than the design that they would bring to the table, we pretty much did it all, all the thinking ourselves, the strategy ourselves, the hiring ourselves. The hardest part about retail is people. Every brand who's ever emailed, texted, LinkedIn messaged me saying, oh my gosh, I love Tecovas retail stores. I'm an online only brand now, but I want to open my first store. How did you do it? And in almost every case, people are trying to open one store. And they're like, oh, how do I get a store manager? And do I have them report to me? I'm the CEO. I'm like, listen, it's really hard to do one store. I'll just tell you that right now. By the way, yes, if you have a store manager, they should report directly to you because that is the most- that person is now controlling all of the physical interactions of your brand. So, you better- you damn well should want them to report to you. Luckily for us, we already had a plan to open at least three, the leases that we signed were kind of, we knew that three were going to be opening within the first six to eight months. And so we were able to bring on a more senior leader at the beginning to help scale personnel and know exactly kind of the issues. We could see around the corner of two, three, four, five stores. We could hire a team for five stores from day one, which is a huge advantage. So that was kind of how it came together. As far as the look and feel, we didn't have our full operating vision of retail yet, but we've really gotten it over the last five, six years. But we did know what it wanted to feel like, look and feel like. We wanted it to feel like a modern Texas, approachable but authentic. And I think what Tecovas has always done well is melding approachability and authenticity. We have three internal brand pillars, genuine, trailblazing and welcoming. And the genuine and the welcoming is something that I don't think any other brand was doing well together. You were either- you could either have approachability, which honestly no one had, or you could have genuine authentic story and 150 year history or rodeo professionals wearing, there are different ways to get authenticity. And I think for us, that melding was what we wanted the stores to look and feel like too. So it was always a pleasure when people walked in and they said, I don't know what it is about this place, but it feels Western, but it also feels modern. That's the trailblazing part. But it also feels like something, somewhere that is selling cowboy boots, and I like it. There's like this, I feel like I can walk in, and I want it to feel like something's- like a really cool person's living room. We always wanted it to feel that way. We wanted it to feel like somewhere you can walk in, and you wanted to sit in that big leather couch, grab a bourbon, grab a beer, which we served from day one. That was the other part of the vision. Not to get people drunk, but to be able to create an environment where they felt comfortable and they felt compelled to stay. And for people who didn't like to shop, why don't they give you an environment where you just might like to shop and stay a little bit and then put no pressure on them. Sorry, I'm kind of rambling, but that was the other thing that I remember from the beginning was I remember telling our first store managers, you can basically optimize for them selling a lot, like pushing people into higher sales, more sales, or you can optimize for operations and operating really well and low cost and efficiently, or you can optimize for customer experience and service and hospitality. It's kind of one of those things like fast, cheap, and high quality, like you can't have- you can have two of the three or whatever. I told the team, optimize for the third one, optimize for service and hospitality all day, every day. I don't even really care about the second and the third yet. It's one of those, if you build it, they will come. If you give someone great hospitality, I'm not worried about the revenue. I think the revenue will come. We didn't incentivize people on, they weren't on commission. We just paid people well. And they knew what they were getting paid. They weren't worried about upselling Joe Bob or walking in the store. So yeah, that's all- And because we only optimize for that one, by the way, we had a lot of issues with the operations. And so I was like, why don't we optimize for hospitality and operations and let the sales take care of themselves. And that's basically where we are today. 

Chris Powers: Did you design the hospitality experience, or did you hire someone from the hotel industry or from another place that was a world-class hospitality company, or did you just, like you did with everything else, kind of have a gut feel for what it needed to be? 

Paul Hedrick: Well, I don't want to take all the credit, but no, we didn't hire anything from the out- We didn't hire anyone from the outside. The word hospitality was something we started using pretty early on. Our team was so hospitality oriented. But yeah, I think it was a lot coming from leading by example. One of my favorite entrepreneurs in the world, if not my favorite, is Danny Meyer, the founder of Union Square Hospitality Group, Shake Shack. He had written a book called Setting the Table, which is, I forget the subtitle of it, but it's basically why hospitality, why your business could use hospitality and be better basically. And I made everyone on the team read it, I put it on everyone's desk when they joined for a little, for about a year. And I was utterly convinced that that word had a really special place in our business, that we hadn't really found a place for it yet until we opened the stores. Now we have an internal pillar that actually sits under. We have like a brand house that has a bunch of words on it. But the word that, you already said it, radical hospitality is a two word phrase that probably is the most uttered phrase at Tecovas these days. It's in basically all of our strategy mapping, all of our strategy work, all of our training. And I don't think anyone else was saying those two words together at the time. There was radical transparency was being said, was being used by some other brands, including Everlane, but we really lead in the radical hospitality. It doesn't, I don't want to get on a big high horse, it doesn't really mean anything that special other than just every time you're thinking about a decision, what's the thing that the customer might want you to do, and can you say yes to it? And can you surprise and delight them along the way? And so, yeah, our hospitality program has grown over time. We didn't- at the beginning, it was just about being treated well, being welcomed, creating a fun environment and serving free alcohol and non-alcoholic drinks at the store. And that was sort of the extent of our hospitality, if you will. It's now grown into, well, what will people expect when they walk into a high-end boot store? What would they want from that company? Will they want free boot shines? Okay, cool, we’ll do free boot shines. Sure they want- they like it. But by the way, they love the drinks. People, we have a big bar program. So that was definitely something people wanted. But what are they asking for? You ask the team, what are they asking for? Oh, they’re asking for boot stretching. Some people want the calf stretched. All right, let's figure out how to offer it. Oh, they want personalization. At first we had- let's put a debosser machine in every store and start with the accessories and then move on to other products when we can. Now we offer branding in all our stores. I think we, oh my gosh, we branded like an absurd number of boots last year. I think we branded 50,000 pairs of boots just in Q4. I think about a quarter of our retail transactions now include a personalization element, if not more. It's probably growing by the day as people become more aware of it. So it's sort of blossomed into a, how do you say yes to the customer? And that does come from hotel. We didn't hire someone from the hotel industry, but I'd read a lot of books, and I personally am a hotel buff. And so, I go to a lot of nice hotels, and I like to see, I like to borrow what they've done well. And a lot of hotels famously have this kind of don't say- figure out how to not say no to the guest rule, and we tried to borrow that as much as we can, obviously to a reasonable extent. 

Chris Powers: Okay. Is there a difference between don't say no to the customer and the customer is always right, or are those both the same exact thing? Because there's some entrepreneurs that would say the customer's definitely wrong at times. 

Paul Hedrick: Oh, I would agree with that completely. The customer's not always right, for sure. And honestly, listen... 

Chris Powers: After ten bourbons waiting for their boots. 

Paul Hedrick: Well, we don't serve people ten bourbons. That would be against most state liquor laws. But how do I CYA this? Anyway, no, honestly like the higher end the establishment and the more you're known for customer service, unfortunately, the more I think people do also try to take advantage of you. So yeah, I mean, one of the core tenets of having a great team in a retail and hospitality business like ours is people knowing, having great judgment and great sort of customer hands, if you will, and just like we had client hands at McKinsey. I'm like, oh, what is client hands? That just means someone who's like really good at dealing with tough clients and delivering bad news and making them feel good. I'm like, all right, we need those kinds of people in retail. And they're not always right. And they know when they're not as well, I would say, like 90% of the time. I mean, we've had many people try to abuse our generous return policies and whatnot. And you make the judgment call. And I think that the thing I love about an organization like ours is you don't actually need really- you need really good protocols and the logistics center or fulfillment center needs really strong training. But if you're dealing with someone one-on-one, especially if you're at a manager-director level, you just need to be trusted with good judgment. And people generally have good judgment when they've been allowed the freedom to have judgment. And not everyone makes the same decision. There's no black and white. There's some gray areas. And oftentimes when I'm in stores, I go to our stores a lot, and if our associates know that I'm around, they'll be like, hey, by the way, we got this kind of random question, we got this question that was kind of tough for us. And someone brought this in and they wanted to know if XYZ could happen. You know what, that's a good one. You hit a gray area. What did you guys say? They say, oh, we did this. I'm like, that's great. Give them the confidence that they made, even if you could have gone either way or whatever, give them the confidence that they have the freedom to make a hospitality-driven judgment call. 

Chris Powers: All right. So, if you open up three stores, even if you open up one store, I know you said it'd be hard to do with just one store, but you can manage hospitality when it's small, but if you look at Chick-fil-A, one of the things they're most admired for is you can drive through all 5,000 of their locations and it's always my pleasure and just perfect manners. How do you scale radical hospitality? Like how does it continue? Because like you said, you might say like our culture's X, but the culture is really what I experience when I go drive down to the Fort Worth store here in a bit, two miles from this office. 

Paul Hedrick: Yeah, love that store. So, I mean, listen, I only know what I know from our experience, and we haven't, it hasn't broken yet. And so we haven't been able to have to fix anything that's majorly broken as far as culture and service and scaling operations goes. It has been really hard. So I'd say the number one thing is talent and senior talent, especially. And we're on our third head of retail, and they've all been great for their moments in time and where we were on our scale. But I mean, we would not be here without her and the team she's been able to scale. It takes the right people and the right person, but also the right alignment. And I can tell you our messaging and our culture is something that people are excited to deliver. And I think Chick-fil-A probably hires people that are excited to be polite, to be kind, to be generous, to be friendly. And I think like attracts like. And so, we've been able to- a lot of people have asked me who've been to a number of, been to five or ten of our stores, they say, man, how have you been able to get- like, it seems like every store kind of has this, like the same type of people in it. They're all like super helpful, super friendly. By the way, they're from all walks of life and they're from all age groups and genders and races. And it's like, but they all have some of that thing in common. And I think it's like attracts like, culture attracts culture, when it's top down and people who are at the top really believe in it and there is servant leadership and they're approaching their teams in a radically hospitable way. It's a cycle that moves forward. But it all comes out of people, and you've got to pay people well, you've got to make it a fun place to work. Some other elements that have helped us, well, I think to draw from the Chick-fil-A analogy, one of the things I know about that business that makes it tick the way it does is they only allow single-owner friendship franchisees, single-unit franchisees. And so you don't have sort of the problem of challenge of scale. You basically have a bunch of servant minded owners who are, they're sweeping the floor because it's their location and they're leading from the top. We don't have franchises, which is our equivalent. We operate all of our stores. And so, there's no chance that any of our stores feel disconnected from corporate and/or the central Tecovas culture. And so that's an advantage. I think it will be challenging to scale internationally. We haven't done that yet for good reason. We will for sure. I'm really excited about it. We will certainly have partners and/or Tecovas stores outside the U.S. in the coming years, but that'll be a challenge. It'll be like probably the biggest challenge in that scale. And we'll talk about it as a board, as a leadership team and figure it out. And the other thing I would say is, because our field, our retail field is so big at this point, I think one of the big advantages we do is we lean into them. We lean in them for feedback. We lean into them to connect into the team, Slack channels. And one of the biggest things we do is have upward mobility. I think it might change. It might slow down our growth down the road. But right now, because we've been in such a consistent growth mode, opening about ten units a year, everyone in the field sees it as a growth opportunity. They know that if they do really well, we'd much rather tap a current store manager to open a new store, a current assistant store manager to open a new store as a store manager. And when you are growing healthily and you've got a healthy culture and things are spinning, people just want to grow. People want to get more of the top spots where they want to grow. So we were offering that internally as a really important thing. Minor note that's related to that, we just started a summer internship program, for example, and man, you could probably imagine, I get pinged left and right, all my buddies, all my friends who have kids in college, oh my God, my son, my daughter, and they only need an internship, I swear, they're amazing, marketing, undergrad. Cool. Well, we're only hiring our interns from our retail field because we've already got hundreds and hundreds of people who love the brand, who are awesome, and if your son or daughter wants to work at Tecovas, tell them to apply to a retail store. Most people don't want to do that, but we're a retailer. We want retail people. It's in our blood. The best people that I know in our business are the people who've worn a lot of different hats, have grown up in stores. So, yeah, that's another big advantage. 

Chris Powers: So, you said, Danny Meyer, I read his book on reasonable hospitality, which was awesome. You said like, yeah, we like to hire people that like to be polite and be nice to people. And then when you read Danny Meyer, like everything seems obvious. Like why would every business not just want to be like good people that treat their customers really well? And maybe we've already touched on it in some way, but like, why can't everybody do this? Is it more because the founder or the person in charge just doesn't see it as valuable? Is it because, like you said, they'd rather win on service or on cost and operation? But like, I guess, why does everybody not choose this path? It seems so obvious. 

Paul Hedrick: Chris, I've been asked the same question for 10 years. And I really, again, I don't want to make it seem like we're speaking from a pulpit, the two of us, our high horse, but yeah, I really do think that it's easy to be good. It's easy to treat the customer well. So yeah, the actual answer to the question, why don't all businesses do that? I mean, it's hard. It takes- and you have to be a certain level of premium as well. So I do think that there's plenty of businesses out there that have different priorities. They would have maybe picked saving money. If you're trying to be a low-cost producer, for example, which we are not, you're going to have different priorities. I think every business probably has a set of trade-offs. They probably have three, four, or five attributes they can really optimize for. And the reality is you can probably only optimize for two or three of them. You can get two out of the three, three out of the five, or whatever. Obviously, Zappos is famous for optimizing for speed at service and I guess maybe like availability and breadth, but they're not necessarily optimizing for super premium experience, or I don't know. There's always a trade-off. Every business has their trade-offs that they made, doesn't necessarily mean they're being run poorly. But we are a premium contemporary lifestyle footwear apparel brand, which means that to beat our competition, we have to win on- we have to have a baseline, if not, really, really winning quality. And then we got to differentiate ourselves in some way. And for us, the way we've chosen to differentiate ourselves is the radical hospitality. 

Chris Powers: All right. Going back a second. So, March 2020 hits, which might've been the worst time maybe in our, at least our lifetimes to be in the retail business. What was that kind of like? And what was- how did you kind of- just what was that year like? I'm just sure you woke up and were in, I imagine, at least fearful at some point. That's a really tough spot to be in. I own real estate for a living and I watched the real estate- the Wall Street Journal say, don't pay your landlord. So that was- my worst moments were those first couple of weeks. 

Paul Hedrick: Yeah, I shared a lot of frustration and fear and sadness and with my friends in the real estate industry, for sure. It was really scary. It was the worst time of my life personally. It was existential. But those six months, kind of April through the fall, were also the most defining moments of my career for our brand. We came out stronger. Yeah, so really tactically, I mean, everything is like clear as day. March 13th, 2020 was the Friday, Friday the 13th. It was the day before that President Trump at the time had had the first press conference where he was officially talking about the pandemic in that language. So that Friday was definitely like a black Friday. It was definitely bad. And that happened to be the opening day of our Plano store. So I was in the Dallas area for that. I was in Plano. And man, I remember, God, I can tell so many stories. But yeah, that day you couldn't find hand sanitizer anywhere. And I'm getting calls from the store manager, oh my God, like, what do we need for the opening? I'm like, I don't know, just business as usual. And we had already been kind of, we had five store openings, this was our sixth one. We were already kind of famous for having crazy lines, hundreds of people. And I'm shaking 150 hands at every store opening, and we're doing like $100,000 the first day, revving all of our stores. And it was actually no different in Plano. So, I had this little surreal moment where I had literally a box of baby wipes in my back pocket that I was like wiping my hands with after shaking people's hands, wondering, is this how you do it? I don't know. And I remember I took the Vonlane, the bus between Austin and Dallas, I took the bus home, and I had a board member call me on the bus ride. He was just like, Paul, this is it. This is make or break. The world is ending. I have- he had spoken to a lot of people who knew a lot more than I did. And he's like, we need a plan for X, Y, Z. Let's, we got to meet tomorrow, on Monday. We got to figure out how we're going to survive. And I'm like, I don't know, man, I think these are going pretty well. We just sold like $200,000 of boots in Plano in like two days, three days, whatever it was, and we already paid that down, like a quarter of our build costs in like three days, anyway. But yeah, it shut down fast. And so yeah, by that Monday or Tuesday, we had sent everyone home. That was really hard. But we had like a... We quickly had to come up with a plan. If you were a CEO in that time, it was existential. And for us, it was... Our demand for our product went down probably 50% overnight. Obviously, we shut down our stores. At the time, we were still the big majority online sales since we only had a few stores, but even our online demand went down at the time. I mean, I remember everyone's saying, oh, you're an e-commerce oriented brand, you'll be fine. I'm like, listen, that's just a sales channel. Are you wearing leather soled cowboy boots that were built for going out to concerts, dates, parties, work offices? Are you wearing those on your couch or are you wearing sweats and Hokas? Okay. That's what I thought. So no, no one was buying cowboy boots. At least half as many people were. And so yeah, when your business goes down by half overnight, you're going to make big changes. So we cut, yeah, we cut everywhere. We had to cut personnel, we had to cut advertising costs, we had to cut everything. I raised a round of capital that summer that was a slightly lower valuation than the previous round. You just did what you could. But we had a plan. The plan was a three-pronged plan. Seems like I remember the prongs. But basically, it was get healthy. So we cut our advertising spend in half overnight. And ironically, it got us healthy in a way that we probably wouldn't have gotten otherwise. So like, blessing in disguise, we were spending a lot of money in marketing at the time. Without a wartime moment, I'm not sure we would have maybe faced the tough decision to get off that drug. And we pretty much cut it down to where it is today as a percentage, which is really healthy then, and we kept it that way. We obviously had to trim some costs. And the other two prongs were, let's hug the customer. Let's figure out who our customer is. And let's stop focusing on acquiring a bunch of new ones. And let's just hug the living daylight out of who we have and see what we can give them and what do they want. They want new products. And so, the third prong was play offense. How can you play offense when everyone else is playing defense? The classic, when everyone else is fearful or panicking, how can you be hopeful and offensive? And for us, that was keep all the new products in the pipeline. So obviously we cut the size of orders for future orders for like our core product. By the way, we didn't cut a single order that we'd already placed, unlike all of our competition. And that's just right. That's just like good business. And again, I don't want to get on a high horse, but like, that's just what people should do. And a lot of brands didn't do that. And because of that, we were well regarded in Leon for the next few years. And we got what we needed when the boon town time happened 18 months, 12, 18 months later. But anyway, we kept all of our innovation in the pipeline. And that's the first thing that every other brand cut. And it's funny, we grew in 2020. We grew despite having that huge dip in natural demand for really the rest of the year. We grew because we kept everything in and we kept listening to our customer, kept giving them new stuff, which was hard, but when no one else is doing it, it makes a lot more noise. And we opened every store. We had ten stores signed with Plano as one of them. So that was one of the ten. We did delay. So, believe me, I was on the phone with landlords for 45 days straight and it was concession here, concession here, push here, pull there. And I got to tell you, Chris, I hate negotiating. Unlike all my like real estate friends, I am not a deal guy. I really, I'm a retail guy. I like making cool stuff and selling it. And I'm kind of the same way when I'm a consumer. I just like to buy stuff. I don't like to negotiate. I don’t like to haggle. I don't like to read legal documents. So that was probably my least favorite part of the whole thing was, man, I had to understand our leases, I had to argue with people, I had to be on the phone with lawyers when I didn't want to be spending any money on lawyers. And I did try to get out of a couple leases and didn't try that hard. I got a little bit of rebuff, like, okay, okay, we'll open the store. So we opened all of them, just slightly delayed. I think out of those leases, yeah, we opened eight in 2020, eight of those ten, and we opened the other two in like March, April ’21. So, yeah. 

Chris Powers: That was a tough year. I thought you were about to tell me that you came out with the Tecovas sweatpants line to bridge you through the summer. 

Paul Hedrick: There were some brief product development and ideation moments for sure. Not for sweatpants, but like, hey, how do we- I mean, there were people making masks, there were people making all kinds of lounge-y stuff. And should we make slippers? And we just kind of... we kept our brand hat on. We gave people what they wanted from us. And we probably could have sold some other stuff, but we stuck with boots mostly. 

Chris Powers: Okay. I got a couple more things. You actually just said something, you said brand hat, and you've actually kind of said this in different ways throughout the podcast, you've talked about it in pillars. Like, I imagine like a brand is like this thing, and the only things that fit the brand must go through it. Everything else is not allowed through the tunnel. The best brand makers in the world, and I put you in there, understand what goes through it and what doesn't, but they can also build a team that can do that, if that makes sense. Like, how do you- cause a lot of it's like gut feel. How do you know, even if you're this far, a millimeter outside a brand that is just not right, is it a gut thing or is it something that you're checking against almost like a physical brand board that you've built, if that makes sense? 

Paul Hedrick: Yeah, I'd say maybe a couple of different reactions to the question. One is, I think for a consumer brand especially, but really any company, I would argue having what we call internally a brand house is absolutely vital as something that has been established by the board and by the executive team and by the founders, whatever, the owners, and is very thoughtfully made. And by the way, it can evolve over time. It can change over time. We've changed ours a couple of times, but we are currently operating a brand house that we made about four or five years ago. It has to be day one training for everyone. This is what the brand is. It's basically vision, mission, and positioning are the biggest things that are part of that. Our mission is to steward the next generation of Western, for example. Every brand has a different one. And our pillars are genuine, trailblazing, and welcoming, and the pillars are the positioning. Positioning is what makes you different from everyone else. I like things to be mutually exclusive and collectively exhaustive, and niche-y, and I like that. I like if you know those four things about our business, you should know where we fit in the world. By the way, if there's three pillars, if two of them are true and the third isn't, then it's not Tecovas. It's kind of one of those, only Tecovas has all three of those. And if it doesn't have all three of them, then it can't be Tecovas. And so I think every brand has a version of that. And that's more of like a strategy alignment, brand alignment. That could be- I really think everyone in the company can pick, can use that as a filter. But the other reaction I have is, yeah, I mean, brand filter in general. I don't think that the brand house necessarily is a brand filter. It won't necessarily help you pick what color the wall should be. So yeah, obviously any consumer brand like ours has many documents, depending on what decision-making power you have at the company. We have visual guides, we have brand guides. I've definitely- it all comes down to the people, honestly. I was going to say, I definitely have noticed that some people are good at it, some people aren't. And some people have really great day one grasp of what a Tecovas boot, shirt, sign, chair, whatever, like furniture selection for the store, some people have a really natural knack for that and other people need to learn over time. And I think that's just a team thing, that's just a judgment thing. Obviously the people in the creative positions at the company, like a head of merchandising, design, marketing, creative, those people are the kinds of people that I and our CEO need to trust, like, all right, those people need to be the people that they are making 85, 90, 95% of the decisions they're making are the decisions that I would have, that we would have wanted to make subjectively in the name of the brand. And that's hard to do. So there's always going to be tolerance. And for me as a founder, I think the right answer for most businesses is for the founder to hold on to those decisions really tightly for the first few years, whatever, three to ten years, I don't know, depending on the brand, and know that there's a really nice history of decision making on the subjective side and the brand side that people can draw from. And then eventually you’ve got to scale it, and you can't scale one person's brain or decision making. So, there's also a little bit of, certainly for me, there's been a letting go of decision-making power over the last five to seven years. And it's been welcome in many ways. It can be frustrating sometimes when I see something that is a little bit different. I rarely see something that's fully off, but I'm not going to say never. But there's a feedback loop. Luckily, nothing last year- we're not building permanent structures or products. We are building things that we can learn from. And I could honestly use a little bit of more test and learn mindset in my life. I tend to be, I don't really like testing and learning personally. I like to be very decisive. If there's a spectrum of being purely data led and sort of customer survey led versus like being Steve Jobs, which is here's what's right, here's what's coming from my brain or whatever, I'm probably a little bit closer to the latter than the former. But I've surrounded myself with a lot of people over the years who are more of the data and customer led, and they've been really helpful in helping us evolve, see around my blind spots and so on and so forth. 

Chris Powers: You have to have thought about it. I know your heart's at Tecovas, but if you looked around the world today, what would be the next, if Tecovas vanished tomorrow and you had to pick where's the missing spot in the market today in a product category, I have to imagine you thought of something else you'd create one day? 

Paul Hedrick: Man, first of all, if Tecovas vanished, I'm solving for bigger problems because all my network is in Tecovas. 

Chris Powers: Vanished in a good way. Vanished in a good way. 

Paul Hedrick: Okay. Okay. Right. I don't know how that's possible, but I'll take the question at face value. Listen, I haven't actually thought about a gap that much. I am really not one of those people. I am passionate about products and experiences. I think if I were to do sort of a second mountain, try to climb a second mountain, if you will, I'd probably go either- And Tecovas was very close to home for me. It was close to my heart. It was something I loved and it was a product category I was wearing. But I wasn't obsessed with it. I was a normal consumer of it. So if I were to do something again, I'd probably try to go even more centered with it as opposed to being more outward. The way you phrased it was more like, out there, what's the biggest gap and opportunity? There probably is a bunch of answers to that question. I probably don't care as much about them. I think if I'm going to ever do anything else, I'd want it to not feel like work. I’d want it to be something that I get up every day excited to do. So probably creating products or experiences that I already love. I've always wanted to get further in hospitality. I've always dreamed of opening a hotel. My friends tell me it's bad business. But I had a lot of people, I had a lot of people telling me that footwear was bad business too. And I chose to ignore them. So, this is probably going to be something that I choose- that will get me compelled enough to choose to ignore. Clearer heads at some point, but not any time soon. 

Chris Powers: That's a great answer. Go inward. All right, man. I appreciate you joining me today. This was awesome. 

Paul Hedrick: Yeah, thanks, Chris. That was fun. Good questions and always fun to talk about it. 

Chris Powers: Thanks. I'll be down in Austin next week. I'm having dinner with Rob Gandy. 

Paul Hedrick: Hey, my boy. 

Chris Powers: Yeah. Rob and I are really good buddies...