Kona Ice: Tony Lamb

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You know, you w everyone knows that guy or you've read about that guy that just he can't get out of his own way and he just entrepreneurs till he dies and he never hits anything big and And you had that in your mind, you thought, Am I gonna be that guy? Yeah, I mean there's times that but you know, the responsibility is I've got th four kids and a wife and I'm sitting there with one truck thinking, Can I scale this? But You know, I was having a great time. My kids thought I was the greatest'cause I'm driving an ice cream truck.

Ha. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz and on the show today, how Tony Lam went from a door-to-door vacuum salesman to founding Kona Ice, a franchise empire of shaved ice trucks that now number more than 1,500 across North America. If you've listened to the show long enough, you'll know that we've had some brand and products that started in places that didn't really seem to match. For example, famous Dave's Barbecue. Dave Anderson started his barbecue empire in a remote part of northern Wisconsin. I mean I don't know about you, but when I think smoke brisket or babyback ribs, I just don't think Hayward, Wisconsin. But somehow it worked. Same with Uni Pizza Oven. This brand has transformed home pizza making.

And yet the ovens were invented by a man from Finland who now lives in Scotland. And let's be honest, when you think of a great Neapolitan pie, you imagine the warm sun of Naples, not mid-afternoon darkness in Edinburgh. Now, today's story is about a guy named Tony Lamb who lives in Kentucky. The home of Hawaiian shaved ice. Okay, I'm kidding. Hawaii, of course, is the home of Hawaiian shaved ice. That fluffy, snowy cup of ice drowning in colorful fruity syrup. Tony Lamb figured out how to turn it into a huge business, a business called Kona Ice.

It now has more than 1500 shaved ice trucks across the US, Canada, and Mexico. The brand generates over four hundred million dollars in annual revenue. And it was started by a guy who For much of his adult life, sold vacuum cleaners.

Now, if there's one secret, one thing that every successful entrepreneur has in common, It's the ability to hear the word no and Just keep plowing ahead. And that in a nutshell. Is what it takes to sell vacuum cleaners.

And Hawaiian style shaved ice. In Kentucky. Tony Lamb was born in the late 1960s. He grew up in Parkersburg, West Virginia, youngest of four kids. Tony actually shares a birthday with his dad, Tom, and growing up, he watched learned a lot about entrepreneurship and sales from his dad. who also sold vacuum cleaners for a brand called Rainbow.

In fact, Tony describes his dad as quote The greatest vacuum cleaner salesman to ever put on a pair of alligator shoes. My dad just got this. bigger than life personality and um I had the weirdest perspective ever growing up because my dad did very well selling vacuum cleaners and he drove nice cars. We had a nice house.

And then I had buddies who Their dad were doctors or lawyers and They didn't live as nice as we were living and and they're like, What does your dad do for a living? I was like, He sells vacuum cleaners. So My perspective was You know, okay, on the hierarchy of of life, you've got vacuum cleaner sales, and then doctors, and then lawyers and bankers. So uh

I always aspired to be a vacuum cleaner salesman'cause I I thought that was the road to Mercedes and and uh quality of life. Tell me about Like he was going door to door selling them like to like were these for industrial use, were they for home use? What kind of vacuum cleaners? No, it's the Rainbow Vacuum Cleaner. So it's it's an in home uh door to door. We th they use referrals more so than they go door to door. So if someone buys a rainbow, they'll send you to four of their friends so they can get a free shampooer. And he started out, you know, I when I was little, I think he was a regional or a a district salesperson or whatever. So but then As I got older he promoted up to the company and and when I was in high school he was the president of Rexair, which is the company that produces them and they're they're sold in eighty countries around the world and it's it's still a thriving business, so

Alright, so you kinda growing up with just wh kinda watching your dad do this and become quite successful in this business. And I guess you also kinda had a knack for for selling'cause in high school you You did sales jobs right? Like you worked I think you worked at the gap. At at a certain point? I'm always surprised when people know details of my life. Uh yes, I worked at the gap was my first uh W two job. I detailed cars for a long time.

And then I wanted to get a real job and I took this job at the gap for three dollars and thirty five cents an hour, which was minimum wage at the time. But the lesson that I pulled from the gap, and I'll never forget this, was I was at the gap and they said, Hey, they're announced this big Christmas contest and whoever sells the most. And I'm like, Well, I'm I'm gonna kill everybody. And I come in and my schedule has been cut and I'm I'm scheduled for like twenty hours this week and Charlie McKay is scheduled for you know thirty six hours. I'm like, how am I supposed to beat him? And so I'm asking the manager and she says, Well, I'm trying to give make it even because you sell more. And I'm like, Well, how is that fair? And I remember going home to my dad and I'm fussing around and and he said, Tony, listen, when you work for somebody, they're always gonna tell you when to work, how to work, and basically establish your worth as a as a person. And I'm like, wow, that's you know, very ver very uh sobering as a sophomore in high school, but but it stuck. And I I thought, yeah, you're right. So eventually I just moved back into detailing cars and I had a had a pretty good little car detailing business for the rest of my

uh high school career. Tell me what what was it about sales that uh that you know, w what was it about your personality that made you good at sales. W you just somebody who can talk to anybody? I think that was it, Kai. I I I think ego is checked at the door when you're when you're in sales. I I have no inhibitions and I say that and I I don't say it boastfully, I say it almost apologetically. And the fact that I'm not a extremely attractive gentleman, so uh and but uh when I was asking, you know, girls to go out, I was never offended when they would say no. And uh I would just go to the onto the next one because it's a it's a numbers game. Numbers game, yeah. Just like vacuum winners say so uh so when it's time for you to go to college, um again

I guess you you go to the University of Kentucky, um and you study marketing And I guess I guess to earn some money, uh, during that time, you're also selling rainbow vacuum cleaners like your dad. Right. Um but what you're you're also thinking like after graduation that You'll interview for like a an office job, like a you know, professional job working under fluorescent lights? Yeah, I I was a fairly good student at UK. I got the grades and the big job interview that came on campus

was a pharmaceutical rep, uh Merck pharmaceuticals. And uh everyone in my little peer group was talking about it and they said, Lam, you know, you should do this because you've got all the sales experience. You've got enough chemistry background. You know, so I go I I you know, get a suit, I go to the interview, I sit down with the guy and man, I'm going to town. 'Cause I sold vacuums all the way through college and I was actually pretty good at it. So I'm in there telling this pharmaceutical rep that, you know, I'm a good salesperson, da da da da and and we're having this conversation, it's going good. And he said, Man, I'm really excited about this interview. And I said, I am too, because you got any questions for me and I said, Yeah, how much do I make? And he said, I'll never forget this. He said, thirty six thousand dollars a year and a company car. And I said, What kind of car?

What kind of car?'Cause my God, it better be a Ferrari,'cause I make thirty six thousand in a summer selling vacuum cleaners. He goes, Well, because you have to transport a lot of, you know, samples and things, ch it's usually a minivan. And I'm like, For the love of God, man. I look like this. I can't drive a minivan. I I'll never get married. Oh man. All right. So I I guess you walk out of that interview and decide to stick with selling vacuum cleaners after college. I mean you're you're good at it and and you were making good money. Tell me about what

you would do like like sell me a vacuum cleaner, right? I'm in let's say I'm in the market to buy one, right? And I and I'm I'm looking at this brand and at that brand and Uh and then you come to my house. Oh God, nobody's looking to buy a vacuum cleaner. So you knock on the door, you've got an appointment because Mary Smith has bought a rainbow, so she gives four of her unwilling friends names and so you call their friends and say, Hey Um Uh Judy, I was wondering if I could schedule a time to come in and show you and John the Rainbow. I'll be quick about it. I'll do it fast. You guys get a a little three day, two night vacation package, uh timeshare presentation. We didn't say that part, but uh get a little three day, two night vacation. Pays for your hotel accommodations. So let's schedule a time.

And she's like, My husband's never gonna go for this. I know, but but tell him I'm I'm fun, it'll be a good time, I'm never gonna pressure you guys. I just wanna show it, get the credit, and I'll be out of your hair. All right. Lord forbid the husband answers the door because he's pissed at me immediately. And they all start announcing, we are not buying. And I'm laughing, having a good time. I come in and just s and I just try to disarm him a little bit. But guy, there's so many nuances of of selling. And I'll I'll give you some fun fun things. If at some point you can figure out whether the guy's got a hobby or not. So let's just say And I'm always looking in the cars and the garage when I come in and say, Man, you guys got a beautiful garage. Won't you show me your garage? And he'll take me out. And if I see a set of ping golf clubs Or a John Deere riding lawnmower.

And probably most wives don't realize that a set of pain golf clubs costs fifteen hundred dollars. Yeah. And but I will announce that at some point if I'm not getting the sale. And the guy who just like sits back and smiles for a big and I'm like, you know, John If this was a set of golf clubs or that John Deere Rodin Lower, you and I could talk about this all night, but it's not. This is a product that's gonna make Judy's job a lot easier in the house, and all we really need to know is if if she want it, would you help her get it? And I think she wants it, so the question comes down to would you help her get it? And of course you would. So what's your middle initial? Wow. Cause you just ask for their middle initial, you pull out the sales receipt, and you put your head down.

Yeah, if you get T. Or S. You've got the sale. But you gotta do your you gotta do the presentation right. You gotta bring them all the way through the journey. Wow.

There was this uh there was an old Zig Ziggler and I A guy God help me if I don't quote Zig Ziggler a thousand times today, but My dad, I I the joke was that I think he put Zig Ziggler tapes in my crib when growing up'cause I I can talk like Zig Ziglar and I can r recite most of the stuff. But his his great line was timid salesmen have skinny kids. And uh so I wasn't gonna be timid. I was gonna ask for the order.

Um That's how I married my wife thirty one years ago is I asked. I d I didn't assume. I just asked for the order. Wow. So um

One of the things that I that I've noticed in all the hundreds of interviews I've done on the show is that when I talk to people who started out in sales. The thing that that sales really help them to learn was how to How to move past no.

Right? Like For a lot of people they hear no and that's it. That's that's the end of the road. Right. But but then if you can figure out how to hear no and understand that that's just the beginning of the road. Well, it's all in how you interpret no. And and the way I was always taught or the way I believe is the the answer is no, based on the information that I have right now.

So The no is not going to change by you pressuring me. The no only changes if you give me more information. So Okay, why would you not purchase the well, it's just too much. You can buy a two hundred dollar vacuum cleaner at Walmart or I can buy a fifteen hundred dollar vacuum cleaner from you. Well let's break that down.

Yeah. Let me go ahead and do a fifteen year cost study. So these vacuum cleaners that you buy from Walmart are gonna break down every three or four years. You gotta buy bags, you're not getting the job done. Or you can spend fifteen hundred, you've got a product that'll last fifteen years, but most importantly, you're gonna get the job done. So let's make it to the point where it's just an obvious yes and you'd feel almost stupid.

Saying no. Before you get there. Alright, so mean time, early in your career, you're you are selling vacuums and you He help me understand. I mean, you you were a rep for the Rainbow Systems, but you had your own

team. Was it was sort of like a real estate agent that eventually when they become good they they build their own team around them. Is that how it works? Yeah, you basically you you I was in Lexington after I graduated. I stayed there for a year and then I moved to Northern Kentucky And I started my own office. And

Very magically. I mean I I don't want to take too much credit for it, but we built a uh one of the large offices in the region Within a year. Wow. So yeah, I mean I'm again, I'm twenty three, twenty four years old. I'm making, you know, ten, twenty thousand dollars a month. Yeah.

And um I ended up with six offices. This was by the time I was twenty five. I had three hundred salespeople I was running a multi million dollar business at twenty five, selling vacuum cleaners and started door to door. I guess when I say it like this and I'm having this revelation, I'm like, Hey, that's not too bad. It's amazing. Yeah.

Grow this. This regional office to quite a big business and I guess what around sort of the early two thousands. you decide to

To leave to retire? I mean w was that Was that what happened? It was. I I uh My dad had stepped down from the company. Um I thought he was treated

Very poorly. Um they rewrote the history of Rainbow and my dad, who I feel like was responsible for a massive. part of this growth. All the programs we running They were my dad's ideas. And he got like two paragraphs in the uh in the history of Rex Air.

Mm. And I was like, you know. I'm done. You know, I'll go do something else. Little did I know how much money I was making. in comparison to the real world. And but I did. I got very discouraged. I didn't like the new management coming in. I I you know, I got a couple of other opportunities and I just started slowly

disassembling the organization. I would start selling the offices off to the managers and And it slowly just, you know, all went away. It's interesting because y earlier you talked about how you know, sort of checking your ego at the door is a really important quality in I think it's

It really is, and just in life, right, in general. Um But it sounds like in this case it did kind of challenge your ego or or your family's It doesn't sound like the same Tony Lamb that You know, that didn't really care what people thought about him.

Listen, nothing will build an ego like you know success in in that. And and again, I will freely admit, you know, you get a little big for your britches. I was very young and I was They fly you to Hawaii, they go on all these trips and yeah, you get a little you get a little bit too big for your britches and then Like I said, and I was like, you know what, I'm gonna quit this business and my wife said

Uh, are you sure? Because we are we are living pretty good and we get these trips every six months that we go on that are fabulous and so um she wasn't a fan, but I I just thought I had some other options out there that d turned out not to be as So a at this point, from what I understand, You start to do some Some consulting work. Like you I guess there was a friend of yours um that you were helping out this guy, Ed um Ed Reynolds. That's it. That's exactly right. And and I guess he had Ed had this struggling furniture company in Louisville. And what was it exactly? D did he have just

One furniture store was it several? Uh it was he had several, but the what we did in Louisville transpired into his whole all of his furniture shops. Got it. Okay. And so we turned it around and t and fairly quickly. Um it got going pretty good. But then they were taking those How did you do it? Um He had finance people running a sales

operation. Yeah. And so you really needed salespeople. And you needed some marketing and I was I'll tell you this real quick I didn't have a marketing budget, so I I would come up with these yard signs. Now remember it's buy here, pay here furniture, so it's not what does that mean? Uh so

you it's not bank financing. So you come in and you want a couch and you put up you know two hundred dollars down and you pay them fifty dollars a month till the couch is paid off. So and they charge you some interest. Oh yeah, charge you interest and they make the profit on the on the couch. So yard signs. And I produced like a thousand yard signs. Buy here, pay here, furniture, you know, no credit checks, blah, blah, blah and I started putting them all over Louisville, Kentucky. Like like signs of people when they're running for office, like those kinds of yards. Exactly. I put'em at every intersection. Business started going up. The city of Louisville calls the furniture store and said, We're getting ready to fine you for all these signs. You can't put signs up. And I'm like, I we paid some high school kids to do it. I'm so sorry.

So a week later they call back'cause there's more signs now. And and he goes, We're gonna find you a thousand dollars a day. Well, we were making probably five thousand dollars a day. I was like, I'll take the fine. I I read that that at a certain point you bought Billboard trucks on eBay? I will give you credit, guy. You have certainly done your research. I could not get billboard space in Louisville where I wanted it and I'm on ebay, I'm looking, you know, trying to f do maybe temporary billboard or signage or something and I came across a billboard truck and

And I thought, huh, and I bought a billboard truck and I and then it became its own business on the side. You would you would rent the truck out or you would basically rent the billboard out on the truck and have somebody drive it around. Yeah, you you go get a retired guy and say, Hey, go get stuck in traffic. And it's it's brilliant. Slow down, you're going too fast. Um I ended up with a bunch of those trucks and that was uh that's kind of a segue into Kona Ice because the billboard truck business was turned into a really nice side bit. My wife still loves the billboard truck business because it saved us, you know, as those were leaner times in the in the Lamb family. W why were they leaner times? I mean you sold your vacuum business to your managers and it was a good business, so I have to assume that you did pretty well out of that. Well, if they would have kept going, I would have done really well. But you know, they slowly they're gonna pay me a hundred dollars over for the sales for the next five years. Right. But you know, then they started shutting down because they didn't have the

all the skill sets to keep running it. So I got about uh probably a third of what I was expecting. And you know, all the other little things that happen in life. You're like, Oh well that didn't work out. Well, okay, that didn't work out. Did you when I mean the the Billboard truck idea is a great idea, right?'Cause it's It is almost like not quite, but almost like a passive income business, which is correct, you know, as you say, you you find some people who want to pay for the Bill but and ha by the way, how much would it cost

place an ad on a billboard on the truck per week or how did you price it? Yeah, you wanna charge'cause you've got a inherently you've got gasoline and labor, so you've got a couple hundred bucks a day. inexpensive. So you're gonna need to get five hundred to seven hundred dollars a day, you know, for it to to to be profitable. So so I started selling the each individual side of the truck The truck holds looks like a big uh teepee or whatever and hold has two sides to it. So I started what I would do is I went to the all the casinos in Cincinnati and I'cause they were the biggest uh media buyers at the time. What happens in casinos when they come to towns, you know, after a while they stop buying all the ads. the revenues go down and and this thing kinda petered out. But then Kona had started up.

I I want to ask you about Kona in just just a minute, but before that, I'm I mean Were you looking for the next thing like that, like an anchor that would be That thing for you? Yeah, I mean

What I hated about uh Rainbow was the lack of residuality. Truly you have to sell another vacuum cleaner every single day. I had buddies that were in insurance and they worked their butts off for a couple of years, then coach for the next twenty, and I'm like, Yeah, I want some of that. Yeah. Um And so what was so fabulous about the ad truck was the five hundred, six hundred dollars a day.

But it was you're at the mercy of the ad media buyer. You're at the mercy of, you know, how much can I generate. I ended up with you know, multiple billboard trucks, but It was all on me, you know, how much can I sell? But I I was always in the back of my head looking for I wanna be able to sell something and make a little bit of money on it for the rest of my life. Yeah. But you didn't know what that was. I did not know what that was. Yeah.

Alright, so The idea for what would become Kona Ice really started a few years before you launched it. So l let's first talk talk about the idea. Um, I guess around two thousand four and it's As simple as like a bad experience at an ice cream truck.

Yeah, the the origin story and and this is true, no embellishment. I moved into a subdivision. We're in the backyard with my kids. We hear the music and my kids all look at each other and take off running to the front yard and and I remember it very Distinctly.

My wife and I kinda jog behind them. Here around the corner comes a seventy-two. Seventy two Chevy van, blue smoke rolling out of the back of it and and you know, this funky music playing and and I was like, Oh my gosh, it looks just like a child predator. Just it's just screaming. And this guy sticks his head out the window and he's he doesn't have a shirt on. He's got a Fresh prison tattoos. Okay, maybe I'm exaggerating that. But uh he was heavily tattooed. Yeah. So They got their popsicles and I'm paying the guy and they're opening up their freezer burnt ice encrusted

Popsicles and they Are disappointed. However, I know for a fact if the guy would have turned around and come back, they would have had the experience all over again. Ice cream child ice cream child and And so that became That is the true origin of

Kona Ice because I said, Can you imagine if that truck would have been Can you imagine if the product would have been good? And and this is a almost a two week conversation that I just kept obsessing over. Where I'm sitting there and I'm like, what about if that truck would have had been all glass on the side and you could have looked in and the it would have been a high school girl or a college girl driving it with, you know, um with a uniform on and sh you could see what she was doing and the products would have been, you know, fair and and reasonable and And the experience would have been engaging. What would have happened? And my my assumption would be as you started to research this.

you would quickly conclusion that this was not a good business. Like Ice cream consumption in the US, for example, has dropped Considerably from like the eighties to today. Correct. the ice cream truck business, you know, depends on the price of gas and like the repairs and There's just so much evidence to show certainly at two thousand four when you were looking that

that that business was in decline. It was like getting a taxi medallion, you know, in New York City. Like That was not the business that you would naturally think, Oh yeah, there's something you could do here with this. But Let me tell you another story that kind of helped that. So when I sold off the Rainbow Business, my personal secretary, um As her as her um

Severance. I bought out a video store in Cincinnati'cause they were dying, but I we moved it to Warsaw, Kentucky, which is a a small town but rural and and country where they're still renting video tapes at the time. Yeah so I moved this video store down there and I we we get it all set up. She did a great job. I was there one time and customer came in and she was trying to turn it over into food. And uh were she was selling ice cream and different things like that. Well s a customer came in while I was there and she sold a shaved ice to So she was doing shaved ice at her

Her video store, basically. Yeah. Okay. And she put some flavoring on it. The guy walked out and she made three bucks or four bucks or whatever the number was and and she said, I love that. And I said, Why? She goes,'Cause I made it's all profit. It's just ice. It's just shaved frozen water. And she says even if I buy the best flavoring in that's out there, the most expensive flavoring that's still wildly profitable. You know, you you make a milkshake, you sell for three dollars, you got a buck fifty in it. He said, I sell shaved ice for three dollars, I've got you know twenty cents in it. And that's ten cents for the cup. Yeah, it's pure and and again, being a serial entrepreneur, you only have to hear that That that one time. Yeah. Bing, my my ears, my senses go up, spidey senses start tingling. And I was like huh.

Mm-hmm. When we come back in just a moment. How Tony builds a tropical themed truck for selling shaved ice, and then changes out of a salesman suit and into a Hawaiian shirt. Stay with us, I'm Guy Raz, and you're listening to how I built this. High Belt This is supported by Crucible Moments, a new podcast about the pivotal decisions that shape the journeys of some of the most important startups, hosted by Sequoia's Rulof Botha, Crucible Moments provides a peek into the journey of companies like Airbnb, PayPal, 23andMe and NVIDIA, and the decisions that change their businesses forever.

like how PayPal formed from a merger of two enemies who had been trying to destroy each other, or how early days Airbnb rebuilt trust after a host's house was ransacked. These companies only matter today because of how they navigated these crucible moments. I just listened to a recent episode with HubSpot founders Brian Halligan and Darmesh Shaw and how they turned Hubspot into one of the most influential tech companies of our time. It's super interesting. Tune into Sequoia's new podcast series to discover how some of the most transformational companies of the modern era were built. Crucible Moments is out now and available everywhere you get your podcasts and at Cruciblemoments.com. Go listen to Crucible Moments today.

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So it's around 2007 and Tony Lam is leaning into a new business idea. Based on two recent experiences. The first a not so fun time buying ice cream for his kids off a truck. And a second

Watching someone make a very tidy profit. From shaved ice. And then a third thing happens. The guy that Tony's been working with on the furniture stores? Ed Reynolds?

He happens to buy A Mr. Softy truck. I actually thought he bought it just to sit at his house so he could eat it. But it you know, he ended up putting a guy in it, driving it around or whatever. And one time he said, Uh, hey, the ice cream truck's not making money. Wha what's your thoughts on on it making money?'Cause I had turned his furniture business around a little bit. So you look at the ice cream truck and you're like, Well, it's complicated, it's expensive, it's the product is too much, you gotta have a mechanic and a salesman. It's gotta get down to a one person operation. Your food costs are too high. You've got way too much waste. You fill the entire ice cream machines up. If you can't sell it all, you know. What about shaved? You know, and we just back and forth, back and forth. And and this became a a very big conversation between us. Yeah. I'm working for them, my contracts are kinda coming to an end.

We were sitting at Stringtown restaurant in Florence and he goes Hey, we've talked about this till we're blue in the face. What do you think? And I said, I think I'm going to go do it. You would pursue this. You would see if you could

Turn. Ice cream trucks into shaved ice trucks, basically. And he goes, You wanna partner up? And I'm like, Nah, I don't want to partner And he goes I'll back it and I was like, you know, I do want a partner. I don't want to spend the last of my family's savings. But yeah, your money. And and by the way, I guess I should mention the the reason

Ed could back you is that in addition to his to the the furniture stores, I guess his primary business was that he owned A finance company, right? I th I think he gave you like what, like half a million dollar line of credit to Yeah. So you were gonna pursue this and and as somebody who grew up with a Snoopy Snow Cone machine

what was the difference between what you were gonna do and like what were called snow cones that you would get at like county fairs? It's all texture of ice. I mean, the way I picture it, my upbringing was you get it from a truck or you get it and then you either have to let it melt or you just take the chance of just ruining the roof of your mouth and possibly busting some teeth off'cause it was like a ball shape. Yeah.

And then with with some syrup thrown on it. Right. And you go at it like crazy and then bite the in end up biting the bottom of the cone off and letting all the syrup drain out into your mouth. Taking me back to Little League. Yeah. Yeah. Okay, so so that's different. First of all For people who've had shaved ice, either in Hawaii or wherever, like these are specialized machines. It's like um it's almost like a vice, right? That that you put up huge, like round Ice.

block in and then it it twirls around like a Get that really nice shave. But But I have to imagine you had to spend some time like learning about that whole thing and like w what is it? Where do you get these machines? How do you Make it.

uh block of ice that does like you're saying, a vice that forces it into an open razor blade that spins on a axis and and shaves it off. It produces a very fluffy product. Um I don't think I would have pursued all the way through because the the speed of service is slow, the danger that the um skill that you have to have. You can't just let an eighteen year old go in there with a spinning razor blade. I mean you're gonna have to train this person to be able to do that. And I didn't want that. I don't want to have something so proprietary that we just can't Duplicate it on a large scale. So I found an ice shaving machine.

It it produced very acceptable Not Snow Cone. Very acceptable shaved ice on a very quick time frame. You know, in a couple of seconds you have a cup full of pretty fluffy snow. Yeah.

So we're we're now talking about you know we're we're going back to 2006, where you really are jumping into this and you are starting to really figure out how to make this work. Because you're we weren't gonna it wasn't gonna launch until 2007, but at that time, and even to some extent today, Unless you go to Hawaii, there are probably huge parts of the United States where people aren't that familiar with shape with like shaped ice. They don't you know it's not it's and certainly in two thousand six. So what made you think that that was going to be A winner. Um the fact that I've never seen a kid turn down a sugary treat.

I get a little grief for that too,'cause I I used to make the statement, hey It's not hard sales. We're selling sugar to kids and and you know Now that's the worst thing you can possibly say. You're an animal. Like everything in moderation. Lighten up, you know. But you really thought that it was just a matter of time, like And I guess because the margins were better than selling

Popsicles or or ice cream. Yeah. Because you can handle the the you're basically You've got your own manufacturing in your truck. Yeah. Yeah.

Alright, so you start let's talk about kind of like breakdown how you started to think about this. First of all, you wanted to remake the experience. So Starting with the truck. How did you Start to think about that. Well a lot of the

ice cream trucks I saw, you know, people are hunched over, running back and forth in the van, opening up freezers, passing out stuff. So you want the it want to be a comfortable experience for the operator. Yeah. And and I I started getting the visualization of of what I wanted pretty early on. you look at a ice cream truck and it rolls through your neighborhood and you're like, Oh my gosh, it just it looks terrible and it looks disgusting, but your kids are screaming and you're trying to you know you lie to your kids and you say, well when it plays music, you know that means it's out of ice cream. And you know, so you lie to your kids about stuff like that. Let's get the presentation down to where you can't say no. You know, a truck drives through it looks like Disney World and your kids are losing their mind. You can't say no to that. I mean what can you say no to on that? Yeah.

All right, so you have this line of equity. to start you know f half a million dollars. You gotta start with a truck. So You know, you bought these off the shelf billboard trucks. What you just gonna buy like an off the shelf.

Like used ice cream truck and Repurpose it. No, I was I was going to go strict custom from the ground up. I got it. So So you and where did where at that time could you source those from?

Well, I was sourcing my billboard trucks out of I was having them built up around El Cart, Indiana. Okay. Elkart, Indiana is this mecca. in the United States for the R V industry. They build all R V. And so there's so all kinds of fabricators up there. I went up there, I spent a couple days, I went around and visited several fabricators and introduced myself, told them my idea. They probably I was probably the fifth person that day that walked in and had a screwy idea. So I found a guy that I was really gonna go with. He was very professional, was a big operation. But then one guy was a s very small operation, but he was I really liked him. And so I actually I called him

to say, Hey, I'm not gonna go with you. I I'm always respectful when I get bids. I'm hey, I don't think I'm gonna go with you. And he said, Why not? I said, Well, you know, blah da da I told him why and he said, Tony Neither one of us are gonna make a lot of money if we only build a couple of these things. He said, but if we get in there and figure it out. Because you're gonna need somebody to to go through the ups and downs in the beginning. But if we can figure this out, because this is what I'm I don't want to just build you a truck. I want to get in business with you. And you know, I just loved that attitude and and uh his name's Tony Marketti and you know, d doesn't have to

sell me too hard, you know his name's Tony, my name's Tony. And did you have a design scheme for what you th wanted to look like at that point, or not? Not quite yet. I did. I had a really close friend, Tony Guard, Uh another Tony. Another Tony. Uh and he's a he's an industrial designer. And then Tony was so talented, he was also able to kinda help me uh you know map out w the look of the outside of the truck. I want a tropical truck. I just don't want tropical colors. I want a scene on the truck. I want the escapism. When someone comes up to that truck for ten minutes, I want them to be on a tropical island. So you wanted it like painted like'cause I mean I'm describing the truck today, but you wanted it like to look like the ocean and sort of the sand on the ocean and almost like a

Painting on the side. A bamboo hut basically selling Shave ice. Yeah, some palm trees, some little characters in the sun, for you know, in the sand for the kids to like and and then tropical music playing. um calypso music playing and you know just these ideas just kept coming and you just but but it all again comes back to the you want this experience. All right, so you're working on this on the truck with Tony in Elkhart, Indiana.

And um I guess you also wanted it to have. Like a self service part. Like when you go to a fast food place, you can fill up your soda yourself, right? Which my kids unfortunately love too much. As much as I prevent them from drinking all that soda. But you wanted a way for I guess for kids to what, to to flavor it themselves.

Well, if you start talking to kids about snow cones or even shaved ice and some either you go to a hut or you buy a flavor combination that I wanted, blah, blah, blah, these different things. And so the idea was hey Can you get the economics right to where you can turn it over to the customer to put as much syrup on as they want.

But here's the moment that I had it. So I'm talking to Ed. And he's got two sons that are hilarious. And they're I think they were nine years old at the time and I said I said, Hey boys, let me ask you a question. I said a truck comes down the street, it's a shaved ice truck, snow cone truck or whatever, and it pulls up and they hand you a cup of s of fresh, unflavored snow, and you get to go to the side and put as much flavoring on as you want.

What's your reaction to that? And they both I mean, you're giving me the keys to the Magical syrup. Um yes, give me more of that. That was a moment that I thought th this has to happen. Um so you got you work on the economics, you you figure out the flavoring and how you can dispense it in a way that it's not

crippling financially where kids, you know, are putting you know, sticking their mouths under the spout and pulling them on. So you gotta design the flavor wave to where the k a kid's head, an eight year old's head won't fit in there. Um the dispensers are called flavor wave and it's like Ten or whatever, I don't know how many flavors. But basically it's The idea was you could take your own you get the shave ice in the cup and then you could just put the flavors on, whatever you want to put on. Which is, as you say, I mean Presumably before you you had the prototype.

You had to ask yourself, is this a good idea? Is is this gonna get out of hand? Is this Is this gonna break? I mean, would it be better to just have like Bottles like ketchup bottles of syrup. I I don't know. Oh, yeah, and the variations are Legendary. Uh uh the the very first flavor wave.

would fold out from the truck. Okay, so you you picture this thing folding out from the truck and it's made out of aluminum. So in essence Guy there was a two foot aluminum edged uh sickle, as I like to say. Driving through neighborhoods. What could possibly go wrong with that? Then with the next generation we had a handle where you could close it from the inside.

But no one closed it. So the it then it would drain into the uh and all the flavors, the excess flavors would drain and well, you know, variation, variation, variation until let's work on in embetting this into the truck. Um I hate to say stuff like that'cause it then people realize how maybe unintelligent uh I am The other thing I'm wondering about is You had some savings, right? But um you weren't financially secure for life. Like you need it you still need it to work. Yeah.

And this was a risk. I mean you had some of your money in this and obvious you had an investor who believed in in this idea. Did you have any doubts? At all going into this that Uh, maybe this might not work, or were you a hundred percent confident?

You know, I guess you would say. Progressively. I'm a hundred percent confident, you know, as the more meat you put on the bone, the more you realize this has got some legs. So the truck shows up. You start working the truck. the customer reaction was so good. You're like, Okay, there's something magical here. We've got to figure everything else out. But at the core, it's working.

I've got a winner here, now just don't screw it up. So this was this is June of two thousand seven. And the first trucks are ready. First truck, period. First truck. And you were gonna be the first driver of this truck. I was the only guy

Uh I say employed, but I wasn't being paid. So I was the only guy in the in the game. So this is what you have to do as an entrepreneur. I mean if you see the movie The Founder like Ray Crock who was in his fifties trying to sell ice cream machines and getting the door slammed in his face. You had run a really successful business selling vacuum cleaners. You had three hundred people working under you. You had a really very successful business. Here you are.

Almost forty. Making Shaved ice and and selling sh like I don't I was any part of you like I used to oversee three hundred people and now I'm like an ice cream man. I'm I'm not saying I hope this doesn't sound like a

Oh no. Listen, uh my buddies harass you know, kids loved me, but my buddies were harassing me in. They were heckling you. Oh my gosh, I pulled into uh one of these cul de sacs, and as soon as I turned down and I thought, oh, for the love of God, Jim lives at the end of this cul de sac. I go down to the end of the street and he comes out. I'm like, ah, gee, many Christmas. And he's like, Lamb, what are you doing? And I'm like

And he's just in a Armani suit and he's like, Lam, you used to drive a nice car and and wear a nice suit. What's what's happened, brother? Is is the economy just and I'm like, Jim, this is a pretty uh I mean, I'm wearing a Hawaiian shirt. This is Not the worst thing in the world. tiki van with a painting of the ocean on it in a Hawaiian chair, which is awesome. And it's that you're living a life. But you gotta explain it a lot. You gotta tell'em how good it is. They don't see how good it is. But uh this is a good story, actually, because why Jim and I are sitting there talking and

probably fifteen, twenty kids come up. They're all buying konas. I'm serving them out and you know, collecting. I probably made fifty, sixty bucks or whatever just sitting there for I don't know, ten minutes and he goes, Well, you didn't do bad here and I'm like you know, we're laughing or whatever, and I drive away. And of course there was a little bruising on the ego at that moment, but I thought, Tech on it, you know, I'll just you know But that you know, that I'm sitting there with one truck thinking, Can I scale this? Yeah. But you know, the responsibilities I've got th four kids and a wife and you know, you everyone knows that guy or you've read about that guy that just he can't get out of his own way and he just entrepreneurs till he dies and he never hits anything big. And you had that in your mind, you thought, Am I gonna be that guy? Yeah, I mean there's times that but you know, I don't know. I just I was having a great time. My kids thought I was the

greatest'cause I'm driving ice cream drive. Yeah. And so when you started to drive around your neighborhood. You would just drive down streets and then as you would see kids run out of their homes you would just Pull up on the sidewalk and

Stop. Yeah, it's it's it's I I took this fella out by the name of David Jones and we were I was training him to be a driver. I think we had three or four trucks at the time and we pulled into this cul to sac and I said, David, here's the trick, we gotta get those two kids right there off that porch. drove around I said go real slow. I said I said, Ah, we're not getting'em. I said, uh go let's stop and go out and clean the flavor wave. So we stopped the truck and we this is early on because Not everyone knew the Kona truck, so we I went out and so these kids come wandering down off their front porch and they're like, Hey what do you got there? I said, Oh, this is shaved ice truck and da da da and they they come in, they s and then people start'cause I'm stopped, music is playing, lights are flashing, here comes some people.

And I've got a picture of this somewhere in my phone because I remember getting back up on the hill and taking a little picture. It was about sixty people gathered around the truck with lawn chairs. I mean, it looked like something out of Norman Rockwell. They're skipping ropes, they're drawing um uh hopscotch on the ground with chalk and and David remembers this, and I I I He said, You remember the time you we got stopped in that cul de sac and it turned into a block party? And I was like, Yeah. I wonder when you I mean What did you have to make what did that truck have to sell per day

for it to be worthwhile. What was your goal? In Northern Kentucky we have a two hundred and ten day season. I I remember these numbers and I was like Well for inclement weather and blah blah blah, you got about a hundred and eighty days to sell. If you can make a thousand dollars a day, you make one hundred and eighty thousand dollars. You've got food costs and labor costs and operational costs that are that you can make, you can net Well over a hundred thousand dollars, even debt servicement to pay the truck off over a five year period of time, da da da. So I remember calling Ed And I said, Hey, I've done the math and and I think I can get the truck up to about a hundred and fifty thousand dollars a year.

And he's like, No way And I'm like, Yeah, I I I think I can he said, Well that's you How many by the way, how many hours a day would you have to work to hit thousand bucks a day? You really start making your money after school's um in this in the summer You make money all day long, all the way till night time. As soon as school starts up, you really start making your money about three to Right.

We were Primarily neighborhood sales. That's where the the business model was. And I was trying to get uh neighborhoods up to a thousand dollars a night. I got a couple of neighborhoods up to a thousand dollars a night. uh through some techniques that we were doing. Techniques meaning what? Well, you you you it's all about consistency and it's about knowing. So I would I would go to Crystal Lake subdivision, I would sign it all up.

In the morning. So cone of ice is coming tonight. You put signs up in the neighborhood, okay? Oh yeah, yard signs in the neighborhood. I don't have I don't have many aces up my sleeve, brother. I keep going back to the well. Okay, keep going. So so now as kids are going uh are are leaving And parents are leaving, they see the big signs. Cona's coming tonight. You make a little deal with the houses at the edge of the neighborhood. Hey, if you keep this sign up, you know, I'll give your kids free Kona when I stop by. So the signs go up, you do the same path, you're so you're basically at the same house or the same street almost every once a week. So I got this s subdivision. in northern Kentucky to an easy thousand dollars a night. Um this is two thousand seven, two thousand eight yet. So you you remember what happened in two thousand eight. Massive financial crisis, yes. Yeah, my neighborhood sales start dropping precipitously and during the the financial crisis you saw sales drop, even though some people still spend money on s like small pleasures like

Ice cream. They do and but you and so y it doesn't take much to drop your sales in a neighborhood. I mean y you you saw a lot of people not in homes. You know, you know, there's more s for sale signs. Especially at that socio economic level of of starter homes with a lot of kids and You know, someone says do you do good in uh in cl country clubs? I'm like, No, because the houses are too big, too far away from the road and the kids are in the basement. Um but yeah, you get a yeah, you know.

little starter homes or something where you know they're full of kids. And the parents want them outside. You know, get outside. You're driving us all crazy. So that's where you do the best at. But those kids, there's not crazy amounts of disposable money floating around out there. So yeah, we we saw it. Tick down. Yeah. But we have this amazing margins in Kona.

are responsible with the amazing margins. And obviously the cups and gas but in general, like Your overhead was quite low. Oh yeah, just crazy low. En so

How long did it take you? Before You hit profitability. I paid the equity line off this in two thousand eight. So I had ran it all the way up to about four hundred.

Yeah. How did you pay off a half a million dollar equity line in less than a year? Um well we we spent a lot of it buying the trucks. And then we were able to sell the trucks and course we were um Oh you sold it to other people. Correct, right. So all right, let me go to this let's talk about selling the trucks, right? Because Was that the idea that you would basically franchise us out to other people?

From the beginning. I didn't know whether to franchise or license or just sell the truck as a commodity and you know, let people just do what they want. Yeah um Yeah, franchising is wonderful because it it it helps maintain the integrity of the brand. It it helps make sure that you can control the brand. Rather than just licensing it or let or just selling the trucks. And and just to to be clear, it's expensive because of what legal fees and registration fees? Yeah, that's exactly what it is. It's writing the F D D is

Let's say fifty thousand dollars and then all the registrations and all the states, the attorneys that are involved, and it it's no easy task. Yeah. So you decide to start small, presumably in Kentucky. Some of these trucks.

And How are you gonna structure that? Um Ridiculously. Um

The model out there was, you know, Mr. Softy would sell a truck for Whatever, let's say back in the day they would sell a truck for a hundred and fifty thousand dollars, make a lot of money on their trucks, but then the royalty was three thousand dollars a year. And you had to buy all the cones.

um in the cups and stuff from them. And they and they were marked up. Pretty substantially. So that was kind of the model to go after or whatever. It's an all cash business. So what I really don't want to get involved in is is Percentages. Yeah. I thought let's just keep this all in the up and up. Let's charge a very minimal Royalty. And we'll sell the trucks as close to cost as we can. So we just get the trucks out there. Let's just build the brand and then just like Amazon at some point we'll look around and say, Hey, do we have something that we can

Parlay on, so to speak. Yeah. So you start out with a couple franchisees Yeah. This is in two thousand eight.

Um, but it's also the financial crisis, so People still had to pay. I think Fifteen thousand dollars for for the franchise, which is nothing, uh you know, compared to other Franchise opportunities and then

and then royalty fees, but they had to buy a truck and the truck was gonna cost them, you know, a hundred plus thousand dollars. Given that we were in the middle of a financial crisis Was it harder to attract franchisees? Well um let me quote uh Forrest Gump. When the hurricane hit

um build a battery and he said All the f shrimping boats were all all busted up and he said, After that, shrimping was easy. Ed Reynolds owned a financial institution, a finance company. Yeah. And he was my partner. And uh so I had financing. Wow. So after that, shrimping was easy. So so uh I could find somebody that I would approve and uh and I liked to be in business with.

And I'd say fifteen thousand dollars down, Eagle Finance will finance the uh the product for you. And again, I'm back and everything. So if the deal were to go bad, I get the truck back and then I'd have to resell it. Yeah. But that was probably if there's If there's anything that just set us apart in the early days is the fact that

We had financing and nobody else did. When we come back in just a moment, how Tony grows Kona Ice from a few trucks into 1500, and then lands on another idea which he thinks could be even bigger. Stay with us, I'm Guy Raz, and you're listening to How I Built This. Raise the bar of your entertainment with Sonos Beam, the compact smart soundbar for TV, music, and more. Enjoy panoramic sound for shows, movies, and games when the TV is on. And stream music, podcasts, and more when it's off.

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There's speech enhancement mode, which is perfect for when you're watching a movie and the characters are whispering or the action intensifies. Or there's night sound, which can tone down loud effects when others at home are trying to work or sleep. Visit Sonos.com to learn more and find gifts for every listener on your list. Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2009 and with financial backing from his partner Ed. Tony is able to move past the financial crisis and to start growing the business. By franchising.

So we started getting contacted. I did a little bit of marketing, put it out there on the franchise portals as they call'em, you know, franchise dot com and um that hey, this is available, these franchises are available. Right. And the ladies would come in and people would call and we'd talk through it. And I've got so many funny stories from franchisees That are doing unbelievably now, but they were some of the early adopters. And um And I'll tell you this one real quick. Mark um from down in Georgia called me. He was out of work two thousand eight or two thousand nine. He got laid off.

And um he decided he was going to get into Kona. And he sent us the twenty thousand dollars and then plan to come up to pick up his truck. And he tells the story and I didn't. Necessarily know the story word for word, but he tells the story. I sent our last twenty thousand dollars, and my wife, who's a school teacher, is just

pounding me that you have been taken by a man on the Internet Uh slick talking vacuum cleaner stable on the internet. And so he drives six hours from Atlanta to come up to Northern Kentucky, pulls into my warehouse, which was nothing to look at. It was a little tiny house with with a couple of garage doors on it and I had some trucks parked out front. And he said and I pull into the prestigious world headquarters of Kona Isa. My wife looks over at me and says, I told you you got scammed. So so he comes in, he gets

And he's nice as he can be and and we are who we say we are. And then Mark and his wife g get in that truck and drive back to to Georgia. And And we talked almost every day. And he was, you know, I did three hundred dollars a day, I did three hundred and fifty dollars, and then he does he did some festival or some event a thousand dollars. So You know, if you add those numbers up, he's doing three hundred dollars a day, he's working seven days a week. He he makes nine thousand dollars a month. He's got expenses of about

three thousand dollars probably back then. It's profitable. So he ch he took off. And Mark's still in the business today. He owns multiple franchises and his entire family is in the business. But that that origin story of a of a person coming up saying, I got scammed. Yeah is is my favorite. And what was your criteria for accepting a franchise? I mean, I have to assume it initially in the first couple of years it was like You know, you needed the business, so maybe the criteria was a little different or or not. Like w who were you looking for? I was very discriminating in the early days. I would stick a mirror under their nose and if it fogged up

And they're check cleared. They have themselves a brand new Cona Extra. No, um I I was looking for And and I'm I'm real proud of this. I have talked to every single person.

that owns a Kona franchise. They cannot get into the F Kona franchise business to this day unless we have a conversation. Mm. I'm looking for someone that has that. You know, I I nothing turns me off more than than the ROI question. I was on a call I think this year and someone was I'm looking at his application. The guy's got tons of money and

And I'm like, Wha what do you What are you wanting to get into Kona for? You say, Well, I you know, I sold a rental house, I was gonna put it in the market, I think the market's on the way down, I'm looking for a good rate of return. I thought I would invest in this. I got some friends that I can get to run it. I couldn't be out faster. There's no interest whatsoever for me to d be in business with that guy. Yeah.

When a husband and wife calls me or or whoever, just a uh they call and they say, We love our community. We've lived here for ten years. our kids have grown up here, we want to give back, or our kids are involved. Something along those those kind of lines. I I'm looking for someone that I want to be in business with. Mm. And you gotta understand a lot of my franchisees are first-time business owners. So let's get QuickBooks set up. Here's your chart of accounts. Let's get you an accountant, let's form your entity, you know, these kind of things that we kind of handhold all the way through. Tony, I wanna talk to you about money for a moment, because obviously this is a business show and you know, business is about creating something sustainable and

You know, uh money is It doesn't necessarily have to be the end goal, but it it certainly is. Important. There's nothing wrong with making it and nothing. Your business model is Interesting to say the least, right? Because you have

The franchise fee is very low, the initial fee. The cost to buy the truck. It's a turnkey. truck you sell that. And then it's about I think three thousand dollars a year per per franchisee, right? Correct.

So I guess per truck. So for every truck they pay you three thousand a year. And so I have to imagine that a very small portion of your revenue actually comes from franchise fees. Right. Most of your money is coming from selling the trucks or selling the

the supplies to the franchisees. Yeah, not even much in supplies. I mean at scale it is. I mean you sell fifty trucks. Everyone's paying you th three thousand dollars. It's a hundred and fifty thousand dollars. I got five people working in the office. Payroll's about four fifty. Right. You know, you're like I can't you know, they say franchise systems have to get to a hundred franchises to be before they can float. Yeah. And I'm at a hundred and I'm not even close to floating. No. But You know the the the reality is this. We make enough money on you know we've gotten at scale and manufacturing scale to where we can make more money when we do sell the product. Uh this year we sold two hundred and seventy six

trucks basically. Um so that's the lion's share of the revenues that come into the m but we're at the point now you're making, you know, I don't know But it's it also it makes us a good steward of the resources. And it makes us very lean But you add up the flavoring, you add up the the truck sales, you add up the royalty, you add up the cups, you add up the this. And and yeah, we've got We've got enough revenue as long as you keep your expenses low.

And you don't even require the franchisees to report revenue at all. So you don't know how much each one is making necessarily. Uh we can do the math if we want to. You know, you do the cup sales and the flavor sales and you work it backwards and then you realize how stupid you are because you're charging not enough royalty. So Yeah, I mean I read that like just I'm just jumping ahead for a sec, like In twenty twenty three, the system wide sales will be like three hundred and seventy plus million dollars. Correct. That's not your revenue. That's what these

entrepreneurs, these small business owners who are franchisees. This is what they're selling in fr in shaved ice. Right. And you're only getting A portion of that, a small portion of that. Yeah, one or two percent. And so really, I mean, the business model is

in your view, like it works because They're incentivized to or card, they're loyal to the brand and You guys are doing well enough. Yeah, we're doing well enough.

But let me turn the tables on it. I was talking to a f uh executive at a big franchise system and you know they've got probably twenty franchisees that pretty much run the company. You know, whatever those people say goes. because they're the ones generating a lion's share of the profits for the company. And I don't have anybody doing that. So uh if a franchisee gets out of line or and I say out of line just against the code or w I don't need them. It's not like you know, someone's gonna threaten, hey, I'm gonna get out of the business and I'm like Alright.

Go ahead. So there there is that double side to that, where I don't get too needy to a franchisee that's pumping in hundreds of thousands of dollars of revenue to the company. Um, Tony, in in terms of like getting the word out right, like you talked about early on, you know, you you had the lawn sign approach, which is so smart, you know, hey Kona truck is coming this week. Um I remember first seeing a Kona truck in uh up here in Sonoma County. um in California, just driving around. I thought, Oh that's cool. That that looks interesting. Right. So

I imagine that you don't really need to spend that much money on advertising because the trucks are like your previous business. They're like tr moving billboards. It all comes together, doesn't it? Yeah, it's it's I've got eighteen hundred billboard trucks driving around out there. Yeah. And I always make this comment, when a truck pulls up for the first time and a line of kids form on the side of that truck, every kid in his mind says, Man, I want some of that. And every adult that sees the truck and the line of kids says, Man, why didn't I think of that? Yeah. 'Cause they do the ma and I mean the testimonies from franchisees are like I saw a line of kids, I did the math, and here I am.

A huge part of the business is school events, right? Есенці. You go, you pull up at a school or or a some kind of fundraiser. And the franchisee is gonna make a lot of money. But they can also donate a portion of the money and still walk away having made money. Yeah, and it's it's

And that's changed the industry tremendously in as far as hey, listen, you're making a great margin, let's figure out how to, you know, revenue share, give back and be communal about it. Yeah. You guys had more than a thousand trucks and moved into a new Office. space in Florence, Kentucky in two thousand nineteen.

Things are looking great. Then COVID hits. twenty twenty. Um I mean you are an events

Like that's most of your business is doing these school events or charities or fundraisers or parties, whatever, office parties. That's over all of a sudden. It was over in like three or four days.

Listen, I don't wanna There were people losing their lives, but there the the businesses were. I mean, this is traumatic, I think. Um But

We pivoted. What what did you do? I had a staff meeting. I'll never forget that. at a staff meeting and brought everybody in and said, um Hey, everybody's okay. We got we got reserves. You you're not gonna lose your job, you're not gonna lose a paycheck.

Stop worrying. Our job here is to Service and save the franchisees. So let's get to work.

And we had a very multi pronged approach. I had some great people that just went after all the Stimulus things that they could possibly get, the PPPs. You know, our franchisees were just not skilled at being able to go through and and we were ha we had a hotline and we had multiple people just we went after all the financial institutions that would have loaned money to Kona franchisees. They were all still looking to collect their payments and So we went after for stallments and deferments. Um but the probably the biggest thing that we did was to be able to develop a program called Curbicide Cona.

Mm-hmm. And it was a is an ordering platform for mobile. And it was it was very archaic, but it it worked for us. So you could go online, order it, and then the truck would pull up and Hand it to you. Yeah. And you know, we we developed our flavor wave till we it operated with the end of a spoon, not your finger. And we just went at it hard. And the franchisees just

came and board and and ideas were flowing. I had guys working here I think sometimes twenty hours a day, you know, talking franchisees through this fairly complicated software to to teach everybody how to do it. Um

when you came out of that and now you are fully, one of the things that you started to do really in the last Mm. two years really in earnest and maybe even more recently. is a coffee business. Can you tell me a little bit about that business? This is this is a it's called traveling toms. This is a totally separate

Business or is it part of Kona Ice? Totally separate. Truck that But does coffee and coffee drinks. So tell me where w what's going on, what's the status of it right now?

It is flourishing. Um this started On March eighteenth. Uh twenty twenty. I looked at my team at that from that staff meeting I told you when I said everybody's okay. Well you start having to reallocate people around. But you started the business in March of twenty twenty, or the idea came to you in March of Twenty Twenty. No, the idea has been with me for years. I have behind my desk. uh was just I don't know, twenty renderings, artist renderings of different coffee trucks, cafe trucks and things like that. Wow. So October of twenty twenty, we wrote a prototype of a very elaborate coffee truck that hit the streets.

And uh just a couple of'em and they started doing really well. We put'em in a couple other franchisees' hands. Uh the following year in twenty twenty one, I think we sold twenty. We sold thirty more in twenty twenty two. And then this year we've already got ninety sold. Wow. No, we're only selling we're only selling to Kona franchisees right now. Right now. Yeah. When you look at the unit economics, do you see the coffee business?

Eclipsing the Shea Vice business eventually. Yeah. I I don't think I would have said that. a year ago, maybe not even six months ago, but some of the some of the results that our coffee people are having are pretty spectacular.

It's amazing because there's s seems to be such a mass proliferation of good coffee. Like you can go to remote parts of the United States and find great coffee in Alaska or you know right. Um that's what makes everything so hard about that, except for the fact that we're mobile and we'll go places where no one else will go. And I don't have the same economic That truck doesn't have to do one point six million to service the debt and the eighteen people that are working behind the counter. It's just a different mouse trap.

And right now you're only in a few states. No, we're we're in probably I think thirteen states right now. Right. Um and Tom is your dad, I should mention. Tom is my dad And he's the mascot too. It's his it's his head, right? Is that him. He is.

He does orange sunglasses. Yeah. Orange glasses. He uh it's been great. Tony, when you think about Like you know, this this journey that you took, I mean You know, from being a a very good salesman to to kind of leaving that behind and kind of

Just try to figure it out and then Going into shaved ice and now here you are with in coffee. In all of the things that have happened, the growth of your business. I mean you've got fifteen hundred trucks just in Cone Ice, um

three hundred and seventy five million dollars in in system wide sales. in twenty twenty three, that's a really great business that you started from You know, an idea. Yeah, thank you. How much of of where you are today do you do you think has to do with

Just the hustle, the grind and your you know, your talent as a salesperson, how much do you think has to do with Good luck. I I listen, there's a lot of smart people.

Lotta people that work hard. You know, so luck plays a huge role in it. You know, I I don't know. I think I'm a good student of life. I pay attention, I see where the problems are. What's the solution to fix the problem? I wish this for my kids. I I I admire this in other people is who's a good student of the game or good student of life. Um Yeah, I'm glad I was there. I'm glad my sleeves were rolled up. I glad I I'm glad I was working my butt off. But you know, I'm I've been so lucky to get around great people and and have a family that you know, that has been involved and stuck with me and you know, I've been married thirty one years and

You know, you're a serial entrepreneur. A thirty one year marriage is probably my greatest accomplishment because the ups and downs of that. is remarkable. That's Tony Lam, founder of Kona Ice. By the way, kind of like the vacuum cleaner business back in the day.

Con ice is very much a family affair. Tony's two older brothers work in the business, as well as Tony's wife, Susie, and three of his children. And Tony's dad, Tom? He's not only the mascot for the new coffee truck business. He's also been working with Tony since the early days of Kona Ice. He gave himself a special title.

The founder of the founder. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and as always. It's free. This episode was produced by Casey Herman with music composed by Rautin Arablui. It was edited by Niva Grant with research help from Catherine Cypher.

Our audio engineers were Ko, Takasugi, Chernobyl, and Robert Rodriguez. Our production staff also includes JC Howard, Carrie Thompson, Alex Chung, John Isabella, Chris Massini, Sam Paulson, Carla Esteves, and Malia Agadello. I'm Guy Raz, and you've been listening to how I built this.

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