September 10, 2025

Building a Successful Restaurant | LoL #14

Shane Pierson, Stephanie Dunn & Brian Congelliere

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Building a Successful Restaurant — Key Takeaways & Deep Dive

Most people who dream of opening a restaurant have never seen the back end of one at midnight when the accounts are negative, payroll is due in the morning, and a trusted employee just walked off with thousands in cash. In Episode 14 of Lords of Lending, Shane Pearson, Stephanie Dunn, and Brian Congelliere sit down with Seth Hannemann of Seven Brothers Burgers to tell the real story of how a family restaurant goes from a $300-a-day hole in the wall behind a gas station to a 14-location brand with a vision to go international.

In this episode: Seth shares the origin story of Seven Brothers — how his father bought a tiny restaurant in Kahuku, Hawaii in 2009 without consulting his sons, announced it on a Friday, and told them they were all working by Monday. The conversation digs into what actually makes a restaurant acquisition work: the family dynamics that nearly tore them apart and ultimately became their greatest strength, the brutal economics of food and beverage, the specific operational levers that separate profitable restaurants from money pits, and why this family of seven brothers chose to stay true to their values while the industry told them to play it safe.

Key Takeaways

1. The Restaurant Business Is the Hardest Way to Make a Dollar — And That Is Exactly Why Most Fail

Seth did not sugarcoat it. When people ask him about getting into the restaurant business, his first response is blunt: "I would never wish it upon my greatest enemy to go into food and beverage."

That is not pessimism. That is the voice of someone who has lived through negative bank accounts, employee theft running into the thousands, and the constant grind of feeding a public where every single customer is their own food critic. The restaurant industry has failure rates that make other industries look comfortable, and the reasons are always the same — thin margins, high labor costs, relentless turnover, and operators who fall in love with the dream without understanding the math.

What separates Seven Brothers from the restaurants that close after 18 months is that the Hannemann family figured out the fundamentals through painful trial and error. They started with burgers priced at $3.75 — literally paying people to eat their food once you factored in the cost of hand-cutting fresh potatoes, making patties from scratch, and chopping every ingredient by hand.

"I would never wish it upon my greatest enemy to go into food and beverage. It is the hardest way to make a dollar on the planet, maybe than farming." — Seth Hannemann, Lords of Lending Episode #14

The origin story itself is instructive. Art Hannemann — the patriarch — was a serial entrepreneur who once left a corner office in downtown LA to open a shoeshine stand at LAX. That venture crashed and burned. His old corporate colleagues found him at the airport shining shoes and could not believe it. But that willingness to throw caution to the wind and chase his own vision is the same energy that led him to buy a tiny restaurant behind a gas station on the North Shore of Oahu in 2009. The previous owners, a Korean couple, were doing $300 a day. Art announced the purchase to his sons on a Friday and told them they were working by Monday. Nobody asked for volunteers.

The turning point on pricing came when Seth's brother Shem ran the numbers and confronted their father about what the menu was actually costing them. He created a guacamole burger with homemade guac, priced it at $8, and it sold. That single experiment proved that customers will pay more when the product is worth it — but only if the quality is genuinely there. No frozen ingredients. No shortcuts. Everything made from raw, fresh inputs. Seth put it in terms every restaurant owner should understand: if you find the people doing it best and copy-paste their approach with your own twist, the premium price justifies itself. Seven Brothers modeled their fresh-cut approach after In-N-Out — they cut potatoes in front of customers, made patties by hand, and chopped every ingredient fresh.

2. Three Levers Determine Whether a Restaurant Lives or Dies

When Steph asked Seth the question every lender wants answered — what are the specific levers that make a restaurant profitable — his answer was dead simple. Food cost, labor cost, and theft prevention. Everything else is secondary.

For Seven Brothers, the target is 33% food cost and 27% or lower labor cost. Those percentages may sound like small numbers, but being off by even 2-3 points can mean thousands of dollars vanishing every month. Seth described the specific ways those dollars disappear:

Portion control. A 16-year-old employee putting large-fry portions into small-fry containers does not seem like a crisis on any individual order. But compound that across two shifts, 14-15 employees, and 26 working days a month, and the dollars add up to thousands.

Inventory verification. For years, Seven Brothers did not check incoming inventory against orders. A delivery driver dropping off 12 bags of potatoes instead of 15 is nearly impossible to catch visually — unless someone is counting. Whether the discrepancy is human error or intentional diversion, unchecked inventory is a constant bleed.

Cash system integrity. Seth shared a story that still clearly stings — one of his most trusted employees, an adult he had trained personally, was stealing hundreds of dollars per shift from two locations. The loss ran into thousands before it was discovered, and they never recovered it.

"If someone now is reaching out to me like, 'Dude, Seth, I've been in the trenches three years now, the restaurant just isn't really working,' my first question is, let me taste your food. The second is, let's look at your food and labor." — Seth Hannemann, Lords of Lending Episode #14

Steph connected this directly to what she sees across every industry she lends into. The principles are identical whether you are running a burger shop or a funeral home — detail orientation, inventory discipline, and systems that do not rely on trusting people with unsupervised access to cash.

3. Family Business Runs on Forgiveness, Not Org Charts

The most remarkable part of the Seven Brothers story is not the food. It is the fact that seven brothers, their wives, and their parents have managed to build and run a growing business together without any of them walking away permanently.

That does not mean it has been smooth. Seth described literal physical fights in the kitchen. Brothers screaming at each other during service. His father pulling him off the grill in the middle of an $800 night because he thought things were falling apart (they were not — he was actually proud). The dynamic of working for your father while also being a married adult with your own children created constant tension between "Dad" and "Boss" that took years to figure out.

What kept them together, according to Seth, was the ability to forgive quickly, apologize honestly, and remember that when it all shakes out they are each other's best friends. None of them is in it for the money. The business stands on three pillars their father established: Christ-centered, family-focused, and passionate about making and serving food that blows people away.

"We are not in this for the money. Never. Do we want to make money? Yes. Do you have to make money? You got to. But none of us has a soul bone in their body to sue each other. We're each other's best friends." — Seth Hannemann, Lords of Lending Episode #14

The scaling question brought its own set of fears. For years, Seven Brothers resisted franchising because Art was terrified of losing control — and rightly so. The McDonald's-Ray Kroc story haunted them. They heard horror stories from other founders who brought on capital partners only to get pushed out of their own companies. When they finally took the leap, it was after thousands of hours of family meetings, consultations with mentors who had been through similar transitions, and a simple piece of math that changed their perspective: you can own 100% of a company worth a million dollars, or you can own a smaller percentage of a company worth a billion.

"You guys could own 100% of a company that's worth a million bucks. Or you could own 50% or 60% or 30% of a billion dollar company." — Seth Hannemann, Lords of Lending Episode #14

Brian, who grew up with the Hannemann family and visited the original Kahuku Grill on his honeymoon, described walking into the restaurant and feeling the family brand without anyone having to explain it. Steph identified this as the "secret sauce" — customers do not just come for the burgers. They come to be part of the family experience, the same way people visit Dollywood to feel connected to Dolly Parton's story.

What This Means for Restaurant Buyers and Business Owners

If you are looking at acquiring a restaurant or starting one from scratch, this episode is the reality check you need before you sign anything. The restaurant industry rewards operators who treat it like a science and a calling, not a hobby or a get-rich-quick play.

The lenders on this show — Shane, Steph, and Brian — see restaurant deals every week. The ones that get funded are the ones where the buyer can articulate exactly how they will control food cost, manage labor, prevent theft, and maintain quality. The ones that get declined are the ones where the buyer loves the idea of owning a restaurant but cannot explain what their food cost percentage target is.

Seth's story also shows what lenders look for in a family-operated acquisition: a clear division of responsibilities, the humility to let the most capable person lead regardless of birth order, and a values framework that keeps the operation grounded when growth pressures hit. Shane made an observation during the episode that applies far beyond restaurants: the businesses that scale are the ones that combine passion with infrastructure. Plenty of operators have the passion but never build the systems. Others build the systems but lack the personal energy that makes customers want to come back. Seven Brothers has both — and it took 15 years of fights, failures, and near-empty bank accounts to get there.

Steph added one more hiring insight that transfers across every industry. When she interviews candidates for banking positions, her first question is: have you ever worked in a restaurant? The discipline of never walking back empty-handed, of picking up a dropped plate without asking who dropped it, of prioritizing the customer experience over ego — those instincts are formed in food service and they translate directly to any high-performance business environment.

SBA Business Acquisition: What Lenders Really Expect — What your lender is actually evaluating when you bring a deal to the table
The Complete Guide to SBA 7(a) Loans — How SBA financing works for restaurant and food-service acquisitions
What Is My Business Worth? A Step-by-Step Valuation Guide — How to determine fair market value before buying or selling

Frequently Asked Questions

What are the biggest financial mistakes new restaurant owners make?

Based on Seth's experience, the three biggest mistakes are underpricing your menu to chase volume instead of margin, failing to verify incoming inventory against purchase orders, and not having cash-handling systems that prevent employee theft. All three are fixable, but most operators do not address them until they are already bleeding cash.

What food cost and labor cost percentages should a restaurant target?

Seven Brothers targets 33% food cost and 27% or lower labor cost. Industry benchmarks vary, but most successful quick-service restaurants keep combined food and labor (called "prime cost") below 60% of gross revenue. If either number creeps above target by even 2-3 points, the impact on profitability is significant.

Can a family-run restaurant get SBA financing?

Yes. SBA 7(a) loans are commonly used for restaurant acquisitions and expansions. Lenders evaluate the same fundamentals they look at in any deal: cash flow history, operator experience, collateral, and a clear plan for how the business will be managed. A family operation with defined roles and demonstrated track record can be a strong candidate.

What should I look for when buying an existing restaurant?

Start with the food — if the product is not good, nothing else matters. Then examine the financial levers: food cost percentage, labor cost percentage, inventory controls, and POS systems. Look at lease terms and renewal options. Evaluate the existing staff and understand whether key employees will stay post-acquisition. And get very honest about whether the asking price reflects the actual performance of the business, not inflated projections.

Ready to Take the Next Step?

Whether you are buying your first restaurant or expanding to your fifth location, the right deal structure and lending knowledge make all the difference. The Lords of Lending Training Platform teaches you how to evaluate acquisitions, structure SBA deals, and present yourself to lenders like a professional.

Explore training options at learn.lordsoflending.com/pricing

This content is for educational purposes only and does not constitute legal, financial, or investment advice. Consult with a qualified attorney, CPA, and financial advisor before making business or financing decisions. Loan terms, rates, and programs are subject to change and vary by lender.