«He opened his last two restaurants while studying at LvBS»
Oleksandr Penkivskyi is the Key Executive MBA program of the Lviv Business School of UCU (LvBS) graduate, an owner of the “City Café” restaurant chain (Ternopil). In addition, he actively organizes tours. He has implemented a great deal of charity projects, but prefers not to talk about it, because he adheres to a principle that charity should be quiet. He reads about 30 books a year, loves to travel and change the world for the better.
«City cafe» consists of 5 restaurats: Pasta Fresca, Barbaresko, Le Rock, Piazza (the town of Chortkiv) та INSHYY Prosecco Pub. Oleksandr opened his last two restaurants while studying at LvBS. During the pandemic any of the employees hasn’t been signed off.
Oleksandr shared how he started his own business, what challenges he faced during the crisis, how his studying at LvBS has affected his business and what the restaurant industry will look like after the pandemic.
Оlexander, you are one of the most famous restaurateurs in Ternopil. Could you please tell us how did you start your business? Was it a restaurant industry since the beginning and why did you choose it?
It all started when I was 20 and I decided to get my feet wet abroad. Under the “Work and Travel USA” program I went to the United States and was bent to get into big money. And big money and America means construction. I am not endowed with special physical abilities, but I was hired.
The developer was an ethnic Pole and we got on well. After three months in America, I no longer worked physically, but had people under my control. But at that moment I realized that if it went on like that, “the glass ceiling would appear very quickly. That meant that my pathway was clear to me – what would happen in a year, five, ten, fifteen… Probably the biggest thing that motivated me to return to my country was the understanding that I would never blend in there.
After my returning to Ukraine, I thought: “what should I do next?” I studied in Ternopil and come from Zhytomyr. Then a semi-genius idea came up to me. I decided to establish a kind of a business for the installation of tombstones. But then I made two mistakes: I took business partners and did not look into all potential scenarios. Finally, the first season of this unjoyful activity ended up with a large number of unfinished orders and a total debt of $ 4,000 (the price of a one-room apartment at the time).
After long and difficult thoughts and hesitations, I turned to my close friend Yurii Fyliuk (a businessman, restaurateur, one of the initiators of the “Warm City” environment and one of the idea authors of creating a public restaurant “Urban Space 100”. – Editor.) from Ivano-Frankivsk. He advised me to start organizing concerts. However, I had debts and no understanding of how to run such a business. But I decided to try.
This is probably fate – my first concert was for the “Ocean Elzy” band with their album “Gloria”. Yura preacquainted me with them, but they stipulated a condition, which was to give an advance in amount of 4 thousand dollars. I thought then that it was an epic number for me. Of course, I did not have such money, I barely dig up a thousand, but they gave me a chance. I was supposed to pay them back in two weeks. That’s how the cooperation began. The tickets were sold out “with a bang.” I have organized many concerts in my life, but I have never had such success as that first time. The end of the story is very positive as that project let me earn more than 4 thousand dollars, so I was able to clear all my debts.
At the same time, I met the famous showman Serhiy Prytula, and we both were dreaming of big business. We did something, we earned something give or take. And then the fertile time of elections in Ukraine started and organization of eight “Kvartal 95”’s concerts in eight cities came out of the blue. They supported one of the political parties at that time. Serhiy worked in Kyiv at that time, so I organized everything. We made jack then and after that I realized that putting on concerts in only one city was not interesting for me anymore. So I started to expand my geography: Lutsk, Ivano-Frankivsk, Khmelnytsky… It all ended sometime in 2010, when I consistently “covered” 12-15 cities, systematically and constantly. As the 2010 crises affected this industry deeply, I began to think again, “What’s next?” You are constantly dependent on something either the artist or the people. To understand people is like to get a handle of space. At such moments, I often remembered Hilton’s autobiographical book (Conrad Hilton, an American businessman, a founder of the Hilton hotel chain, and author of a book titled “Be My Guest”- editor). He said: “Until the age of 42, I invested in completely sure things. And I constantly lost. At the age of 42 I started to manage my first hotel. “That’s the phrase I go through my life with. Since I’m not 42 yet, I decided not to “be down”. I asked Yuriy again for advice. He boasted that he had opened a cafe. We spent a lot of time together and so the idea to open the first restaurant appeared.
How was everything developing?
I was supposed to open a restaurant with 35 seats, but it turned out that my first restaurant called “Fayne Misto Ternopil” had 160 seats and at that time (we speak about 2012. – Editor’s note) was really the largest restaurant in the downtown. It still works.
This is my first restaurant, built together with my wife from the scratch. But here again I had some tough time with my partners, so I always repeat: “if you ever have the idea to do business with politicians, government officials or anyone who has access to public funds, throw it out.”
I have already had several such attempts and each of them had a predictably sad demise. And that gave me the impetus to move on. I felt the need to do something, and so there was, in fact, a second, but my first “entirely mine” separate business – a restaurant of Italian cuisine “Pasta Fresca”. It also works successfully up to present.
Next… I often walked by one place in the central part of the city, it seems to me it was a second-hand shop, and I was thinking of how cool it would be to open a restaurant there. Then I found out who the owner of that place was, came to him and shared my idea. However, he took a critical look at it, even he arranged for consulting several times and they claimed that it was impossible. One day, with God’s help, I convinced him. It wasn’t easy, but that’s how my third restaurant, Barbaresko, saw a light of day. After that, a team of like-minded people and I opened a pub with our own brewery named “Le Rock”. Later I opened a restaurant in the city of Chortkiv called “Piazza”. By the way, I opened my last two restaurants while studying at the Business School.
What about scaling, what motivated you to open more and more new restaurants? How many are there now and how many jobs have you created?
The chain now has five restaurants. There were some instantaneous seasonal objects. But seasonal business in Ternopil, probably, as well as in Lviv, for some reason doesn’t bring success for me. There are only three active months of summer work and nine months of upkeeping and constantly dealing with burning issues. There are 200 people in my staff today, but there are some changes seasonally.
What motivated? My life philosophy: moving is living, to stop means to die. And the second is the need for self-fulfillment. I always dreamt not to take over the world, but at least to make a sizable contribution.
What do you think unites your restaurants now, what is special about them?
As the person who runs this mini-chain of institutions, I would like us to be united by the moving spirit. I really don’t like to call it “my restaurants”, because first of all it’s a team that does all the work, and today it is quite large.
We work not only for profit. There is still a large part of the so-called psychic income. I would say that our business is socially oriented.
We are involved in charity and not only this. Yet, we do not publicize it. But this is probably more my viewpoint than the company’s. I follow the principle that charity should be quiet.
To my mind, it is interesting that all five institutions are completely different. It means that we do not have two identical restaurants, each of them is special. Our last establishment is called ” Inshiy” (“a Different”). We wanted to send the message somehow; we “fought” for a long time about the name. People often ask why “a Different”. Because not like everyone else.
Speaking of the crisis, was there anything that had to be sacrificed, perhaps some of the institutions had to be closed?
All our restaurants have survived the crisis. It is clear that we had to forego certain tangible assets. Somewhere I read the phrase that everyone was waiting for a black swan, but a white elephant flied in. Until March 16, 2020 (according to the resolution of the Cabinet of Ministers from March 17, 2020, the work of schools, restaurants, shopping centers, etc. was banned- editor’s note), life went on as usual and everything was absolutely normal. And we have a slightly specific business, because we do not produce the off the peg product. It is clear that money is made on deferrals; it means that we can take a product or manufactured article and pay for it, figuratively, in two weeks. Hence the money. And here, one day, you just stopped working – and that’s about it.
Nevertheless, it seems to me that we acted humanely. At that time we had about 200 people on the staff. When we realized that we were sending them on vacation not for a week or two, we paid in recompense, if I’m not mistaken, 4 thousand hryvnias to everyone. We also had a special fund. There was no sky-high money, but if someone needed money, he applied and we donated some money for it.
In addition, when I realized that delivery is a problem, I thought it would be good to be useful to society at such a difficult time. I discussed this issue with the mayor and we decided to cater to two infectious diseases hospitals, children’s and adults’, hot lunches. Therefore, for three months, we provided food for 40 to 60 people a day. But then I got peeved at the mayor, because he posted everything on Facebook, and I didn’t want to publicize it.
Can we say that the quarantine still made some positive adjustments to the restaurant business?
Of course it did. Churchill said that “success is the ability to walk from failure to failure without losing enthusiasm.” Without question, the quarantine has changed the world, the country and us both as people and as an industry. In general, we have learned to work much better with such things as savings, leftovers, purchases, as well as to predict how much goods are needed. For our structure, I think the biggest victory is that all the people we had before the quarantine stayed with us after the quarantine. That is, during the entire period of the pandemic, we did not lay off any workers, despite all the inconvenient moments.
In general, quarantine restrictions have significantly affected the running of the restaurant industry. What were the biggest challenges for you and how did you manage to adapt to the new conditions?
They had a dramatic effect. The biggest challenge is the complete lack of any stability. This is the first and most important thing, because nothing could be planned or predicted, because no one understood whether it would end in May or July, or in 10 years at all.
Our approach has not changed much; we treated our staff, as well as our guests, as honestly as possible. The restaurateurs thought that if the quarantine was announced tomorrow, then the day after tomorrow the number of deliveries would not just increase, but take off. However, in the first quarantine week, we realized that the delivery is the crutches that will help the restaurant business to crawl until the end of the quarantine. It not only yields to poor returns but it was a fight for breaking even. But at the same time, we tried to develop a model so that those people who worked for us could earn at least something. Wage rates were not crucially, but reduced. We equalized absolutely everyone, regardless of level or position, everyone worked at the same rate of UAH 500 per day – no more and no less (before quarantine, for example, a chef earned 700 UAH). Sometimes we managed to make money per day, and sometimes we didn’t, but in the end, I was proud that we shared everything honestly with the staff and managed to make flexible work schedules. We gave the staff a free hand. To those who had their own car, we offered to deliver food, so as not to pay intermediaries. We weaseled our way out.
The most difficult, perhaps, was to communicate with landlords. Out of five restaurants, we are the owners of only one and the other four are leaseholds. I had different opinions about the people who lease space. And quarantine became a check for humanity.
Of course, I had to immolate my profit and I did it with my eyes open. I believe when business is lame in the left leg, the state should do everything possible to be useful. The government has talked a lot about business support, but in fact has not taken any remarkable measures. If we speak, for example about public-service utilities or taxation.
On a global scale, we can say that if we speak about telling tolls so those people who didn’t have assets to outlast this period, just failed. I read the statistics that at the beginning of May, after more than a year of quarantine, 20% of businesses in Ukraine closed. I think it’s 99% related to the relationship with the landlords.
In Lviv, when strict quarantine restrictions were introduced, restaurateurs united and joined some initiatives. I wonder to what extent in Ternopil restaurateurs communicate with each other and act on a “win-win” basis? Is it still a more competitive business game?
Ternopil is actually a bit of a specific city and not as big as Lviv. But such things happened. Sometime in April, when everyone realized that the quarantine would last long, they initiated a meeting of restaurateurs, where we all gathered and wrote an appeal to the authorities. It would be unfair to say that the local authorities fell in deaf ears. In 2020, the support was very high. From time to time we met, cried out for, created some associations, but it all ended in trite, and to my mind, unpleasant way, because the people who initiated these meetings, after some time started to break these deals. So everything fell into pieces. Some people refused to observe guideline not to work after 22:00. One man even renamed his restaurant into a church. To be honest, at that point, I left that association. After all, in my value-based outlook on life, that wasn’t any good. There are some red lines that cannot be crossed.
But in general, they tried to unite, even tried to do some cool things. Something worked and something didn’t.
How are you planning to recover after the Corona crises? What will you place greater emphasis on?
In general, our plan is very simple. We will try to do our work as efficiently and productively as possible. Today we can confidently say that despite the financial indicators (we have not recovered yet for over 60%), there are small advantages, in particular, in terms of optimization. I think that our recovery will be connected with the recovery of the whole economic situation in the country. After all, we understand that a restaurant for a person is like a luxury. We live in a city with only 220,000 people. And here are some nuances and limitations.
And we will focus on quality, and as always – on honesty, quality, work with staff… On such simple and trite things.
This business consists of little things. I set the tasks as follows: the more these little things we find and influence on them and change them, the better the results will be.
What are your expectations about restaurant business recovery in Ukraine in general? How long will it take to reach pre-quarantine rates?
I believe that everything here will depend on the epidemic situation in general and to what extent people’s lives will return to normal. Online will never replace live communication and this is the fact. It seems to me that if we are more or less vaccinated and some went through the illness, there will be a certain stabilization period lasting from six months to a year. But, again, this period may be shortened, as many businesses simply will not survive until then. We should understand that there are many companies which work with credit funds, and many which live here and now. And if there is no financial cushion – it is impossible to survive. This business may not die in a day, but in a month or two or three it doesn’t have money to pay salaries and rents – and that’s the end.
I can say that the market of 2012-2015 and the market of 2018-2021 are incomparable. Everyone has already forgotten about the super profits. It means, if in 2012 the average profitability was about 30%, today, if you can manage to have from 12 to 15%, you can be considered as a super cool.
What are your basic rules / formulas for successful business?
The first and the crucial one is to work honestly. It doesn’t matter if we speak about staff, team, guests or suppliers. I believe that a hard-boiled appraisal of the situation and honest attitude to things and events are the first evaluation of success. And no matter how painful or difficult it is, we need to talk about it honestly.
Also, one of the key virtues that I always try to convey is human decency. I really like the analogy to the situations when people buy tickets for concerts; they always ask the organizer if there is a live sound. The same works with restaurants. For some reason, many people think that a restaurant is a place where everyone steals and cheats. In fact, this is not the case, but we will have to break the mold for many years to come.
How to succeed? I can’t identify myself as a super successful person, but my winning formula is very simple: the more you work, the luckier you are. I don’t really believe in Bill Gates or Steve Jobs’ success stories in Ukrainian reality. But, apparently, they are possible. In general, try harder, work harder and sooner or later the result will come.
I remember while studying at the Business School we had a “Strategic Planning” module, and then the lecturer told me: “Olexander, remember once and for all, a dream is not a strategy.” You need to clearly understand what you want to do tomorrow or the day after, in a year’s time or in 10 years’ time. Today I have a vision for tomorrow – more or less by 2030 I know what to do and where to run to make it real. And then it’s a matter of effort – mine and my team’s.
How has studying in the Key Executive MBA program affected your business? Why did you choose this training and LvBS?
I really wanted to get better, to sharpen my own business, but I crucially was lacking skills and a global vision. It is clear that there is a concept of “I want”. I want a hundred restaurants, it’s cool, so what? Why this program? – I did not even consider others.
I had a choice between two schools – Kmbs and LvBS. But when I first came here for an interview, I realized that there is no alternative, no offense meant to Kmbs. One more plus was that geographically it was convenient for me to get here.
What has changed in business? It became bigger. To be more precise, I have moved from some meager operational movements to strategic planning. Besides, after finishing this business school I realized that the world is much bigger than I could imagine and there are much wider possibilities in it. Perhaps, I won’t be able to make all my ambitious plans fly, but even today I am very satisfied that even if we do not do super-global things, I believe, we are doing everything properly.
What were your expectations from the program and how much valuable this studying was for you?
I thought I would get information overload and be capable of everything. After the МВА my world has changed, but it became different in a fundamental and global outlook on life. I consider communication with all those involved – teachers, school management, and most of all – with my group (this is my love in general) to be a great achievement. I adore everyone, we still communicate today. People are very diverse, and this is a very cool community which exists even today and we are all happy to help each other.
If you ask “Is it any good doing it?” I will answer tritely: I had a choice: to buy a new car, which costs jaw-dropping price, or to study for MBA. I preferred the second one and I want to say that I don’t regret about it at all. I am just sad that this adventure is over. I am thinking about joining another program. The only thing a person has no right to stop doing is to study. It does not matter how.
The topic of your degree thesis was dedicated to the eating establishment chain to ensure an effective social component of the business. Tell us more about it. What did you manage to implement?
At the moment, my large-scale ambitious plans are paused. I do not hide it, but I think it is quite clear why.
What we managed to implement is the following: we actively support different charity projects, but as I previously mentioned, I don’t want to promote myself with that. I believe we influence the society in some way. If I was asked whether it would be possible to implement I would answer –yes, definitely. It is a matter of time. The last 1, 5 year of a kind of knock-out has taught us a lot. I want to repeat again that I am deeply convinced that the world will never switch to online life, despite different hypotheses. Moreover, in the Ukrainian realities in the next 100 years, this is, to put it mildly, difficult, if ever real.
My degree thesis vision was to launch 25 new objects and scale across Ukraine. Some work has already been done to reach it. The most positive thing is that people who visit our establishments from different parts of Ukraine call with offers to open a restaurant in their city on the terms of franchising. It inspires hope and faith that a glittering future is not far off.
Oleksandr, if it was not restaurant business, which one then?
What I do, I do not call the word “business”. I just live my life and get some kicks out of it. Now it is like that. Today, in addition to restaurants, I am still quite active in organizing tours. On average, I do about 30-40 events a year in the west of Ukraine, geographically, roughly speaking, from Zhytomyr to Uzhhorod.
It is not so important for me what to do. As soon as you do something that you enjoy and you put your heart into it, it doesn’t matter whether you are a tailor, a carpenter or a successful businessman. For me, this is not essential, it is important to remain human.
What is the concept of restaurant culture for you? And do you think the approaches to the hospitality industry in the world that has overcome the Corona crisis will change?
Long time ago I visited Prague and one restaurant there ,which is 120 years old. This is about culture. In Ukraine there are already some changes. I mean that you will not surprise anyone with French meat and cabbage salad anymore. We are really in trend, and to be honest, there is no such level of service abroad as we have. I have been to Norway with my children recently. I came, I ordered, bon appetite! Such a service as ours, where different flatware are given for different dishes, sparkling water, still water, warm or cold water – no one cares about that there. I feel we are also moving on this way. Power is in simplicity, because it is more comfortable for people. For example, no one builds fancy restaurant in Ternopil not because there is nobody who can do it, but because there is no demand for it. Today we all are moving towards democracy and want to spend time with people and among people. There are no people willing to sit in a flashy establishment with sky-high prices.
What do you think a return to “normal” will mean for this industry? What changes are irreversible?
I believe that “normal” means to be able to go out without masks, antiseptic, gloves and stop being terrified of other people. That situation that happened last year in Novy Sandzhary will remain with us forever and we will have to live with that. Will people become more careful and secure? As I feel, it is more likely no than yes. I travel a lot around Ukraine and I see people’s behavior in the restaurants, at different events. To tell the truth, people are just tired. I believe as soon as the government wave the white flag and tells “you can live as you used to”, in two weeks we will forget about the quarantine. Man is a social being.
Looking back and having business experience during the pandemic, what three tips would you have given yourself at the beginning of quarantine?
The first tip. I would have implemented certain elements of lean-systems (the concept of management) much earlier. Its essence is to optimize business processes by maximizing focus on the customer’s (market’s) interests and needs and taking into account each employee’s motivation, so that all product orders occur exactly as needed. According to Toyota’s philosophy (the author of the concept is considered to be Taichi Ono, who developed a unique production system for Toyota Corporation).
The second tip. I would not have spent money so thoughtlessly, but would have formed a financial shield which would have helped me cope with the crisis more easily.
And the third… I would have thrown a supercool party for my employees so that we would have started the quarantine in a widely merry way.