Wharton MBA for Executives

Just because the economy is down, it doesn’t mean that all businesses are in trouble.

A few months ago I started hearing about the Kogi BBQ truck. I first heard from word of mouth from lots of friends down here in LA. Then an interesting thing happened…I started getting email messages from lots of friends outside of the area (San Francisco, France, Korea, etc.) asking me if I have ever eaten at this truck. They would all send me links to various articles on the internet or newspapers where they have read about this truck.

For those who don’t know, the Kogi BBQ truck is a taco truck. Taco trucks generally park near construction sites, parks, some office buildings, etc. during lunch time and provide relatively inexpensive food. They are regulated somewhat but the cleanliness is a bit suspect since they are enclosed inside a truck. Kogi is the Korean word for “meat” and everyone knows that Korean BBQ is pretty good stuff. They have tacos and burritos (spicy pork, chicken, tofu, or beef short ribs) which are by far the most popular items. They also have sliders, kimchi quesadillas, tortas, etc. The prices are decent…tacos are $2 and burritos are $5. As you can see, it is a fusion of Korean and Mexican food, 2 of the most popular ethnic foods in Southern California. It was started by some Korean people who decided to combine the 2 types of food in various interesting ways.

The remarkable thing about the Kogi BBQ truck is how they have grown into a massive phenomenon. I decided to study this business a bit and try to analyze what makes them so successful? What makes them stand out from the thousands of identical looking trucks in the city?

I believe that their success is largely due to the buzz generated by the following:
1) Word of mouth
2) Use of technology
3) Entrepreneurial spirit
4) Quality of product (in this case, the food)
First we have word of mouth. I am just one example of a guy who has heard about this truck from multiple sources across multiple geographic locations. I am sitting here writing this post in my blog. There’s something about this truck and this product that makes you want to talk about it and tell others about it. After my meal last night I called a few friends and said “dude, I had Kogi truck for dinner” and they all laughed and said “cool man”. It was a cool thing to talk about.

Second, the use of technology. This is a taco truck that changes location daily. The only way to keep up with where they are located is via their webpage (www.kogibbq.com) or their twitter page (www.twitter.com/kogibbq). The twitter page is actually very effective because many users (over 1,000 people so far) are “following” them. This means that every time there is a kogibbq update on twitter (especially with their location), those 1000 people are alerted so it’s easy to keep track of where they are located.

In addition, when the kogi truck shows up near your house, there is a plethora of facebook status updates. I found out about the truck last night because a bunch of random friends on facebook all had status updates along the lines of “Kogi truck is in Torrance tonight 7-9pm at the corner of Van Ness and Toyota Way!” After my Kogi dinner last night, I updated my facebook status to “…just had Kogi BBQ truck for dinner” and I got a bunch of responses saying “I’m jealous” or “awesome!” or “cool! how was it?” etc.

And finally, the truck does not have a posted menu. You just have to know what they have. You can ask the guy if they have any specials but you can’t ask him “so can you list out your menu and all of your prices?”…he’s a little soup nazi-ish in that way. With a line this long you need to step up, order, pay, and leave ASAP. So most people were looking at iPhones while standing in line to see what was available on the menu.

If these forms of technology were not available to spread viral growth, they would not have been able to explode into this phenomenon.

Third, there is definitely an overwhelming attitude of entrepreneurial spirit. Almost everyone in line knows the origins of this truck and feel that the people running it are hard working mom and pop entrepreneurs. We all want to see them succeed. This is not a mega corporation like McDonalds, this is just a few guys trying to make ends meet in this tough world…at least that’s the message (whether intentional or not). People feel like they are helping real people by eating here. As a result, the tip jar was overflowing and almost everyone was rounding up and letting them “keep the change.”

Before I get to the last point, I’ll continue with my experience. Since it showed up yesterday only a few miles from my house…I had to go. I was curious but not curious enough to drive anywhere far to experience this. But in my neighborhood? How can I NOT go?

I left work and drove straight to the site and arrived at around 7:15…No truck. But there were people…about 100 people all standing around waiting for this magical truck to show up. Most of the crowd was fairly young (high school/college age) and most were Asian but there were a few other races mixed in there. When the truck finally did pull up, people started following the truck to see where it would stop. It kind of reminded me of the days when I was a kid running after the ice cream truck in the summer. Anyway, the truck couldn’t find a good place to park but one guy told them “hey I’ll move my car if you let me be first in line” and they agreed. I strategically positioned myself to be near this guy so the truck basically pulled up right in front of me (with only a few people ahead of me). I got lucky.

They took a few minutes to set up. There are about 6 guys working in the truck. The main guy who takes your order grabs his pen and paper and he’s ready. He’s no soup nazi but he does want you to step up to the plate and make your order. He calculates how much you owe pretty quickly, asks for your name, hands you a yellow receipt, and you’re on your way. There are around 4 chefs who quickly prepare your food. Finally, there’s a guy at the end who yells out your name and hands you your food. There are some radishes, sliced oranges, and sliced limes available on request from this guy at the end.

As I mentioned, there is no posted menu so many people in line were simply listening to what other people order or discussing it amongst themselves. Many people with iPhones were also looking on the internet at the various items and sharing their iPhone with those around them (who aren’t cool enough to have one). Most people estimate the line to be about a 1.5-2 hour wait. Since I lucked out by having the truck park right where I was standing, I only waited for about 15 minutes. The line was fairly social with people talking about the food. I would roughly estimate that about 1/2 of the people had the food before and the other half were trying it for the first time. The typical meal per person was 2 tacos and 1 burrito (so if a guy was buying for 2 people, he would double that, etc.).

From my observation, these guys are making bank. There is no recession here. The use of technology, promotion, word of mouth, buzz, etc. were all amazing but there was one more fascinating thing that I observed. Since the wait is so long and since this is a truck, you don’t really know where they are going to be in the future. This means that you don’t know when you’ll be able to have your next Kogi BBQ fix. This is like waiting for Halley’s comet…you need to seize the opportunity when you have it. If you also combine this with the long line and the overall attitude of helping out a minority (Asian) business, the result is that the average order when you step up is extremely large for this type of business. People who finally get up to the front of the line to order end up ordering tons of food. The average order was about $30 (much higher than the average ~$6 taco truck meal). Many people in line were asking “do you know if there’s a maximum?” and making comments like “aren’t they gonna run out of food? how much food could they actually fit inside that truck?”. When I left, the line was well over 200 people. People were buying food for their parents, friends, siblings, etc.

Finally the food. I did not have high expectations as I treated this more as a marketing study than anything else. I started by thinking that I’d try a couple of tacos. But then as the overall experience of the line kicked in I allowed myself to get immersed in the moment and ordered food for the whole family. I got 4 spicy pork tacos, 4 chicken tacos, and 4 short rib burritos. The total should have been $36 but the guy said $39 (maybe tax or something?) and I handed him a $40. Maybe he just isn’t good at math but aren’t all Asians good at math (heh)? Most people were rounding up and just letting him keep the change anyway so I did the same (remember the attitude of helping out a minority business?).

The chicken taco was fabulous. The crispy cabbage and seasoning mixed with the flavors of the marinated chicken was perfect. I was sold immediately. This really was good. The spicy pork taco was also good but I’m not a big pork eater (I just wanted to try it). The burrito is made like a breakfast burrito so it has potato, egg, etc. in addition to the short ribs (kalbi meat). It was also pretty good but my favorite was the chicken tacos. It’s a bit ironic that my favorite item at “KOGI” BBQ ended up being chicken.

Is this a fad? Yeah probably. But in music, one hit wonders make a lot of money right? I don’t know how long this fad will last. I am pretty sure that the owners are making a ton of cash right now so my guess is that they will either:

1) Buy more trucks and replicate the current model to spread out across the city
2) Invest their money in setting up a real restaurant (or taco stand) where they can aspire to be like Pink’s hot dogs (lines at all hours of the day)
3) Open up a sit down restaurant and take it from there (I think this would lose a lot of the aura and spirit that attracts people)

As far as the longevity of this business, I don’t really know. I think definitely the hype will die down but the buzz level is so high that I think they’ll do well for at least the next few years. Sometimes the best businesses are formed during recessions.