In the latest conversation on North State Rocks, Bruce Dean, co-founder and chairman of Black Bear Diner, shared the unvarnished truth about building a restaurant empire from humble beginnings in Mount Shasta. His story offered critical insights for entrepreneurs navigating growth, failure, and the brutal realities of business expansion.
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Dean and his partner Bob Manley launched Black Bear Diner in 1995 with just $40,000—a stark contrast to today's reality. “I think I sold a boat. Bob went into his retirement plan for being a teacher, and we put together $40,000, and that's what we started Black Bear with,” Dean recalled. “We open a restaurant nowadays; it takes a couple of million dollars to open a restaurant.”
The early days were grueling. “Bob and I worked 38 straight days when we opened it... We worked 16 hours a day. We lost 40 pounds each,” Dean shared, highlighting the physical and mental toll of entrepreneurship.
Dean's willingness to share failures proved as valuable as his successes. After rapid expansion to four locations by 1998, the company nearly collapsed. “We came within just this much of going out of business in November 1998 because we'd opened too many restaurants and we'd stretched our cash flow,” he admitted.
The lesson was stark: “If we had a good weekend, I could make payroll on Tuesday. If we had a bad weekend, I would have probably shut the business down.”
One of Dean's most powerful lessons involved his decision to close underperforming locations. Despite having significant investment in a Red Bluff location, he made the painful choice to shut it down while continuing to pay rent for three years. “I paid rent on an empty building for over three years at a time that I couldn't really afford it, but I knew that it was the right move.”
This decision stemmed from a previous costly mistake in land development, where he couldn't walk away from sunk costs. “The smartest decision I would have made would have been to walk away from it... But I wasn't willing to walk away from that original investment,” he reflected.
Dean offered sobering statistics for aspiring restaurateurs: "About 75% of restaurants fail in the first five years.” The primary culprit? Cash flow. “They didn't open quite right. They didn't invest right in their staffing... The biggest failure of restaurants is that they've run out of money.”
His current pre-opening investment of $200,000-$250,000 just for training 120 employees per location illustrates the capital intensity required for proper execution.
Dean emphasized that successful growth required promoting from within rather than hiring external managers.
“We find it best that we grow our people from within. They know us. They know what we expect,” he explained. “Somebody looking for a manager's job that isn't working in my business is basically unemployed for a reason.”
His philosophy extended to customer experience: “Invest in your staff. And if your staff is happy... they're going to make sure your customers are happy.”
In 2016, after growing to 75 locations, Dean sold a majority stake to private equity to fuel further expansion.
“We sold a majority part of our equity because some of our partners needed to be cashed out... but we hung on to a significant share of it,” he said.
The key was finding the right partner: “They've not been demanding... They never made us change the business for profit motives that may not be good for the business long term.”
Dean's decision to invest during the 2008 recession demonstrated contrarian thinking. “To me, that was the time that I needed to invest. I needed to show confidence in my brand,” he said. This approach led to “28 quarters of same-store sales growth” coming out of the recession.
Recent challenges included absorbing massive egg price increases without passing costs to customers. "We usually would pay $1.50 a dozen... That went over almost $8 a dozen... we ate that price increase... and that cost us over $1 million."
When asked why the North State restaurant model worked nationally, Dean's answer was simple: “People across the country... everybody likes to eat like we like to eat up here... People kind of want large portions... they love having the opportunity to maybe take some home.”
The cabin-themed atmosphere resonated universally. "People in Las Vegas like that same feel, people in Los Angeles like that same feel... They all want to feel comfortable."
Dean's journey revealed several critical business principles:
and bring energy, experience and expertise to complete the simplest jobs efficiently, and overcome the largest obstacles with enthusiasm.
