How the CEO of Hot Palette America Found His Passion in Franchising and Built a Consulting Empire

Troy Hooper, CEO of Hot Palette America, started his journey into the fast-casual dining industry after years of success in the luxury hospitality sector. Hooper, who once managed fine hotels, resorts and private clubs, found himself drawn to the restaurant industry after reconnecting with a friend thriving in the quick-service restaurant (QSR) and fast-casual space.

Eager to leverage his skills in a new arena, Hooper co-founded a brand scaling firm and an outsourced C-suite consulting practice, where he assisted emerging restaurant brands in building infrastructure, upscaling teams, and refining franchise systems. This experience laid the groundwork for his current role at Hot Palette America, where he leads the expansion of the Pepper Lunch brand across North America.

“We’ve taken all the lessons from hospitality and applied them to create a franchise model that is both resilient and dynamic,”  Hooper told Nick Powills, founder and publisher of 1851 Franchise, on his “Meet the Zor” podcast.

Now, as CEO, he is fully dedicated to driving the growth of Hot Palette America, using his extensive background to steer the company toward continued success in the competitive fast-casual market.

A summarized transcript of Hooper’s interview with Powills has been included below. It has been edited for clarity, brevity, and style.

Nick Powills: Troy, how did you accidentally fall into franchising? What’s your franchise story?

Troy Hooper: You know, I had a management company that I owned, and we did turnaround business in fine hotels, resorts, private clubs and golf clubs. My good friend Mark Bailey was over here having a lot of fun in QSR/fast-casual. I had been learning from him for a number of years on what he was working on. He had a couple of projects where he needed some help — additional resources and human capital.

So, I brought that to bear and started learning a lot more about it. This was about 12-15 years ago, and about 8-9 years ago, we decided to partner and create a brand scaling firm, an outsourced C-suite consulting practice, and get into helping emerging brands develop their infrastructure systems and upscale their teams.

Ultimately, we offered a full package deal where we could do it for them, which is how we ended up doing the Pepper Lunch deal. They called us, thought they needed some guidance and set on the right direction. It turned out they wanted and needed a group to come in and actually just run the program.

So, we’ve done that a few times, and we’ve had a lot of fun with it. It put us in the driver’s seat to help a bunch of restaurant brands get off the ground, retool their franchise system, upscale their teams and get the right folks in the right seats. We love the heck out of it because we’re predominantly in fast-casual/QSR. We do a little bit of casual full service, but it’s fast-paced and a lot of fun. So, I fell into it, really.

Powills: When consulting for restaurants, did you find that it was easier for operators to enter the industry than to actually build a successful restaurant business, especially when they thought franchising would be a quick solution?

Hooper: Yeah, it’s an interesting way to put that. At the end of the day, the knowledge gap is enormous. The resources out there are limited and there’s an endless number of people that will charge you $65,000 to $95,000 and say you’re franchised, and you’ll learn nothing from that necessarily — and you won’t sell any. Look, 250 companies — not just restaurants but corporations — on average, file an FDD [franchise disclosure document] every year to franchise, and about the exact same number don’t renew from the previous year.

So, 100% turnover is not a great starting point. Restaurants have their own situation within that — the failure point. For us, we’re really different in the space because we don’t just tell you what you need to do and hand you templates. We’re a full-board A-to-Z consultancy. Everybody on our team has been a C-suite member of a 250-unit or larger brand. We’ve built brands, turned around brands, saved brands and created brands.

So, we just know the roadmap of how to get from here to 50 or 100 stores. We know what the franchise business unit operations system needs to be and what services you need to provide at a very high level. We just try to come in and complete that entire lack of knowledge. It doesn’t matter where you’re at. We do look back; we look at the product, the service, the business itself because it has to be ready. It has to be optimized, refined, scalable and replicable. We do that first from our experience. We’ve all been operators and C-suite members on different disciplines.

So, we can look at that and tell you what you need to do and how you need to get there if you’re ready or not. We then explain and show you what running a franchise business looks like. It’s a separate business. If you have 5, 10, 15 restaurants, yoga salons, studios or nail salons, running that business is the business. It’s a special discipline. Setting up and running a franchisor infrastructure is a separate corporation. It’s a separate business with a separate set of services. You’re doing something different. So, do you want to do that? Do you want to learn that? Do you have any idea what you’re getting yourself into? 

So, we go through a lot of that early on to make sure. Literally had one of those calls this morning. “Where are you at? What do you want to do?” This is what it looks like. Tell me where you want to land, and we’ll tell you how we could help you, advise you, get you the right people on the team. That’s just where we’ve come from and what we do.

We’re very, very fortunate in that this Hot Palette America/Pepper Lunch brand has taken up our entire book for a year and a half. We’re completely engaged and on board as a team. I’m CEO of the holding company in North America and co-CEO of the brand. I’m loving the heck out of it. It’s a ton of fun. Going to be here as far as the eye can see, and we’re just getting started. Really, we’re just getting off the ground and getting going.

Powills: So, are you not doing other consulting now?

Hooper: Yeah, so we’re not taking on new clients, like paid clients. We don’t have the capacity for that. I still advise like crazy. I’ll take that half-hour, hour phone call. We have a lot of folks in our ecosystem that we can help make connections to. Today, we’re fully engaged with Pepper Lunch, and that’s where we’re at. So, yeah, it’s just that they needed, wanted and had the ability to go full-board, full-team. We’ve shrunk what normally would take two, two and a half years into less than 18 months of work. So, we’re going on a lot of rails at the same time, getting a lot done, putting a lot of points on the board and getting some great results — not just in sales, but internally, operationally, systems, processes. Our first new era franchisee training started yesterday here in California.

Our Florida franchisee is going to open in the fall. So, you know, those kinds of things—opening a new store, training a new store, new tech stack, all that fun stuff going in all at once. So, it’s crunch time.

Powills: Did Pepper Lunch bring you in to leverage your infrastructure and accelerate their growth because they recognized the complexities and challenges of scaling a restaurant brand, especially compared to simpler franchises like a yoga studio?

Hooper: Yeah, that’s exactly it. That’s exactly what they saw. They didn’t know going in.
They thought they were going to try and do it themselves. It was under new ownership. Previous ownership had failed a couple of times to do corporate stores, failed to do a national master license agreement, master franchise agreement that did not scale. They just didn’t know — as a Japanese company, an Asia-centric brand — they didn’t know all of the things necessary and all the differences. Franchising in the U.S. is very, very different from most of the world, closest to Australia in the systems and processes.

In the U.S., franchise sales and marketing require a lot of specific efforts, unlike in Asia, where they do little to no marketing. They lacked a clear understanding of what was needed—how to launch, structure, and budget for it, what the infrastructure should look like, and when and how to build the team. Ultimately, they were buying experience.

They bought the roadmap, and they bought the guys and gals that know how to put it to play. We’re just a little unique in that we do things at a bigger scale, much faster than most because we’ve done it so many times before. We’re able to bring that institutional knowledge and those resources. We have all the vendors. Right now, we don’t use the same vendor for every project or every brand, but we start with them. We may have two or three others, but we know who to go to for that thing. There are hundreds, if not thousands, of those things.

And you’re right. The restaurant is far more complex. The franchise model in restaurants is no different from any other business, except that it has many more layers of complexity, touchpoints and tools you have to create and manage. But that’s why I love restaurants. By the way, we’ve done yoga studios, eyebrow salons, boxing studios and gym brands because if you can do restaurants, you can do anything, in my opinion. You don’t actually have to know the business so deeply. That’s what the founder and the founding group and operating team are for. They can tell you what the mechanics of that business are. But franchising is franchising. It’s just a matter of what complexity and what the franchisee needs in that business.

If it’s a window washing business or pressure washing business or something like that, the franchisee might need a lot less from the franchisor than they might in other businesses like restaurants.

Powills: What resonates with me is that, fundamentally, franchising is about consistency, like how McDonald’s ensured a uniform experience in its early days. But the sad reality is that too many consultants say, “Yes, we can franchise your business,” without assessing its viability. I had a client where I told them they either needed to invest a million dollars to reset or close down because their business wasn’t good enough to franchise. They said I was the first consultant to tell them not to do it, while others were just willing to take their money. That’s the unfortunate truth.

Hooper: Yeah, 100%. There has to be a “there” there, and it has to get refined, retooled and touched. I mean, as much as Pepper Lunch is a great example, a fun example. When we got involved, they had 389 restaurants. We have 516 a year and a half later. They had figured it out in Asia. The master franchisor model — they own 126 corporate stores in three countries.

Boy, I would never purport to tell them what they need to do to be successful in Asia. They can open stores in weeks — literally weeks — have a store up and running and doing huge numbers. They don’t have ramp-up periods because the brand is so well established. They have a lot of advantages. But to come to the U.S., I didn’t want — and we would never want — to Americanize or whitewash the brand. We thought there’s a lot about it that’s in play that works.

There are more complexities, consumer demands, and educational needs here. Unlike a brand with 30 years of consumer recognition, we’re starting from scratch. With just seven stores in North America, we face low market awareness—even in California, people 10 miles away haven’t heard of Pepper Lunch. We have to assess if what we have works here and consider retooling or building new prototypes if needed. For Pepper Lunch, we recognized it required American business practices, operational systems, and technology that aren’t used in Asia to succeed in this market.

We had more complexity and more decisions, so we had to build from the ground up, which I think you need to do a little bit in most businesses that want to franchise. Some of that has to be done. It’s to varying degrees, though, depending on where they’re starting from.

Powills: I would assume the up to $3 million gross sales is for the international locations. Has that hit domestic yet?

Hooper: Irvine, California is doing just under three — I mean, pennies under three million. So we just round up.

Powills: One of our proud moments was with Paris Baguette*. Initially, they were mostly in H-Mart locations within Asian communities because the brand is South Korean, and the customer base required little education. But they were only doing five to 10 deals a year. When we came in, we realized we needed to train the broader American market on why this brand is special. As we’ve expanded to a general American audience, the unit-level economics have skyrocketed. I believe a similar approach will work here — once mainstream America buys into the brand, sales volume will increase.

Hooper: Yeah, we think so. You’re absolutely right. And by the way, when you’re in an Asian-only community, the competition is much higher because you’re around nothing but Asian brands, right? You’re isolated. You’re one of many with a very similar experience or opportunity. When it comes down to the niche of the actual product itself or the experience itself, we’re excited about getting out of that model.

Now, Irvine is a great example. While Irvine, California, has a 33 percent Asian population, it has a massive university and an adjacent university. A lot of people live in Irvine who go to other universities nearby. And the general size of the population is enormous. So, we have a lot more Asian folks, but we also have a lot of non-Asians. What happens when you have that kind of mix is when you stand in Irvine and any of our stores, it’s changing more and more every day because of our marketing efforts. Almost every group of people that have predominantly non-Asian members — let’s say four people walk in, there’s going to be one Asian and three non-Asians if it’s not an all-Asian group, because they’re introducing it.

That’s an amazing opportunity to build brand affinity through introductions. But the challenge is bringing in non-Asian customers. Yesterday, four middle-aged white ladies walked into our store in Artesia, California, an all-Asian community. They came straight from LAX with luggage tagged from Utah. When I asked how they found us, they said, “Someone told us that on the way to Disney, we had to stop at Pepper Lunch.” We’ve only been here 18 months, so that’s a huge win.

I looked around the restaurant and saw other groups without an Asian member. We’re starting to reach beyond our core demographic. The lesson is to know your market and stretch it methodically from the center out. If you’re in Korea towns and want to expand to Wisconsin, start near other Asian concepts. When people think of Asian food, they’ll discover you too.

Co-tenancy in real estate is crucial — getting discovered by shared audiences is key. It’s a good lesson because real estate is the fastest path to failure in scaling any franchise business.

Powills: Well, there’s no real estate available, so you just gave away the secret. So now you just made it harder on yourself, too. So, yeah, it’s a different thing.

Hooper: We’re doing pretty good. It took a little while. It does take a while when you’re a new brand, by the way. Landlords are very skeptical, right? It takes us getting involved at the brand level to help them understand we’re very well-backed — we’re 30 years old, we’re growing massively, we have a very experienced team — because they just don’t want to take the risk. They don’t need to. Landlords don’t need to take high risks on new brands, new tenants, new franchisees that have never been a franchisee before, potentially, right? They just don’t need to. The options on the table for them are endless at the moment because the market’s so tight. So, you have to sort of chip and fight your way into the arena and then hopefully win the day once you’re in the game.

Powills: What’s the cost to open up a Pepper Lunch right now?

Hooper: I like to say it this way because I think a lot of franchisors play word games around numbers; I’ll just tell you what it is. From the day you sign to the day you’re open and operating, it’s $800,000 depending on the market. That’s a California-based number. But if you’re opening a 1,700 square-foot shoebox standard inline strip mall restaurant with cash reserves, two months of payroll and six months of marketing paid, that’s a sustainable business that’s ready to open and be there for the ramp-up period. It’s probably $800,000 to $830,000 today, depending on the market.

Powills: You said six months of marketing; obviously, that’s listed as a grand opening. What is that number?

Hooper: On the marketing side, I don’t actually know the number right off the top of my head. I’ll get back to you and put it in the show notes. I don’t remember what the actual six-month marketing spend minimum number is, but I think it’s $7,500. But that’s a light quote. That’s a quote with an asterisk.

Powills: You’re dealing with an $800,000 investment, so educating the consumer and setting franchisee expectations is crucial. I’d increase it to 10%, raising expectations to $80,000, even if it just becomes operating capital.

Hooper: Sorry, I thought you were just asking about the actual marketing spend piece of it. Yeah, I think all in, that’s reasonable.

Powills: All right, Troy, let’s end on this. If you want to close with just a final statement — if you want someone to reach out to you or what you want them to know about the brand — what is it?

Hooper: The biggest thing about Pepper Lunch is if you’re looking at restaurants and you understand the complexity and the failure points or the points that will stress your business, Pepper Lunch has a handful of differentiating value propositions, not the least of which is that we have zero prep labor, low total labor model. We run the store with between four and six humans on a shift, and we have no skilled labor costs.

So, total labor costs are much less, which gives you some breathing room. We’ve negotiated a national duplicated supply chain that has lowered the food costs across the chain. There are just a lot of benefits of a Pepper Lunch — the unit economics. You’re going to have great volume, higher EBITDA because your cost basis is lower because it’s a simplified operation. It’s phenomenal, and it’s why we’re involved. It’s why we got involved.

We saw these from a distance, then we saw them a little closer, and now we’re in it. When I ask multi-unit franchisees what matters to them before we start the discovery process, they usually list those five or six things they care about most. We hit it out of the park on the most important things when it comes to a restaurant. So, if I’m sitting here going to be a franchisee of a multi-unit brand, I’m looking for more assurances to success and fewer roadblocks and complexities. Pepper Lunch has it in spades. So, that’s the exciting part of it.

PepperLunchRestaurants.com, pretty simple. You can find us there. Click on the franchise button, enter the portal and learn all about it without a salesperson even bothering you initially.
You can just figure it all out and see what you think.

Powills: Ultimately, you’ve built a career out of studying business opportunities, and for you to invest your time, money and energy into a single brand, there’s got to be a reason. So, if I’m a buyer, I want to go figure out what that reason is if I’m looking for a franchise.

Watch the full episode above or on YouTube.