David Grutman, the hospitality entrepreneur who built Groot Hospitality from behind a bar to a portfolio of prominent restaurant and nightlife brands, said in a new interview that owning intellectual property is the single most important factor in building a lasting business — and that founders who take management fees instead of equity are leaving money on the table.
In an interview published June 10 on The Wall Street Journal’s “The WSJ Money Interview” podcast, Grutman told host Gunjan Banerji that his approach to intellectual property shaped the deal structure at Komodo, his flagship restaurant. “Intellectual property, I think is the most important thing in the world,” Grutman said. “And, in Komodo, I gave all the investors a portion of my intellectual property, which means they come along with me on that ride. Now, they deserve it. They took that chance with me when nobody else did back then.”
Grutman said he will no longer enter a restaurant deal without retaining ownership of the brand’s intellectual property. “Now, I will never do a restaurant that I don’t own a piece of the IP of,” he said. “If you’re going to turn the needle for somebody, then you better be part of the IP. Upon the exit of selling your brand, is where you gain real wealth.”
He contrasted that approach with taking cash fees, a path he said fails to produce long-term upside. “I think people that…just take fees instead of taking equity, I think miss out on growing,” Grutman said. “It’s one thing I love to talk about, especially with my celebrity friends or athlete friends.”
Grutman described his method for bringing celebrity investors and partners into his deals as a deliberate strategic move. “My strategic move is talking to a founder and then putting, like, a Mark Wahlberg on with them or something,” he said. “That’s my move, to connect people right away on FaceTime, so they’re like talking to the person.”
He acknowledged that the approach does not always land. “Some days are better than others and…you’re just like, killing it,” he said. “Some days nobody wants to talk to you because they know there’s going to be some wacko on the other side.”
The interview is the latest installment of “The WSJ Money Interview,” which Banerji hosts. The Wall Street Journal said new episodes of the series are released biweekly on Sundays at 7 a.m. ET on WSJ.com and the WSJ app.