Play By the RULES to Stay in the GAME

·20 min·2 clips

Chip Klose reveals why business is an infinite game where the goal is simply to stay alive, not destroy competitors.

This episode of Restaurant Strategy focuses on the extreme difficulty of running a profitable restaurant in 2025 and the mental frameworks needed to succeed. Host Chip Close, a 25-year industry veteran and founder of the P3 Mastermind coaching group, argues that operators must embrace new constraints. He asserts that current market conditions make profitability harder than in past decades like the 1970s or 1990s. Close begins by explaining that "rules are what make games fun," using American football as an analogy for operating within set constraints. He contrasts finite games, with clear winners and losers, with the infinite game of business, where the goal is simply to stay alive and keep playing. He cites Simon Sinek's book *The Infinite Game* and references thought leader Alex Hormozi's concept of business as "last man standing." Close uses the example of car dealerships clustering together to illustrate how competitors can collaboratively create a thriving marketplace. He identifies three major changed "rules": skyrocketing rent, labor costs, and cost of goods. The host states that the restaurant industry was historically built on the promise of cheap rent and cheap labor, a quote he attributes to Danny Meyer. He gives a specific example of challenging lease terms dictated by large commercial real estate owners in Orange County, California. Close details precise financial targets, stating rent should be a maximum of 8% of revenue and total occupancy costs between 10-12%. He says food cost must be under 30%, beverage cost around 20%, and blended cost of goods should be 25-27%. Labor costs, he argues, must stay below 30%, or 35% in states like California, Washington, and Oregon. A key insight is that prime cost—the sum of cost of goods and labor—must be under 60% to achieve a 20% operating profit. Close warns that concepts conceived by previous generations may now be financially unsustainable under these new rules. He points to the proliferation of chains like Chili's and Taco Bell as entities that have successfully mastered these operational frameworks. The host also notes a significant shift in IRS enforcement regarding tip reporting that began in the early 2000s, altering a previous financial advantage. He further argues that changing dining habits and the rising economic influence of Gen Z, with different expectations than Millennials or Boomers, will continue to challenge operators. A surprising claim is that some of "the best restaurants in the world" are closing because their models, which might require charging exorbitant prices, are unsustainable. The episode's tone is direct, educational, and motivational, blending business philosophy with specific operational advice. Close frequently promotes his paid resources, the Restaurant Foundations membership site and his P3 Mastermind coaching program, throughout the discussion. Independent restaurant owners feeling squeezed by rising costs and seeking concrete financial benchmarks would find this episode highly valuable. Listeners looking for a purely inspirational story or narrative-driven content without promotional elements might choose to skip it.

As heard by us

A plainspoken case for staying power, profit, and discipline over theatrics.

The episode treats restaurant ownership in 2025 as a long haul, not a quick win. Chip Close argues that the job is to stay in the game long enough to build a business that actually makes money, then uses the idea of the infinite game to link Wall Street and car dealerships…

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Why you'd press play

If your margins are thin, this gives you a cleaner way to think about staying alive.

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