April 18, 2001
By BERNARD WYSOCKI JR.
Staff Reporter of THE WALL STREET
JOURNAL
NICHOLASVILLE, Ky. -- It is
midmorning at the 284-seat Golden Corral restaurant, and Bruce McIntosh,
44-year-old financial executive turned entrepreneur, is getting ready to open
the doors again.
This particular day is the 29th
since the restaurant opened alongside busy Route 27. Mr. McIntosh, one-third
owner and chief operating officer, has a paper in his hand with the previous
day's sales tally: nearly $11,000. He walks into a small, cold room and chats
with his butcher, who is already cutting 16-ounce steaks, today's special. Mr.
McIntosh has already had a word with his director of operations, David Holtz,
about putting more "cheerleaders" in high-visibility spots.
"You have to get your bright
smiley faces out front," Mr. McIntosh says in his soft Kentucky voice.
"This is one of the things you learn in Phase II."
This is entrepreneurship with a net,
in this case one held by Golden Corral Corp. Mr. McIntosh and his two partners
are franchisees of Golden Corral, based in Raleigh, N.C., and Phase II is part
of the company's three-phase training program. Over the past eight months, Mr.
McIntosh has learned every position in a typical 100-employee outlet. He has
had classroom sessions and business-planning tutorials. He had to keep his land
purchase -- his was $385,000 -- within the ratios outlined by Golden Corral.
The restaurant itself is built to
well-defined standards, from the tile floors and cash registers out front to
the multiple seating areas around the perimeter to the lavish buffet stations
smack in the middle of the restaurant. In a move that is common although not
required, Mr. McIntosh bought much of the equipment and fixtures from a Golden
Corral subsidiary.
For Mr. McIntosh, the life of a
Golden Corral franchisee is a blend of entrepreneur and traditional manager. On
a day-to-day basis, he is an opportunity hunter and deal maker, as he searches
for the best sites for the next four steak-and-buffet restaurants in his
empire. As a manager, he hires people, makes sure suppliers deliver and get
paid, keeps the books and keeps the franchiser in Raleigh informed of what's
going on.
Franchising is a way to offer
entrepreneurs some expertise from the get-go and allows expansion-minded chains
-- food, lodging, auto repair and many others -- a chance to grow quickly using
other people's capital. But franchising has its tensions, notes Steve Spinelli,
a co-founder of Jiffy Lube International, who today heads up Babson College's
entrepreneurial program. Among the possible pitfalls: boundary disputes over
turf, trade-offs between maximum sales favored by the "parent" and
maximum profit sought by the franchisees.
Opening the doors of this Golden
Corral restaurant cost the partners nearly $2 million in land, construction,
equipment and working capital, financed by a conventional 80% bank loan. Mr.
McIntosh and his partners paid $40,000 in upfront franchise fees, plus 4% of
ongoing sales as royalty payments. In return, they get the accumulated
expertise of a company that has been in this business since 1973 and has opened
more than 500 new restaurants, both company-owned and franchise units. The
"parent" has stumbled at times, prospered at others, learned,
quantified, codified and taught its newcomers a hard-won formula for making
money in a notoriously tough industry.
Starting a restaurant is
competitive. Out in these strip malls, where Wal-Mart super centers
rule, lots of restaurants follow. They fight each other. With an average meal
check at $6.50, Golden Corral is hoping it has a recession-fighting formula. It
may even take business away from the higher-priced casual-dining chains. Asked
if the word "recession" ever entered into his thinking, Mr. McInitosh
answers immediately, "Yes, right before we paid our franchise fee."
The co-equal partners here in
central Kentucky bring a mix of skill and experience to the table. John Revel,
of Richmond, Ky., built up an 11-unit Hardee's fast-food franchise that he
recently sold. Ray DeSloover is a major real-estate broker in Richmond. Mr.
McIntosh, the operating chief, left Kentucky Utilities as a financial
executive, after it merged with Louisville Gas & Electric Co. in 1998.
The restaurant is their second
venture together. In the mid-1990s, this trio teamed up on a 101-acre real-estate
development project in Richmond. They are gradually selling off pieces of that
land for commercial development. In 1997, they formed Golden Ranch Development
LLC, secured the rights to five Golden Corrals in the greater Lexington area
and began the arduous process of looking for sites.
Initially, two other Kentucky
cities, Lexington (a prosperous university town) and Georgetown (home of a
major Toyota Motor assembly plant), topped their list of locations, but
they couldn't find the right site at the right price. They turned to smaller
Nicholasville for their initial unit. Executives at Golden Corral headquarters
thought it would never work. With 10,000 people, the market was considered too
small by the experts in Raleigh.
Mr. McIntosh didn't relent. In his
extensive market survey, he noted that 52,000 vehicles drove past the site each
day. They could get a good price for the land. And, unlike the sites in
Lexington and Georgetown, Nicholasville had relatively little competition.
Golden Corral gave in. Mr. McIntosh went through his training, and they broke
ground last November. Soon, Mr. McIntosh was consumed by the nitty-gritty of
opening up for business.
On Feb. 9, just 72 hours before the
launch, it's barely controlled bedlam. Out in the parking lot, two officials
from the city of Nicholasville are unhappy about some of the landscaping around
the building and indicate they will withhold their approval for the opening.
They relent after promises to fix the problem.
Inside, workers are making electrical
and plumbing adjustments while an "A" team of experienced Golden
Corral workers prepares to train dozens of new employees. The supplier of steel
doors used to separate the kitchen from the dining area is demanding certified
checks.
All the while Mr. McIntosh's mobile
phone keeps ringing, to the tune, "Take Me Out to the Ball Game."
(He's a baseball fan and Little League coach.) And no matter what he does, he
can't seem to find somebody to erect the parking-lot lights. The night before
opening, they are still lying on the ground, forcing Mr. McIntosh to cancel a
VIP reception.
At 11 o'clock the next morning, the
crowds come. The owners hoped for $60,000 total sales the first week. It tops
$80,000, close to a company record. And as Mr. McIntosh calls in the nightly
sales figures to Raleigh during the first 30 days, the Nicholasville opening is
the talk of the Golden Corral executive corridors.
Still, this is going to be a fight
for market share, waged all day every day. The next few months will test Mr. McIntosh's
marketing ability in the teeth of the slowdown in the U.S. economy. Can Golden
Corral, with its $6.50 meal check, take away business from the higher-end
chains? Mr. McIntosh knows that those $80,000-revenue weeks won't last. Where
will business settle? Above $50,000 a week? His first-year revenue goal is $2.5
million. They are way ahead of their targets, but the restaurant is still in
its honeymoon period.
Facts about Golden Ranch
Development
Headquarters: Richmond, Ky.
Founded: Late 1997
COO: Bruce McIntosh
Employees: 100
Financial Snapshot: The company spent about $2 million to open
first of five restaurants, with bank financing covering 80% of the cost. First
year sales expected to top $2.5 million.
Business: The company is a new Golden Corral
franchisee, targeting greater Lexington, Ky. First restaurant, with 284 seats
opened February 2001, in Nicholasville, Ky.
The partners are also pushing ahead
with their expansion plans in markets that already have loads of restaurants.
Ten miles north, in Lexington, Mr. McIntosh and his partners recently reached
agreement to buy a parcel of land for their second restaurant.
The quick success of the first
restaurant breeds its own problems. Sometimes Mr. McIntosh is up until 1 a.m.
working on bills and financial records. He tried twice to recruit a former
colleague from the utility to come on board as a financial executive, but she
turned him down, having started her own at-home business.
"I'm on a double shift,"
Mr. McIntosh says wearily. He is contacting food-industry recruiters to help
him find more management talent in the crucial $40,000- to $65,000-a-year
salary range.
The restaurant has become a magnet
of sorts for nonmanagement staff. Mr. McIntosh notes that his Golden Corral has
snared a top-flight waitress from Shoney's, as well as a cook who came over
from Applebee's, located just across the parking lot.
Looking ahead, a big challenge is to
keep building his team, the 20 to 30 people who will eventually constitute the
company's core as it expands. This involves motivating and retaining the best
people. It also means cultivating regular customers.
Mr. McIntosh is surprised at how
much he likes the "people" side of the job. In fact, of all the
surprises involved in starting up, this is the biggest, Mr. McIntosh says.
"I'm a CPA in accounting, but I'm surprised I'm more of a people person
than I thought."