One-Brand Woman: Dawn Lafreeda builds a Denny's empire

When we last visited with Dawn Lafreeda in mid-2012 she was operating 70 Denny's restaurants in six states and had been adding restaurants, even through the Great Recession. That's not really surprising for Denny's largest individually owned franchisee and one of the largest female restaurant franchisees in the country.

Since then, Lafreeda's San Antonio-based Den-Tex Central company has entered another new market and bought five more Denny's in Arkansas. She's also converted an old Shoney's restaurant into a Denny's location in Neosho, Mo., and closed one underperforming location, bringing her total to 75 locations.

Lafreeda takes growth, challenges, and success in stride. "We like to do whatever makes sense for us," she says.

But her Denny's operation isn't the only thing keeping her busy lately. "I recently filmed a pilot-presentation for The Food Network where I advise young restaurant owners how to take their business to the next level or expand," she says.

In the past few years, she says, there has been a great deal of uncertainty for franchising. "Governmental regulations such as minimum wage increases, ACA, and NLRB issues have put a strain on margins," she says. "Also, more and more competitors are offering breakfast and new concepts are popping up everywhere, so we are constantly fighting to keep our market share, and that also has an effect on margins."

Despite these challenges, Lafreeda says her stores and the Denny's brand continue to enjoy strong sales numbers and traffic. "Our newest remodel package is proving to be very successful and guests and employees are giving us credit for it," she says. "It's my goal to upgrade as many locations as possible as we are seeing happy employees and increased sales at all of our newly remodeled sites."

She continues to be very involved with the Denny's Franchisee Association where she serves as a director and treasurer. She also serves on several other committees for Denny's, including its Development Brand Advisory Council, Pilot/Flying J Committee, and Corporate Social Responsibility Committee. "Denny's has a very good franchisor/franchisee relationship," she says. "There is a lot of inclusion, testing, and a share of voice, which I believe has helped make our brand stronger and better."

For now, Lafreeda says she looks forward to "spending time with my family and friends, supporting my community, and building new restaurants."

Name: Dawn Lafreeda
Title: President/CEO
Company: Den-Tex Central
No. of units: 75 Denny's
Age: 54
Family: Partner of 21 years. We have 11-year-old twin sons
Years in franchising: Since 1986
Years in current position: 29

Personal

First job:
Taco Bell for 6 months until I could afford to buy a car to take me to Denny's, where I ultimately wanted to work.

Formative influences/events:
We didn't have a lot when I was growing up so my mother always had to work hard. She had a great work ethic and I knew if I wanted things in life I was going to have to work hard as well and earn them myself.

Key accomplishments:
I am Denny's largest individually owned franchisee and one of the largest female restaurant franchisees in America.

Biggest current challenge:
The unknown factors of all the new laws and reporting requirements. Huge financial and reporting burdens are being put on employers and it is adding to the cost of doing business.

Next big goal:
To reimage and upgrade as many of my existing fleet as I am able. With so many locations it is a very large financial commitment and timing challenge, but I believe it will yield great results once we accomplish it.

First turning point in your career:
Buying my very first restaurant. It was the launching pad.

Best business decision:
Buying out my business partner. We had 13 restaurants at the time and a different business philosophy. Once I bought her out I was able to move forward and grow the business.

Hardest lesson learned:
If you can avoid it, never be 50/50 business partners with anyone. Business partnership is like marriage, only a lot more complicated. If you do have to be 50/50, have a trusted, unrelated third party appointed in advance to assist in conflict resolution. Try to set up a formula and a procedure for buyout should either party decide to exit and a mediation agreement in place to avoid litigation.

Work week:
When I am in town I am in the office every day. Due to the nature of my business, I also travel extensively. My restaurants are in 7 different states plus I sit on the Denny's Franchise Association Board and the Denny's Development Brand Advisory Council as well as other committees that require me to travel.

Exercise/workout:
I walk about 2.5 miles 5 days a week and try to work out with a trainer when I am in town and able.

Best advice you ever got:
When I bought my first restaurant at 23 I was worried I might fail. Thirty-five people were dependent on me for jobs. My mom said to me, "What is the worst thing that can happen--you start over at 26?" Once she said that, I was instantly okay and the fear went away. To this day, whenever I am faced with a challenge I still ask myself "What is the worst thing that can happen?" It always empowers me to move past any obstacles I may be facing.

What's your passion in business?
I love the art of the deal. Finding the site, negotiating for it, and finding the financing. I also love food and feeding people.

How do you balance life and work?
It is challenging at times because I love to work but I believe if I work hard I deserve to play hard as well. I make a point of always scheduling plenty of play time for my family and the fun things we all enjoy and love to do.

Guilty pleasure:
A long weekend is Las Vegas.

Favorite book:
The Success Principles by Jack Canfield.

Favorite movie:
The Barbra Streisand version of "A Star Is Born."

What do most people not know about you?
I started as a hostess at Denny's and bought my first restaurant off credit cards.

Pet peeve:
Tardiness. My time is valuable and I respect others time by showing up promptly and I expect others to do the same.

What did you want to be when you grew up?
I always had a dream of being self-employed, I didn't know what I would be doing, I just knew I wanted to own my own company and be in charge of my financial and professional destiny.

Last vacation:
An Inspirato trip to Nantucket with friends.

Person I'd most like to have lunch with:
Oprah Winfrey.

Management

Business philosophy:
I am often asked to open other restaurants or concepts, and while I am often intrigued and have the means to do so, I feel a large part of my success is because I am in only one brand and I know it like the back of my hand. I also believe in the win/win philosophy and always giving back. I reinvest in my business and I always try to the right thing. I am never afraid to ask for help or take a risk. I live by these philosophies and believe they are the core reasons I have been so successful.

Management method or style:
I believe in transparency and a win/win attitude. I feel we all win if all parties at the table are happy. Greatest challenge:
Finding and retaining good talent.

How do others describe you?
As someone they can count on. If I say I am going to something, I do it. I am hard-working, organized, and I get things done. I care about people, I am fair, I like to have fun, and I believe in giving back.

One thing I'm looking to do better:
Get a better handle and long-term strategy for all the facility issues we have. With a large fleet in multiple states it is a challenge, especially in small cities where there are not a lot of vendors to choose from.

How I give my team room to innovate and experiment:
I am always open to new ideas and change. Some of the best ideas for innovation and progression have come from my team.

How close are you to operations?
Very close. My VP of operations and I stay in close communication with everything that goes on operationally. While I don't get to the units as often as I'd like, I am still deeply involved in all that is going on. I have a strong and seasoned team and they do an excellent job.

What are the two most important things you rely on from your franchisor?
Delicious craveable food offerings at a great value and a great marketing plan with a strategy that drives traffic into my restaurants.

What I need from vendors:
Honesty and innovation to help move my business forward.

Have you changed your marketing strategy in response to the economy? How?
Absolutely. Fortunately, Denny's is very proactive in this arena. They are always looking at our value strategy to be sure we have something for everyone while paying close attention to cost-per-plate, product availability, and execution. We have an arsenal of products and strategies to tackle the economic challenges that come our way. Additionally, each year I also invest additional funds into local marketing co-ops across the country that allow me to make local-based marketing decisions that may be more tailored for my specific regions.

How is social media affecting your business?
It greatly affects us, on both a positive and a negative side. It is a great vehicle to attract customers, build business, and send immediate messaging and offerings out. It is also something we have to pay close attention to as a perceived bad experience in a restaurant can taint a location or a brand.

How do you hire and fire?
I have been very fortunate that my core team has been with me a very long time and I have not had to hire or fire anyone in many, many years. When I do have to make a hire, I look for individuals who share the same business philosophy and understand the importance of the guests and the restaurants. They have to have a broad understanding of the 24-hour business and have great people and support skills. The last time I fired someone was because they did not have the right skill set and were in over their head. I believe in the end they were relieved and happy that they could do something they were better suited for.

How do you train and retain?
In order to stay relevant, you have to continuously train and develop your team. We are fortunate that Denny's puts a lot of emphasis on training and supplies tools and training aids we are able to tap into. Those training aids are always being updated and enhanced to offer our employees all the tools and knowledge they need to do the job. Retention is difficult as the restaurant industry has high turnover. We do the best we can to prescreen our candidates to make sure we are putting them in a job that is well-suited for them and that they will be happy and want to stay in.

How do you deal with problem employees?
I do my best to coach, train, and develop but sometimes no matter what you do, someone may not be cut out for the restaurant business or be a good fit for the company. I have learned over the years that in most cases you cannot change behaviors and it is best to deal with the problem early on.

Fastest way into my doghouse:
Dishonesty and petty behavior.

Bottom Line

Annual revenue:
$100 million.

2016 goals:
To add at least two new locations to my existing fleet.

Growth meter: How do you measure your growth?
New locations, profitability, EBITDA, and the strength it provides the total enterprise.

Vision meter: Where do you want to be in 5 years? 10 years?
Enjoying all that I have worked for, spending time with my family and friends, supporting my community, and building new restaurants.

How is the economy in your regions affecting you, your employees, your customers?
I am in a lot of regions, and different regions have different economic issues. For instance, sales in West Texas fluctuate greatly based on oil prices; this market soars when the price per barrel is high and it declines when it is not. When people are working, they are spending and that is great for employees and customers.

Are you experiencing economic growth in your markets?
Yes, I am in about 23 different markets and most all of my major markets are experiencing growth. The smaller, more rural markets are not experiencing the same growth as the bigger metropolitan markets but they remain consistent and dependable.

How do changes in the economy affect the way you do business?
Considerably, and we have to be quick to react, realign, and adjust. The great thing about being in business so long is that I have learned how to see the signs and know for the most part the impact it will have. Being a part of a franchise system also helps as Denny's corporate is usually experiencing the same effects, and they share their best practices and offer solutions as well. Different situations require different strategies.

How do you forecast for your business?
We have always forecasted quarterly as I feel we are able to be more accurate and precise. So many things change in the course of a year for each individual location. Quarterly forecasting, while time-consuming gives me a better picture of what is happening on a more real-time frequent basis--things like road closures, weather issues, utility prices, commodities etc. These are just a few of the things that cannot be predicted a year out. Reviewing and budgeting quarterly lets me predict and forecast more efficiently.

What are the best sources for capital expansion?
Capital has been readily available and quite easy for the last few years. I use different lenders and different methods depending on the specific requirements and type of deal I am doing. I have been using many of the same lenders for years now. They have an understanding of my business and my needs and I have been able to secure all the capital I have needed and at very competitive rates.

Experience with private equity, local banks, national banks, other institutions? Why/why not?
I have worked with all except private equity because I have not had a need. I am very hands-on and involved in my business and I like calling the shots. I imagine a time may come when private equity may be an option and advantageous. It has just not come yet.

What are you doing to take care of your employees?
A 401(k), bonus plan, paid time off, incentives, and opportunity for advancement. My business is dependent upon good-quality employees. We always try to train and develop from within to give key people an opportunity for advancement.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)?
This is a huge and ongoing challenge that is not in our control. We can only take price increases every so often to offset these rising costs, so we are always searching for efficiencies in other areas to help counterbalance these increasing costs.

How do you reward/recognize top-performing employees?
We have various incentives, a quarterly bonus program that rewards them with extra money for being a top performer, and advancement opportunities. In some cases, key employees have been given partnership opportunities and have become franchisees themselves.

What kind of exit strategy do you have in place?
I don't have a formal plan in place as I am still in a growth mode. However, with each new deal I do and each contract I sign, I keep things in mind such as lease terms, pre-payment penalties, personal guarantees, automatic extensions and renewals, and bench strength to name a few. I make certain I am poised for a smooth transition when that time comes.