Rapid Returns: 127 restaurants in 3 years and targeting 1,000!

Name: Mike James

Title: CEO & Founding Member (Owner)

Company: Guernsey Holdings

Units: 87 Sonics, 40 Little Caesars

Age: 37

Family: Wife, McCall, and a baby girl due in November

Years in franchising: 3

Years in current position: 3

Mike James has been a franchisee for only 3 years. In that time he has built a portfolio of 87 Sonic and 40 Little Caesars locations in Idaho, Washington, Texas, Illinois, and Louisiana, ringing up annual revenue of $200 million. While that’s already a sizeable operation, he has bigger plans.

“We plan to eclipse 500 restaurants by the end of 2025,” says the 37-year-old. One more thing: James is not just juggling a lot in his business life, he and his wife, McCall, are set to welcome a baby girl in November.

James says he can still recall his first taste of Sonic when he was playing football at the University of Utah. He and his teammates would go there for breakfast on game days. After graduating, James found himself working as a commercial real estate broker where he got to know some Sonic franchisees and corporate contacts through their development projects. It took him about 5 years of witnessing the franchisee lifestyle and connecting with their employees to make him want to try franchising for himself.

His first franchise buy was a group of 21 Little Caesars. From there, it was a quick trip to 40. In the spring of 2021, James purchased his first Sonic and has had his foot on the gas ever since. So far, he’s built his portfolio exclusively through acquisitions.

James says his company is planning to build some new Sonic locations in the coming months, along with continued acquisitions, primarily in the rural markets that have been his sweet spot.

Like most successful multi-brand operators, James is passionate about the people who work for him. “I have hundreds of examples of people who have come from nothing and built a real career within our company,” he says. “I love being in the field and feeling the passion of our team.”

Even with 127 franchise locations, James remains an involved franchisee. That means 10 to 12 hours of weekly operational calls and visiting as many as 30 restaurants every month. “We’re not just buying units, we’re investing in them, and we want them and everyone in them to be successful.”

PERSONAL

First job: Commercial real estate broker.

Formative influences/events: Playing football in high school and college taught me the value of discipline and hard work. I applied those principles to commercial real estate brokerage when I began my career in 2010. That was during the heart of the Great Recession, and I worked 100-plus-hour weeks for the next 5 years. The investment in time accelerated successes and ultimately led me to launch my first company, now called Ascension.

Key accomplishments: Acquiring 127 restaurants in my first 3 years in the franchise business. Playing a large role in the Alzheimer’s Association as a board member and active participant.

Biggest current challenge: Dealing with commodity inflation, the low labor participation rate, and the revolving door of government policies and regulations.

Next big goal: We plan to eclipse 500 restaurants by year-end 2023, maintaining our position in the top 10% of operations, as measured by each of the brands we operate, while building a culture around internal training and promotion.

The first turning point in your career: Starting my first company.

Best business decision: Partnering with the right people.

Hardest lesson learned: When my partner, Reed Melillo, and I decided to pull the trigger on our first restaurant acquisition, we partnered with Ari Miller of Camden Holdings, who was a real estate client of mine at the time. We acquired 21 Little Caesars in Michigan and quickly realized we had no idea what we were doing. I flew to Michigan every month for 2 years, trying to sort out how to manage a restaurant business, and finally realized that we had hired the wrong team at the outset. We needed to get the right people on the bus immediately, so we quickly made the necessary hires and the business has performed tremendously ever since. I’m thankful for having such amazing partners. I would not be where I am today without them.

Work week: I stopped setting an alarm a couple of years ago. I get to bed by 10 p.m.and am up around 5 or 6 a.m. to start my day with meditation, sun, and working out. I average around 60 hours of work per week and track my time. What I don’t do is drink alcohol. After a bender one weekend, I decided to take 30 days off drinking alcohol. I had never felt better and decided to challenge myself to 1 year. I’m now 2 years into sobriety and I have never been happier. The revenue of the business grew from $40 million to over $200 million in those 2 years, by the way. I would highly recommend trying sobriety.

Exercise/workout: Five to 6 days a week, weights, cardio, dog walking. 

Best advice you ever got: To read the Wall Street Journal for 45 minutes every day. I was a terrible student when a college mentor suggested this. I adopted the habit in my junior year of college and didn’t understand 90% of what I was reading, but by the time I graduated I understood at least half of the content. Now I’ve considered writing articles.

What’s your passion in business? The people I work with are at the forefront of my priorities in business, so it’s rewarding to see a store-level employee, who may have come from a low-income household, turn their job into a career by rising through the ranks. Many fast-food franchisees are money-making machines that churn through people the way they churn through beef patties. We do the opposite: Take care of our people and create greatness together.

Guilty pleasure: Panda Express, sour candy, and room service.

Favorite book: Grinding it Out: The Making of McDonald’s by Ray Kroc.

Favorite movie: “The Founder.”

What do most people not know about you? My entire family is English and I am the first-born American.

Pet peeve: People not seeing the big picture.

What did you want to be when you grew up? An NFL superstar.

Last vacation: Charleston, South Carolina.

The person I’d most like to have lunch with: Raising Cane’s founder Todd Graves.

MANAGEMENT

Business philosophy: People, People, People. If you don’t have the right people, you don’t have a business. Get the right people and you’re halfway there.

Management method or style: I’m a driver who moves things forward aggressively. I’m also empowering, patient, and willing to do whatever is necessary to achieve success.

How do others describe you? Positive and full of energy.

One thing I’m looking to do better: Be willing to take a step back to take two steps forward. I’m a driver, and I want to move forward and win now, but there are times when I could benefit from pausing a beat and being more tactful.

How I give my team room to innovate and experiment: I have an incredible team that has a ton of autonomy. Innovation is in their blood, and we have created a culture in which the best idea always prevails. As my grandpa always said about golf, “It’s not how, it’s how many.”

How close are you to operations? I’m highly involved. We have 10 to 12 hours of weekly operational calls, and I typically visit 20 to 30 restaurants every month. A lot of owners shop the store, say “Hi” to the team, and then leave. Our Sonic Brand President Jacques Grondin calls that “kissing the baby.” I don’t visit restaurants to check them off the list. I visit restaurants to spend time with our team, talk about what’s going well and what’s not, and ultimately thank them for all their hard work.

What are the two most important things you rely on from your franchisor? We need real and reliable guidance. From products to marketing campaigns to real estate advice and more, we need to know that our franchisor has our best interests in mind. Inspire Brands has been there to guide us as needed for our Sonic locations. We also want to know that our franchisors are just as invested in our restaurants as we are, and that we can trust the decisions being made on our behalf from the corporate level. We put a lot of time, money, and resources into our locations to help ensure their success, so it’s essential that a franchisor recognizes that investment and is willing to help deliver a return.

Have you changed your marketing strategy in response to the economy? How? We are starting to roll out more value-based menu items to support our customers during an unprecedented inflationary period.

Fastest way into my doghouse: Not doing what you said you would do.

COVID-19

How did Covid-19 affect your business? The government circulated too much money into the economy, and it has made it incredibly difficult to manage the business. At first, it led to a shortage of workers, and now it has led to inflation that is hurting our customers and affecting the cost of our products.

How have you responded? We have implemented a value-driven menu approach while doubling down on efforts to support our existing team and reduce turnover.

What changes do you think will be permanent? The digital component of our business grew tremendously during the pandemic, and we are only seeing that continue to grow.

BOTTOM LINE

Annual revenue: $200 million.

2022 goals: Top 10% operations in all the brands we operate, bottom quartile in turnover when compared with the QSR industry, and more than 250 units by year’s end.

Growth meter: How do you measure your growth? Margins are currently off by 10% to 25% because of labor challenges and commodity inflation. We look at a normalized profitability percentage and create unit-count growth goals based on those assumptions.

Vision meter: Where do you want to be in 5 years? 10 years? We will surpass 600 restaurants in the next 5 years and most likely reach 1,000 in the next 10 years.

Do you have brands in different segments? Why/why not? All brands have their ups and downs. Diversification is key to long-term success. Little Caesars and Sonic both have a strong track record of performing in all different types of economies.

How is the economy in your region affecting you, your employees, and your customers? Inflation is killing the customer, particularly around housing, food, and gas prices. Our typical customers are hardworking Americans, and inflation has taken away most of their discretionary dollars.

Are you experiencing economic growth in your market? The bulk of our units are in Louisiana and Texas. Both are tremendous states in which to operate businesses, and both support growth by maintaining low taxes and providing a business-friendly environment.

How do you forecast for your business? We have anticipated commodity prices coming down meaningfully by the fourth quarter and drastically in the first or second quarter of 2023. Although I expect this will coincide with a minor recession, I believe that it will be a significant net positive for the QSR industry.

What are you doing to take care of your employees? I’ve described the major points above, but the essential aspects are our focus on training and creating a culture of internal promotions. We provide significant upward movement opportunities for our people.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? We make sure that employee compensation properly aligns with that restaurant’s profitability so that team members hold an appropriate stake in the business. If our team is aligned to drive operational and financial results, then they will benefit regardless of the inflationary pressures on the aforementioned items.

How do you reward/recognize top-performing employees? We organize and host an annual trip for our top performers, as well as provide numerous other awards on a weekly, monthly, quarterly, and annual basis. We go above and beyond for our team. 

What kind of exit strategy do you have in place? We are looking to build a company that we will never sell.