A Man of Many Talents
"I had no business being in the food business"
John Prince has done a lot in his 66 years. He's been a radio talk show host, reporter, stockbroker, and even ran a small hot dog and soup stand. He's worked at SmithBarney, Citibank, been a multi-concept owner, and even started his own franchise brand (more on that later). He's seen franchising from more than both sides now.
"The hardest part of all of this is it seems to me there are different philosophies that different franchisors have--which I'll call an enlightened and a less enlightened philosophy," says Prince.
He's referring specifically to the resistance some franchisors have regarding what they consider competing concepts--especially when the franchisee doesn't see it that way.
"Almost any franchisee of any concept would argue it would be perfectly rational for him to have another franchise. For most franchisors, it's difficult for them to let you have another concept. All are competing! It's natural, but I think it's just plain mis-thinking, boneheaded in a way," says Prince.
"We would absolutely have had other concepts if our franchisors had not aggressively said it was a competing concept. We would have had Buffalo Wild Wings, but Applebee's argued it was a competing concept. It seems to be distinctly different, and very strong financially.
Famous Dave's, on the other hand, under David Goronkin, was different, he says. (Goronkin left in December to head Redstone American Grill.) "No barbecue concepts, of course, but he thought it was a good idea for you to have many concepts. You never had to worry about that."
Prince says there are lots of concepts he would have liked to own that would have strengthened his company, like Panera Bread, but for franchisor resistance. "If I were a franchisor, I'd choose stronger companies, because they can weather a storm. There are times where one will be a strength where another is reinventing itself, or is off," he says. "At the end of the day, franchisors don't understand you'll build every opportunity where you can make money. It seems obvious."
Also, Prince says he's seen an amazing difference between public and private franchise companies. A public company has incredible external growth pressures on its stock price. "If you don't have enough growth, hedge funds will come in just to liquidate the land values. Most franchisees have no sense of the pressure the franchisor is under when it's public," he says. "What if you wake up and see Carl Icahn has taken a 5 percent interest?"
In the case of Applebee's, it was former SEC chair Richard Breeden, through his Breeden Partners hedge fund, who turned up the heat on the franchisor after acquiring about a 5.3 percent stake. His actions pushed the sale of the company to IHOP, which netted Breeden $22 million, a 27 percent return in less than a year--and now Applebee's is selling off its company stores to raise cash.
Hedge funds are doing it now to H&R Block, says Prince. "They look at the land, see no reason to own it, then sell it to investors, and lease it. What is left is that shareholders and hedge funds have more money, and the restaurant is left with debt that's staggering, and tell me how the world's better for it? At Applebee's, for years, their strategy was to buy back existing restaurants. In retrospect, what a mistake that was."
On the other hand, he says, "It's astonishing to be a franchise of Golden Corral. It's a private company, so they don't have shareholders that are pounding on them. I have never seen so many people who absolutely revere the franchise management as at Golden Corral." When Prince started meeting with Golden Corral, he says, "My first thought was 'You're all acting, setting me up. After I sign up, do you all disappear?' It was so like family."
He's been a franchisee of Golden Corral for two years now, but without his first unit open, says he's still "all hat and no cattle."
Still, he says, "It's an absolutely magnificent franchise. One of the services they provide is that you pay them--not an extraordinary amount--and they will find a site for you." They finally found him one in Yakima, Wash., set to open this summer.
Name: John B. Prince
Company: William Tell Inc.
No. of units by brand: 20 Applebee's (18 in Utah, 2 in Alaska); almost 8 Famous Dave's (4 in Utah, almost 4 in Washington); first Golden Corral set to open this year.
And in Salt Lake City, 1 Hooters, and two private clubs/sports bars (because of Utah's liquor laws): Green Street and The Puck. Membership is $1 a month.
Family: Single (still very good friends with ex-wife, Pamela Prince); two children, son Matthew, 33, graduate of Univ. of Chicago Law School, now attending Harvard Business School; and daughter Courtney, 29, in design at Gap Children, New York.
Years in current position: 16
Years in franchising: 16
Key accomplishments: I'm still standing at 66 years old. It's interesting as we get older and older, the bravado of how you've done financially. Everyone subjectively knows it gets less important, but it really does get less important. Still, I've built a pretty good organization in the restaurant industry. It's kind of fun to sit at Christmas parties and look back at the people you started with in a little soup shop 40 years ago, and see that together we've created something that's keeping us all afloat.
Biggest mistake: We'd run out of territory with Aaron's and sold it back to them at a mighty profit. Then we thought we could do it ourselves and got involved in an area where we were trying to be the franchisor--our own concept in rent-to-own rims, and a separate electronics and furniture concept. We got in the business, and it was a mistake. We had too many chefs in the kitchen and were risking too many marbles on one thing.
By and large, with the exception of the private clubs, we have always made a mistake where we think we can create our own concept and go blasting off, versus plugging into a concept that works. We thought that with the amount of royalties we send out--millions of dollars a year--wouldn't it be fun to be on the other side of those? And it would be. I think everybody who is part of a franchise wonders that. It's just really hard to start a concept. If I had it to do over again, I wouldn't have sold the Aaron's--although we did awfully well. Because what we did next wasn't so snappy, and it was turning into a pretty good cash-flow machine. We had about nine in Utah and Washington. We sold the concept in February. I wish them well (but not too well!).
Smartest mistake: Getting in the restaurant business by accident. Ten of us bought a building, Trolley Square in Salt Lake City, to start a shopping center. But we didn't have tenants, so to fill it we started little businesses. I started a soup and hot dog place. Then I met someone and got involved in Ponderosa. Everyone abstractly dreams of going into the restaurant business and making money while you sleep. It can be awfully good, and it can be awful. I had no business being in the food business. But when I applied to Ponderosa and they asked "Have you been in the food business?" I could say yes.
Ponderosa was a dumb decision, but then I wouldn't have ended up with Applebee's. When Ponderosa began to disappear, I had about nine restaurants that were going out of business, with $78,000 per month in personally guaranteed lease payments and no Ponderosas open. That gets your attention. So I looked for a box about the same size as a Ponderosa. That's how I got Applebee's. I could have gone Ground Round.
How do you spend a day, typically? We have some really wonderful managers. With 30 restaurants you can't be 29 other places at a given moment. I don't actually have a key to any of the buildings. My part comes in more when we're making the decisions as to what kind of franchises to pursue. We're talking to some now. Do we get more or less aggressive in one concept? Sometimes you have to feed a fair amount of money into something you can't borrow against.
Favorite activity: I live high on the hill in Salt Lake City. If I look at the most tranquil part of my day, in the morning I take the bus to the University of Utah, quite a ways away, have some coffee and a morning snack. I've downloaded the New York Times into my little Audible.com device, walk back up to my house, a pretty good trudge up the hill, and listen to the day's news. In Utah I'm surrounded by Republicans who despair for my soul because I'm filling my head with the New York Times.
Exercise: Walks for just about exactly an hour. I've timed the walk perfectly to match the New York Times I listen to.
What do you do for fun?: Ski, tennis, golf. I love to drink wine--I have a bar and go there. Skiing at Deer Valley when the sun is shining is glorious. Golf is not an absolute passion--I'm better at golf than I like it.
Books/magazines recently read/recommended: For Whom the Bell Tolls. Hemingway is just such a good writer. A book my son gave me: Remember Who You Are, speeches by 15 Harvard Business School professors given to departing classes. I haven't read a business book for a long time. My steady diet is mostly New York Times, Business Week, Economist, and The Week.
Management method or style: We rely heavily on good people being in charge of "whole divisions," and our director of operations is phenomenal. We have one dedicated individual for each concept, plus one in Alaska. I have two younger guys with a stake in the business, a 10 percent ownership in the equity; a few more have equity too. I push more to push down than the two younger guys do.
With so many of the managers at various levels, we communicate by voice mail. I think it's really worked. I feel like I have conversations with my director of operations. When I started this, I had a manager who resented it--said it tied him down, but I think it frees you up. It doesn't ring, so you can leave a message Sunday morning when they're at church, or at two in the morning, and not get asked 50 questions. We do emails like everybody else, but there's nothing like a human sentence. And it gives you a chance to erase it when it's wrong.
Greatest challenge: Your guess at the future and what you should do and shouldn't do. I don't think it takes a wizard to see we're in tougher economic times. Looking out, when you read the newspapers, what is this country heading toward? What's it going to be like? Are we on the brink of a 1929 recession? Should we be selling? How did we get in it? My job is to think about these things. I simply read more of current events than most people, because we do fit into some context--and we have a whole generation of people who can't even imagine another recession.
And trying to run a business from everyone's standpoint, and sometimes that's not the exact standpoint of your own. At 66, should I be selling restaurants? I have no risk, I could play golf. But you have young people coming along with a different view. So it's trying to figure out how your risks balance against the risks of younger people. How do you do a transition of a business? This is the thing I wrestle with that I have never really wrestled with before. It's coming to the realization that you don't last forever. Should you step aside in some way? Sell out? To whom? And how?
I stay in because it has consequences for a whole bunch of people. Let's say you just up and sold it someday, you disrupt a lot of people's lives. If just one heck of an offer came along, you could sprinkle everyone with enough money to say, "That's not so bad."
Personality: Volatile, with John McCain's temper, I understand. People have stuck with me because at the core they know I am absolutely honest, and they know they'll get a fair deal financially. After we sold Aaron's, the people who own a part of the company got big checks. They never had that happen before.
"Growth meter"--How do you measure your growth?: Money. I don't know how else you measure it. How are you cash flowing compared with the year or years before? Then you look at concepts within concepts. They're like living breathing organisms, some on fire more than others.
Annual revenue: about $80 million
2008 goals: We're cautious, probably just adding on. We don't actually have goals with pins in the map. We're trying to identify great locations for Famous Dave's, the same in Alaska with Applebee's, and get a Golden Corral open. Your first restaurant for a new concept is always scary. So often, you don't have the exact right management at first. You start with somebody you hope is right.
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