Hand of Fate: Unexpected Paths Lead Tony Lutfi to a Career in Franchising

Tony Lutfi came to California when he was 16, a Palestinian-Jordanian immigrant looking for a better life. He dreamed of growing up, getting an education, and becoming a doctor.

To earn some money, he took a job working the graveyard shift at a Jack in the Box. Then fate stepped in. "The manager had a heart attack, and they promoted me. I helped the management team in the summer after I graduated from high school," says Lutfi. "It became my passion. I never went back to school, and I was promoted at Jack in the Box."

Lutfi moved on to work at growing the Rax Roast Beef franchise in Northern California. When Rax failed, the restaurants in the Sacramento market converted to Arby's. That's where he met Bill Brusslan, who would become a longtime mentor. Brusslan made him vice president of restaurant operations for Northern California. Later they partnered on three Long John Silver's and three Church's Chickens. By late 1997, Lutfi had enough money to buy two Arby's of his own.

His life took another fateful turn when he met and partnered with Greg Maroni. "Greg and I decided to grow the partnership," says Lutfi. In October 2001, they purchased four Church's Chickens in Las Vegas. In December 2006, they purchased the Tucson market, and the next December they picked up the Phoenix market. Another year later, they purchased 12 Church's in the Dallas market. Today they own 52 restaurants (46 Church's), with two more ready to come on line--and the partners are far from finished.

"We really would like to add one more concept to the portfolio and eventually take it up to 100 restaurants," says Lutfi. "I have three boys, and I'm hoping they would have an interest and come in and double it for their children."

QUESTIONS

Name: Tony Lutfi
Title: Chief Operating Officer
Company: MarLu Investment Group
No. of units by brand: 46 Church's, 3 Arby's, 2 Little Caesars, 1 Burger King

PERSONAL

Age: 49
Family: Married 25 years with 3 boys
Years in current position: 12
Years in franchising: 22

Key accomplishments: Becoming the third-largest domestic franchisee of Church's Chicken and serving as chair of the association and of the supply chain.

Biggest mistake: Selecting the wrong locations for new restaurants based only on price of entry. We've learned that for a location to be successful, you first must be in the right neighborhood, regardless of the price.

Smartest mistake: Expanded into Las Vegas in October 2001, only one month after the September 11, 2001 attack and suffered severe losses during the first year. But the turnaround was great. In fact, it has been the catalyst in our current growth into other markets in several states.

How do you spend a day typically? I start my day at 6 a.m. and spend 1 to 2 hours reviewing the sales and controls from the prior day. I use the Internet to read world and local news while watching CNBC. The rest of the day is always dedicated to operations and management. I always finish the day by recapping with district managers, the project manager, and my partner.

Work week: 12-hour workdays, but always off on Sundays; travel almost weekly.

Favorite fun activities: I enjoy Las Vegas and have a second home there. It is the best place on earth to mix a little business with a lot of exciting fun!

Exercise/workout: Remains an opportunity.

Favorite stuff/tech toys: I never go anywhere without a laptop or BlackBerry.

What are you reading? Managing Difficult People and The Next Step for Business Owners. But mostly I read articles focused on self-improvement and food franchise issues.

Do you have a favorite quote or advice you give? For our employees: "Run the business as the owner" and "Do the right thing, even when no one is watching." For my children: "Never settle for less than what is truly possible." As for advice: It is okay to say "I don't know" once, but any more shows a lack of interest in learning and improving.

Best advice you ever got: In 1997, I was offered a position with a large public company with a great salary and a prestigious position, but I would have had to sell my recently acquired two Arby's restaurants as a condition. I contacted my previous employer and friend Bill Brusslan, an Arby's franchisee I still consider to be my mentor. He said, "Take a chance on entrepreneurship while you are young. You'll always be a good employee if it doesn't work out." As always, he was right!

Formative influences/events: I experienced war and poverty at a young age as a Palestinian-Jordanian, and knew then that I deserved better as a human being. The opportunity to emigrate to the U.S. at age 16 offered the first real chance for a change. Another event that influenced me was the birth of my first son, as it was evident that it was up to me to set him and the rest of my children up for success. I have worked diligently since!

How do you balance life and work? It is really hard, but I have a great wife of 25 years who fills in all the blanks that I leave while moving at high speed. For me, it is more about the quality than the quantity of time, but there isn't a day that I wish to be available more often. I also have great children who come home from college at least twice a week and call often just to chat!

Partnership: Greg and I have a great relationship as partners. We each know our strengths and weaknesses, and we both allow the other to excel within our expertise. Greg is a dentist by trade, operating three dental offices--and a visionary. I am a restaurateur and an operator. Together we cover all angles of the business. We do a deal only if we both agree, but when it comes to operations, Greg yields to me!

MANAGEMENT

Business philosophy: To succeed, especially in a competitive environment such as QSR, we must own a minimum of two attributes and compete well in all others. Attributes in QSR are taste, product quality, healthy, price/value, portion size, speed/convenience, facility, image and atmosphere, and community outreach. Once attributes are owned, we must defend them when attacked and celebrate them often as true points of difference.

Would you say you are in the franchising, real estate, or customer service business? Why? Operating 52 restaurants in 4 states qualifies us as all of the above. But in the end, it is all about being a good employer. Choosing a good franchisor and negotiating a good real estate deal happens once in a while, but customer service happens every minute. Being a good employer for a team that is willing to be the best is what gets it done in the end for our customers. The right people at the front line are the difference makers.

What gets you out of bed in the morning? An annoying alarm clock that is 20 feet away. The challenge is to wake up before the alarm sounds each day. But there's also the responsibility that I have to the 900 employees who expect me to do what is right for the business.

What's your passion in business? People and the relationships that are created in the process of building something special. If the passion is anything but people and relationships, it is usually short-lived and limited, but relationships are often everlasting. Some of my previous employees are now successful business people, government employees, doctors, and teachers. Many remain in contact. I like to think that somehow I am able to positively influence the outcome.

Management method or style: Do what you know well and learn what you do not know from those who do. Offer mentorship to others who truly show promise and never forget those who were there to help you. Focus most on the weakness, and be known for your ability to improve upon anything that you touch. Recognize those who excel, and correct and encourage those who don't.

Greatest challenge: The greatest challenge to me is to give up on a person who has not been able to deliver to the expectations. I tend to believe in people. I work hard to help them improve, but often it's too late and I have to end the relationship.

How close are you to operations? I think I am very close to operations, but it is challenging as we grow the size of the company. I am confident that I still can run a store today if I had to. I can make a pizza, cook chicken, and make a Market Fresh sandwich and a hamburger as well as anyone. I am just not as fast as I used to be.

How do others describe you? Honest and trustworthy.

How do you hire and fire? Hiring is a challenge, but it is mostly done at the unit level. We have little turnover at the manager level and no turnover at the executive level. We promote from within and fire only when we are convinced that it is best for the employee to get a fresh start elsewhere.

How do you train and retain? We focus on creating a culture in the restaurants and within the organization that promotes teamwork and cross-functionality. We find that most people want to be more productive once they are clear as to what is expected. We encourage mentorship even in the units, but especially for managers and assistants.

BOTTOM LINE

Annual revenue: $40 million

2009 goals: 2 percent increase

Growth meter: How do you measure your growth? By the number of units improving profits over the prior year.

Vision meter: Where do you want to be in 5 years? 10 years? We would like to be at 100 units in 5 years. This world is rapidly changing. Ten years seems to be so far away; we plan 5 years at a time.

How is this economic cycle affecting you, your employees, your customers? For us, the economy has been tough more psychologically than in dollars. All of our businesses are more profitable this year versus the prior year, but clearly the consumer's confidence is lagging. We have lost frequency and check, but made it up with better controls.

What are you doing different in this economy? We're eliminating waste in labor and food, have tightened up on investment spending, and are taking less risk.

How do you forecast for your business during these trying times? It is difficult to forecast the top line in this economy. We focus more on bottom line and the P&L segments that are within our control. We share actual results with our managers at all levels and ask them for their input. Every manager is able to see all P&Ls for units within their market and is asked to compare their results with the others.

Where do you find capital for expansion? In the last six months, we purchased one property, four restaurants, and opened two others by using cash. The last acquisition was funded with 40 percent cash and 60 percent from a local bank. We hope that this credit crunch will change soon. We, like many others, cannot fund all projects out of cash.