Julia Stewart of IHOP: Making the Partnership Work

Julia Stewart is a very persuasive woman. As president, CEO, COO and director of IHOP Corp., she is, she says, using all her skills as a communicator, persuader, and collaborator, to revitalize one of the oldest and best-known foodservice brands.

Her whole career has been designed to put her in this position. She actually started out in high school as a server in an IHOP in her native San Diego. Her degree at San Diego State University was a BS in communications with minors in marketing and business-a degree that has raised a few eyebrows over the years.

But really, Stewart says, it's a perfect degree for her career.

"I had lunch the other day with the president of SDSU, and I said, 'I'm your best student because I use my education every day'," she says. "Think about it: I have a vision and a mission, and my job is to convince 420 franchisees, 55,000 field employees, a couple hundred corporate employees, a board of directors, and Wall Street that you've got to go in this direction."

Her first job was with a local advertising agency, a two-year stint that ended because of a serendipitous plane ride.

"I was flying to a presentation with a client, and I ended up sitting next to Carl [Karcher, founder of Carl's Jr.] on the plane. And the man kept trying to read my Wall Street Journal," she laughs. "Finally we struck up a conversation-we are dear friends to this day-and he said, 'You are just the type of person I need to meet. I very much want to have you come to work for me.' From that moment forward I have done nothing but be in the restaurant business."

Although she didn't necessarily intend to be in the restaurant business, she certainly had a major goal form the very beginning: "Even working as a server I made the decision that some day I would run a company because, she says. "I just knew it."

Much of her early career was spent building brands, not something that the industry was attuned to in the early '70s. After generating campaigns as a marketing manager for Carl's Jr., she took the chance to work for Burger King. She held marketing jobs, starting with the west coast, and adding the Pacific rim, and finally much of the U.S. "I was there five years, had five jobs, and moved five times," she says. "It was a wonderful time. I was learning about the business, leadership, about working with franchisees. I just loved working with franchisees, that whole idea of creating partnerships and teamwork."

That collaborative style was not celebrated or, as Stewart says, "wasn't viewed as much of a point of difference as it is today."

After Burger King, she had a chance to work for Saga Corp., owners of a number of restaurant concepts, including Spoons Grill & Bar and Stuart Anderson's Black Angus/Cattle Company Restaurants.

Saga had just acquired Spoons, and Stewart got the job of designing the UFOC. But the company decided she would be more valuable in the larger unit, so she took the job of vice president of marketing and research for Black Angus.

It was a major challenge; the chain had 10 years of negative growth, and was about to get out of the beef business since all its research had showed that beef was out and healthy eating was in. Stewart thought differently, and was able to persuade the company to do a 180: "I celebrated beef, and created these ads that won every award. It was just a series of marketing activities, but always working in conjunction with the operators. Even though it was not a franchise I spent 50 percent of my time convincing the operators that we had to work together. So even then I was using my collaborative skills to build a brand." The strategy worked.

Marketing has not usually been the career path for a CEO, however, and Stewart knew it. She had also done everything in marketing, at least as a prime responsibility, that she wanted to do. :I got to the point where I didn't want to produce another ad, I didn't want to write another business plan, I had sort of exhausted my career, made all the big leaps, and I really wanted to run something."

Her first step was to talk to the head of Black Angus.

"I went to the chairman and said, 'OK, I've turned it around, and I really want to expand my opportunities. I want to run a company or at least get into operations, because I know I'll never be a CEO until I have P&L experience. So I want you to get me out of marketing and into operations.' He looked at me and said, 'You must be joking.' I said, 'No, I'm serious; I'll start at the bottom and work my way up, but I really want to get into operations.' He thought I was crazy, and said I made too much money for him in marketing. I said if you don't let me go into ops, I'm going to get bored to death and I'm going to find somebody who will."

It was no idle threat, and Stewart is not one to sit quietly when she could be exercising her skills of persuasion where they could do some good. In an interview with Nation's Restaurant News, she mentioned her ambition to run a company. The vice president of human resources for Taco Bell read the story.

She got her wish to start at the bottom: as an assistant manager working the night shift in a Taco Bell. It was, of course, the fast track, but it was starting in operations, and she worked her way up quickly, and within a year was vice president of company operations for the west, and eventually national vice president of franchising and licensing with responsibility for all 5,800 restaurants.

She loved it, but she had not set aside her desire to, as she says "run the whole enchilada." The chips didn't fall that way at Taco Bell, and after a run of eight years, an executive recruiter steered her to that top job, at Applebees.

There she did many of the things she had done at Black Angus: finding a new agency, collaborating with franchisees, building a new menu, figuring out what it would take to move the business. One of her major changes was where the chain advertised. All of it was local advertising when she took over, and she convinced the franchisees to go with network advertising.

"That was a major turnaround," she says, "because it provided them awareness they'd never had before. That was in 1998."

After four years, she was president of Applebees' domestic division, and the CEO's job was still not hers. Then came what she calls "the opportunity of a lifetime" to be CEO of IHOP.

The additional attraction was a chance to move from Kansas City back to her home area of southern California. She had had the distinction of being the oldest woman to give birth in Kansas City (to her second child, Aubrey). "I got bored on the first day I delivered, so I was looking at my chart on the edge of the bed, and on the top in big bold letters, it said 'geriatric pregnancy'," she says. "It's funny now, though it wasn't then. It made me realize I had pushed the boundaries in a million different ways."

She regarded IHOP as a 45-year-old American icon, but in need of being reenergized. She spent months visiting with franchisees and employees, and came up with a new business model for the company. Up until last year, the company had bought the real estate, built the building, and then found a franchisee for the location. Under the new model, the franchisee acquires the real estate and builds the facility.

The results have been dramatic. Saving cash, reinvesting it in the business, buying back stock, and declaring a dividend have all pushed the stock value up 62% in a year. And Stewart's rallying cry is to make the chain No. 1 in the family dining segment. "And it's not just the number of units, but number one in the consumer's eye, the best operation, the best training, the best marketing, the best menu."

After the company announced that IHOP could support 400-600 new units in the U.S., the first 200 went to existing franchisees. Stewart says franchisees are still lining up to take the new locations.

"We're also looking at folks who are not IHOP franchisees, but are franchisees of other concepts," she says. "I like people who are on the ground who know their restaurant general managers' names, who've got infrastructure, who are involved in their business every day."

As for the future, Stewart says the important thing is to get the chain built out, and along the way her team will decide what new directions will work, whether international expansion or the acquisition of a second concept, or something else. But she doesn't see herself going anywhere: "This is a perfect match between me and the brand." Her method will continue to be collaboration and consensus-building.

It is, she says, the ideal way to approach franchising: "People don't understand first that franchising is highly regulated by the U.S. government, and secondarily that it's much harder than running a regular company. I don't demand or dictate anything: I influence, I collaborate, I persuade."

It amuses her that she hears from many other business leaders (mostly male, certainly, though she doesn't say that) that they don't know that they could do her job. "I know people in the restaurant business today who are highly successful guys running businesses, and they literally tell me they couldn't do what I do." That includes on chairman and CEO of a major restaurant chain, who says he tells people what to do. He says he could not deal with having to persuade.

It is a characteristic that she says women bring to their jobs, and that makes franchising an idea fit. She is a founding member and past president of the Women's Foodservice Forum.

She is aware of her role as a trailblazer for women: "To this day when I go into an IHOP, I get food servers coming up to me and saying, 'You give me hope.' It's wonderful.

"I really do believe in encouraging advancement of women and minorities, and have been a mentor throughout my career for both women and men. I want to become more involved in helping, mentoring, and coaching. There are a lot of women out there who still need a lot of coaching and are not getting it in their own organizations. I think it is sad, and it's disappointing to me that I am the only woman to run a publicly held restaurant chain. I can honestly tell you we've come a ways but we have a long way to go."

She considers the skill set that women bring to business a potential great advantage for franchising. "Franchisors need to be mindful of the partnership," she says. "At the core of being a franchisor, you'd better desire to be a partner. If you don't want to be a partner, it will never work."

In that, she says, IHOP has done a great job over the years. "A lot of our franchisees started 20-30 years ago as a cooks or servers and are millionaires today. That's what franchising can do for you."

Published: February 15th, 2004

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