Living the Dream: And $100 Million on the Horizon
As a kid growing up in New Orleans, Yaron Goldman dreamed of owning a restaurant.
"I have always enjoyed cooking, ever since I was a child," says Goldman, who grew up to become the second largest franchisee of McAlister's Deli. "My sister and I used to cook all the time, and there is nothing better than serving someone a great meal."
These days, Goldman is dishing up even loftier dreams. His strategic growth plan includes 2016 revenue projection in excess of $100 million and the addition of three more brands in the next 10 years. His company, SD Holdings, operates 59 McAlister's Delis in North and South Carolina, Missouri, Colorado, and Wyoming, along with 3 units of the rapidly growing MOD Pizza brand.
Goldman started with McAlister's in 1996 in Tuscaloosa, when he took a job making sandwiches to earn extra cash while attending the University of Alabama. Three months later, he was tapped to work full time managing the restaurant.
"I just loved the job from day one," says Goldman, who went on to earn an MBA at the University of North Carolina at Charlotte. "I had always worked, but never looked forward to coming to work until I got that job." He ultimately partnered with the people who had hired him in Tuscaloosa to open his first McAlister's Deli in Charlotte in 1999, as part of an area development agreement. His aims now are to grow his own company's portfolio in both size and number of brands and to empower his team system-wide.
"In my experience if employees are allowed to make decisions, they usually will make the right ones," says Goldman. "In the instances where I have tried to micromanage the business it always seems to backfire. Generally people will do the right thing when given the opportunity."
While Goldman will say only that the company has "a few brands targeted," he is seeking franchises with a matching corporate culture, a quality product "that my own family would eat," and a brand that also owns and operates a significant number of units. In evaluating franchise opportunities, Goldman looks for a 25 to 30 percent capitalized return for each unit. In the end, it comes down to unit economics.
"The store-level P&L is where everything happens," says Goldman. "I don't believe you can add new units just to spread overhead costs. The store level EBIDTA has to be worth the investment."
Name: Yaron Goldman
Company: Southern Deli Holdings/SD Holdings
No. of units: 59 McAlister's Deli, 3 MOD Pizza
Years in franchising: 16
Years in current position: 16
Bus boy at Steak and Ale when I was 16.
Opening the second location really changed my outlook on the business. Once I realized that I couldn't just work more hours to solve any problems, it changed my philosophy and approach to the business.
When our business passed the $50 million annual revenue mark, that was a big accomplishment. Being able to give some of our key management equity upside is also something I am very proud of.
Biggest current challenge:
Real estate at prices that make sense over the long term. Currently, real estate prices are skyrocketing and, as we all know, the economy can change on a dime, so it's important that our leases reflect possible downturns in the economy.
Next big goal:
We hope to surpass $100 million revenue in 2016--a goal we set back in 2000. Our entire organization knows about this goal and will be excited to surpass it.
First turning point in your career:
The 2008 recession. We had never really had any economic headwinds before and access to capital had always been very easy.
Best business decision:
Empowering my key people early on to run the restaurants. Every time I gave away more control, the better the restaurants operated. It was difficult to let go, but it's the reason we have been able to grow.
Hardest lesson learned:
Buying restaurants at the peak of the market in 2007, right before the 2008 recession. That was tough.
I am usually traveling 10 days a month visiting restaurants. The rest of the time I'm touring real estate and meeting with our leadership team to discuss performance and how we can take advantage of opportunities to operate better restaurants.
I try to run when I can. I also walk the course when I play golf, but my wife would say that I need to exercise more!
Best advice you ever got:
Trust your people.
What's your passion in business?
I love growing the business through acquisitions. The ability to take over existing units that are underperforming and then turning them around is just a great feeling. Half of our units have been acquired. We have turned around or improved existing operations of 90 percent of those units. The 10 percent we didn't do well with still bother me.
How do you balance life and work?
When I'm not traveling, I make sure I am home every night for dinner with my wife. It's important we stay connected.
Late night cocktail.
The Devil in the White City by Erik Larson.
What do most people not know about you?
The first raise I ever received was at McAlister's Deli, the first week I worked there. I went from minimum wage of $4.25 an hour to $4.75 an hour. I was 21 and thought, "Wow! This is the greatest job!"
No attachment on an email that says, "See attachment."
What did you want to be when you grew up?
I trekked for gorillas in Uganda.
Person I'd most like to have lunch with:
Treat your employees like they are volunteers.
Management method or style:
Fully train and teach your people, then get out of their way and let them do their job.
Finding great people.
How do others describe you?
Passionate about my business.
One thing I'm looking to do better:
Communicate. It's something I'm always working on, whether it's to the people I work with every day, our guests, or our vendors.
How I give my team room to innovate and experiment:
When they fail, I let them know it's not a big deal. As long as the spirit of the idea was positive and everyone tried their best to execute, then we have no problem with trying things and then recognizing they did not work. This way they are not afraid to continue being innovative and continue to bring new ideas to the business. All the best innovations in my business have come from someone other than myself.
How close are you to operations?
Not as close as I used to be, but I can still walk into a restaurant and within 30 seconds get a feel for how the shift is going--positive or negative.
What are the two most important things you rely on from your franchisor?
1) Menu innovation. Clearly franchisees cannot do that, so it's critical that the franchisor continue to innovate. 2) Cost reduction through buying power. Again, one of the biggest selling points of a franchise business is the power to leverage the buying power of an entire chain of restaurants, even though the franchisee may only be a small part.
What I need from vendors:
Timely and reliable service. And when they can't deliver that, the honest communication as to how they will fix it.
Have you changed your marketing strategy in response to the economy?
Yes. We rely much more on targeted marketing strategies using both digital and traditional media. Branding is still part of what we do, but we now supplement that with much more of the targeted marketing approach.
How is social media affecting your business?
It's just added one more way to engage our guests. We really love it, and I think it's great to be able to get immediate feedback from our guests.
How do you hire and fire?
We hire for personality and energy. Our business is easy to learn, but the right attitude is something you just can't teach someone. Before we fire anyone, we make sure we can look ourselves in the mirror and ask if we gave that person the best chance to succeed. Did we give them the training and the tools they deserved? If the answer is yes, then it's an easy decision,. If it's no, then we try to retrain and see if we don't get a better result.
How do you train and retain?
Training is one of the most important parts of our business. The better our team is trained means less turnover, higher guest satisfaction, same-store sales increases, and of course, a stronger bottom line. We have "manager trainers" in every market, meaning their only job is to train newly hired managers to work in the restaurants. We also have key hourly employees who train new hourly employees. The new hourly employees are trained by one of the store managers, key hourly employees, and online training. Employees also can access training videos online. We host our own annual conference outside of the brand conference. We bring all of our general managers to a resort for a two-day event. The keynote speaker is always the highlight for the managers. The last two years we had operations consultant Jim Sullivan and motivational speaker Dale Henry. They both are excellent motivators and teachers.
How do you deal with problem employees?
We make sure there is nothing we are doing to create a negative environment, but at the end of the day we probably will let them go if they continue to be a "problem" employee.
Fastest way into my doghouse:
When someone has bad news and does not tell me. I can handle any situation except for the ones I don't know about.
$85 million to $95 million.
To surpass $100 million and keep our four-year string of positive same-store sales.
Growth meter: How do you measure your growth?
Same-store sales, unit count, total revenue.
Vision meter: Where do you want to be in 5 years?
Operating three brands with 100-plus units.
10 years? Five brands, with 200-plus units.
How is the economy in your regions affecting you, your employees, your customers?
Real estate prices are high, so we have to be smart about where we open new locations. We are increasing our starting wage for employees and are adding additional benefits, like increased PTO. The market is so competitive and we know our guests are always in a hurry, so every day we wake up thinking about how we can increase our speed of service. It's the number-one driver of our guest satisfaction.
Are you experiencing economic growth in your market?
How do changes in the economy affect the way you do business?
Short term they do not, long term it changes the way we raise capital and borrow money.
How do you forecast for your business?
We budget every October for the following year. Our GMs--all the way up--have a say in the budget. I believe it's important to get the input of the store-level managers since they know the specifics of what is happening in their trade areas.
What are the best sources for capital expansion?
It depends on your goals. If it's slow growth and/or debt reduction, then a traditional senior lender is probably best.; for high growth, expansion mode, private equity and/or mezzanine debt.
Experience with private equity, local banks, national banks, other institutions? Why/why not?
I've worked with everyone from angel investors to private equity and it all depends on where you are in the lifecycle of your business. Private equity is a phenomenal way to grow your business, but you're giving up control and a lot of the upside. Local banks will go only so far and usually are not good growth partners. We have doubled the size of our business since 2012 using a variety of sources.
What are you doing to take care of your employees?
Three weeks of vacation for full-time employees, financial incentive plans that tie to our budget, deep discount or free shift meals depending on the time with the company, and generally just treating everyone with respect.
How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)?
We do our best to offset these costs in other parts of our business, but at the end of the day we have to absorb it. We have taken some price hikes to offset it but you can only charge so much before you turn away the guests.
How do you reward/recognize top-performing employees?
Financial rewards and company-wide recognition. We also give out awards at our annual conference.
What kind of exit strategy do you have in place?
Probably a sale to a strategic or maybe a PE group, but we're growing so fast right now I have not given it a lot of thought.
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