On a Roll! Catching up with McAlister's Largest Franchisee

Adam Saxton is co-CEO and owner of The Saxton Group, a family business that has become the largest McAlister's Deli franchisee in the country. Along with his father Kelly (founder and executive chairman) and his brother Matt (co-CEO), Saxton has created not only a profitable and successful company, but one with more than 35,000 employees working in a culture that embraces philanthropy and community connections.

When we last spoke with Saxton in 2016, he had just been recognized with Multi-Unit Franchisee magazine's MVP Award for Community Involvement Leadership. "We have a comprehensive approach that covers everything from small local fundraisers to big company-wide charity programs," he said at the time. "However, I think the most important thing is that we empower our employees and managers to take action on their own. If they see a need in their community, they have the ability to step up and do their part to help."

Saxton was the first franchisee to bring the sandwich chain to the Dallas market. When we spoke in 2016, his company had 67 units and was working to open another 10. Since then, The Saxton Group has grown to 83 McAlister's in 6 states, with a couple more under construction; and annual r67evenue has grown from $132 million in 2016 to $160 million in 2019.

Saxton says the company has funded its growth through traditional lenders and by teaming up with a private equity firm focused on the restaurant industry, allowing more rapid expansion.

He has always understood that to remain competitive, his company must continue to evolve and adapt to market changes. "Like many in the industry, we have continued to see the growth of third-party delivery and off-premise sales. In 2016, 44 percent of our business was off-premise," he says. "Today, that number is 51 percent and climbing. In 2016 we were doing $25,000 a week in sales on third-party delivery platforms and today we are doing $225,000 a week on them."

With his next big goal of 100 restaurants, Saxton says he's ready for the challenge--and the payoff. "My passion is growth because it allows us to do more of what we love and to continue to provide an opportunity for our people," he says. "We're proud of our 100 percent promote-from-within culture at the general manager level and above. We would not be able to do that if we were not constantly growing!"

Name: Adam G. Saxton
Title: Co-CEO & Owner
Company: The Saxton Group
No. of units: 83 McAlister's Deli
Age: 38
Family: Twin boys, Patrick and Harry
Years in franchising: 15
Years in current position: 5

Personal

First job:
I started working in my family's restaurants when I was 15. Back then, you could get a driver's license at 15 if you had a job, so I said sign me up! I delivered pizzas.

Formative influences/events:
I grew up in the restaurant business, so talking about our restaurants and our customers was a part of my daily life. I can recall a specific experience at a very young age when I was eating at one of our pizza restaurants and noticed the poorly kept salad bar. Within minutes, I approached the front-of-house employee and told her that the salad bar was unacceptable. Imagine her surprise when she heard that from a 10-year-old! Shortly thereafter, my parents took the opportunity to teach me a lesson about how and when to speak to employees. That sticks with me today, and I try to lead by example with the mentality of a team member.

Key accomplishments:
I'm especially proud of the company's growth in our hometown, Dallas-Fort Worth. We brought McAlister's here, developed the brand here, and today we operate more locations in DFW than any of our direct competitors. Dallas is an emergent and dynamic place to develop a business and will always be a core piece of our future growth strategy.

Biggest current challenge:
Any business that serves the public has to be ready to evolve, and our industry is seeing unprecedented change. We continue to look for ways to innovate and serve our customers in the manner they wish to be served. I've often heard that the growth of third-party delivery, online ordering, digital apps, etc. all boil down the customer service experience. However, I disagree. I believe getting our food into the hands of customers through the channel that's convenient for them at the time they're ordering is an incredible service offering. I find innovation to be the most challenging, but like most things that are challenging, it is also the most rewarding.

Next big goal:
100 restaurants!

First turning point in your career:
When I was elected to the McAlister's Deli franchise advisory council and then had the honor of serving as president, it was definitely a turning point. I have learned that the best franchise systems are those with a healthy and active dialogue between franchisor and franchisee. One can't be successful without the success of the other.

Best business decision:
Our belief in operating in territories where we are the only McAlister's franchisee has served us well. It's allowed us to set the standard and create a brand of McAlister's that has a distinctive "Saxton Group" touch.

Hardest lesson learned:
Growing through times of adversity.

Work week:
During the work week, I start my day reading through the New York Times, Wall Street Journal, and the Financial Times. I spend half of my week in the office working closely with our company's leaders, and the other half out in the field searching for new communities to introduce McAlister's Deli to.

Exercise/workout:
I spin at SoulCycle, which feels more like mental health wellness, and I strength train at Equinox with a former Marine who never cuts me any slack! I like exercising around other people. I would fail miserably at a home gym.

Best advice you ever got:
My dad always says, "Slow don't pay," which implies that being busy means being productive. It's simple but very true!

What's your passion in business?
My passion is growth because it allows us to do more of what we love and to continue to provide an opportunity for our people. We're proud of our 100 percent promote-from within-culture at the general manager level and above. We would not be able to do that if we were not constantly growing!

How do you balance life and work?
I acknowledge that life doesn't stop, and work doesn't either. There's no clear distinction between the two for me. I grew up in an entrepreneurial household while my dad was building a company that would later become The Saxton Group. Our life was our work, and because of that it never felt like work. I'm lucky to do what I love with people who give me an enormous sense of pride.

Guilty pleasure:
The 2-Cheeseburger Meal from McDonald's.

Favorite book:
The Catcher in the Rye.

Favorite movie:
"Good Will Hunting."

What do most people not know about you?
I can be shy if you don't know me.

Pet peeve:
Negativity.

What did you want to be when you grew up?
I've always wanted to work in our family's business.

Last vacation:
Nantucket.

Person I'd most like to have lunch with:
Howard Schultz, because I'm fascinated by the way Starbucks grew to such massive scale but maintained a tight, recognizable culture. I consider that a true feat that I haven't seen replicated by other brands.

Management

Business philosophy:
Negotiation doesn't mean someone wins and someone loses. I always look for common ground.

Management method or style:
I like to hire talent and give them enough room to let their talent shine. The Saxton Group doesn't micro-manage our leaders. I believe leaders come from all backgrounds. Experience and education count, but they aren't everything. We have people performing at a really high level in roles you might never expect to see them in.

Greatest challenge:
The pace of change in our industry has never been faster. You have to look beyond what's happening now (sometimes it seems everything is happening now) and try to prepare for what comes next. That can be very difficult in a hyper-competitive environment flush with innovation. Some days we feel like we are treading water in this business, but the best brands have to continue to look forward.

How do others describe you?
I hope they say I am cooperative and easy to work with. I also hope my passion for the McAlister's brand is apparent.

One thing I'm looking to do better:
Prioritize. I would like to do a better job of recognizing what needs to be done now and what could be done later.

How I give my team room to innovate and experiment:
Get out of the way! Innovators need guardrails and support, but too much management can stifle innovation. Let people experiment. Let them fail. I often say, "It's just sandwiches, what's the worst that can happen?" The restaurant industry is supposed to be fun. We aren't curing cancer. You can't come up with a great idea if you aren't willing to try some things that won't work.

How close are you to operations?
Our company is led by my brother, Matt Saxton, and myself. In our co-CEO roles, Matt is closer to operations while I focus on real estate, marketing, legal, and the franchise relationship.

What are the two most important things you rely on from your franchisor?
Supply chain and product innovation.

What I need from vendors:
Be nimble and quick! It's a fast industry and entrepreneurs like to adapt, which means our vendors have to adapt.

Have you changed your marketing strategy in response to the economy? How?
Yes. How McAlister's Deli is integrated into people's lives is shifting. They aren't just dining in at lunch anymore. In 2019, our marketing focus and dollars have been directed toward off-premise. Our marketing strategy is focused on meeting guests where they are through online ordering and our grab-and-go units, and through promotional and email marketing campaigns directed at our catering clients, as well as seasonal promotions with our third-party delivery partner, DoorDash. We're about to launch an e-commerce site and feature merchandise that we hope will increase brand loyalty. We hope the site also will lead to a new revenue source for us. In 2020 our marketing focus, strategy, and efforts will be largely centered around digital. Reaching, engaging, and interacting with guests through the thing they can't live without has never been more important to us.

How is social media affecting your business?
We view social media as the outlet to continue the relationship we have with our guests. Our approach to social media is to bring online the same personal touches and genuine hospitality a guest receives within our restaurants. Social media is also how we inform our guests about new menu items, upcoming promotions, and local community fundraisers. Social media has allowed us to reduce the amount we spend on materials within our restaurants and redirect those funds in a more targeted approach through Facebook ads. Social media also is another channel to receive guest feedback. We get over 1,500 reviews each month about experiences our guests are having in our restaurants across Google, Facebook, and Yelp. The expectation is to respond to every single review we receive--and to respond within 24 hours. The guest left the review for a reason: they want to be heard. In 2017 we received 6,539 reviews, and in 2018 we received 16,876 reviews. Our marketplace is competitive and we have to fight for every single guest. Not responding to reviews is easily interpreted by guests as your brand not caring. Last, more research is coming out about guest engagement driving sales.

How do you hire and fire?
There is no question that hiring great restaurant operators and team members is more of a challenge now than ever. When it comes to hiring, we train our supervisors to hire for attitude, personality, work ethic, and passion. Most important, we are looking for the right culture fit. Generally speaking, we can train and develop almost anyone to serve our guests, operate the POS system, and prepare our food. But more often than not, what we are unable to train and develop are the intrinsic values that make someone a good fit for the McAlister's Deli brand and The Saxton Group. Our recruiting, training and development, and human resources teams continually evaluate our internal processes, procedures, and resources to ensure they are adequate and sufficient for our restaurant-level operators to make a great hire. Letting someone go is one of the toughest things a leader has to do. If a unit-level leader believes they need to let someone go, they are required to contact their regional director to discuss the potential workplace separation. Our human resources department is always available for support and is here to guide our leaders through the process of an involuntary termination. The crux of our employee relations systems is to always be fair and treat our people with dignity and respect even when we have to part ways.

How do you train and retain?
We have an internal training department here at our corporate office. Our Manager of Training and Development Megan Burleson is responsible for the communication and implementation of the training systems and operations within our restaurants. She oversees all quarterly rollouts, pre- and post-new restaurant openings, and our Manager in Training program. She also created our Certified Training Store and Certified Deli Trainer Programs. Our training department and its programs have improved overall restaurant operations, guest satisfaction, and increased employee retention. Our Vice President of Operations Stephen Lee and our Vice President of People Matt Heston created a leadership develop class for our assistant managers this year. The one-day course covers all things restaurant operations, human resources, and what leadership skills are crucial in becoming a general manager at one of our restaurants.

How do you deal with problem employees?
Attracting and retaining the best talent has to do with encouraging our people to be their best. It's about leadership, fairness, and a willingness to address problems and issues head-on. If we have a team member who is struggling, we train our supervisors to coach first and, if necessary, move toward progressive discipline while following the elements of due process and just cause. Our goal with progressive discipline is to communicate problem issues directly and in a timely fashion so our people can involve themselves in the problem-solving process. However, proper communication--both verbal and written--can be difficult to accomplish without a framework for structuring a supervisor's thoughts and sharing their suggestions with their people. As such, our human resources team provides our leaders with the tools they need to manage and lead their people. We also offer leadership development classes throughout the year for our supervisors where we develop their employee relations skills.

Fastest way into my doghouse:
Treat a guest poorly.

Bottom Line

Annual revenue:
$160 million.

2020 goals:
We will open around five new restaurants, launch new digital capabilities, and accelerate our remodel strategy.

Growth meter: How do you measure your growth?
Unit count, total sales growth, and same store sales growth.

Vision meter: Where do you want to be in 5 years? 10 years?
We want to add a second brand to our portfolio and grow our McAlister's count to over 100 units.

Do you have brands in different segments? Why/why not?
Not currently, but we are exploring additional opportunities with different brands. We very much want to continue to provide growth and development opportunities for our people and leverage our strength in additional markets. A second brand makes more and more sense to help us accomplish those goals.

How is the economy in your regions affecting you, your employees, your customers?
Our heavy concentration in Texas has always served us well. We have benefited tremendously from the growth in our hometown of DFW and the larger Texas market as a whole.

Are you experiencing economic growth in your markets?
Yes.

How do changes in the economy affect the way you do business?
A growing economy generally means that consumers are willing to eat away from home more often, which is positive for us. However, McAlister's has an option for everyone and performs well even when the economy is not doing as well. Low unemployment and rising wages can compress operating margin at the store level unless it is made up elsewhere.

How do you forecast for your business?
We start at the restaurant level. We believe the leader closest to the operation, the general manager, must play a key role in writing their budget.

What are the best sources for capital expansion?
Running an efficient, growing business and reinvesting your profits into that business is the best source for organic capital expansion. We also have great banking partners that have helped us increase our working capital and optimize our company's cash flow.

Experience with private equity, local banks, national banks, other institutions? Why/why not?
CapitalSpring, a private equity firm focused on the restaurant industry, has had an equity investment in The Saxton Group since 2012. We have found them to be great partners, and their confidence in our team and our brand has allowed us to grow faster. Our current senior lender is BMO Harris Bank.

What are you doing to take care of your employees?
This year, we're proud to launch a tuition assistance program to help aid in the educational goals of our employees. Many key employees are working nearly full-time while going to school. They play a key role in serving our customers, and we want to serve them too. The initial reaction among our employees to launching a tuition assistance program has been very positive.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)?
Strategically. Sometimes the solution is short term and sometimes the solution is long term. Our executive and senior leadership team will analyze an abundance of data before pulling the trigger on a change. Whatever strategy we choose it often comes with some sort of risk, so we always look for a balance that is best for our guests, our internal stakeholders, and the organization as a whole. For example, we may need to implement new technology or software, consolidate vendors, or increase menu price to mitigate the financial impact rising employee costs have on the business.

What laws and regulations are affecting your business and how are you dealing with it?
Minimum wage hikes, DOL regulations modernizing the FLSA (e.g., overtime, tip pooling, etc.), state legalization of marijuana, paid family and sick leave laws, workplace immigration laws, health care reform, predictive scheduling laws... the list goes on. Our human resources team stays abreast of the ever-changing world of employment law and trains the leadership team on what employment laws are in the pipeline and how they will affect our business in the future.

How do you reward/recognize top-performing employees?
We have a monthly employee recognition program where two employees at every McAlister's Deli restaurant are selected as their restaurant's "Team Member of the Month." The employees are awarded a t-shirt to wear at work that publicly recognizes their achievement in front of the guests they serve daily. Today, over 6,000 employees have been recognized through the program. Also, whenever an employee is mentioned in a review left on Google, Yelp, or Facebook, we like to commend that employee's efforts on their restaurant's local Facebook page. We include a photo of them and a brief write-up on why we're thankful to have them on our team. It is a way of publicly recognizing the employee and often results in other guests talking about their interactions and experiences with that particular employee as well. We're also currently working on a tuition assistance program, "TSG Tomorrow," for our employees. All employees who have worked for The Saxton Group for a least a year will be able to receive monetary assistance for courses. This includes team members, shift managers, assistant managers, general managers, regional directors, and our corporate office staff. Our people are our future.

What kind of exit strategy do you have in place?
This is a family business and a legacy business. We hope to do this forever!