Perpetual Grow-Motion: Guillermo Perales Thinks Bigger in Texas... and Florida

After visiting with Guillermo Perales five years ago, perhaps the most pointed question to ask him today is, "What have you not been up to?"

When last we spoke with the country's largest Latino restaurant franchisee, he was holding steady at around 140 units across five brands. Today, following two recent mega-deals with Arby's and Burger King, he's flirting with 400 units, making him the fourth largest franchisee in the country. Perales has more than doubled the size of his company by adding both new units and new brands (Del Taco, CiCi's Pizza, T-Mobile, and Arby's) to his holdings, which still include Popeyes, Burger King, and Golden Corral.

"We're in growth mode, yes," he says, in typical understatement. "With Arby's pushing to refranchise many of its locations, it was a good move for us." This year alone, his "growth mode" has included adding 51 Arby's and purchasing 19 Burger Kings out of bankruptcy in the Dallas area, and adding 96 Burger Kings in central Florida. (Both brands have recently rolled out refranchising initiatives.) And talk about domination: although he already has 72 Burger Kings in the Dallas area, his goal is to own all 96.

Born and raised in Mexico, Perales showed signs of excelling early on. As a university student, he graduated with honors before departing for the U.S. and corporate life. His first job, with Mexican company Gruma Corp. in the 1980s, gave him the experience he needed and provided a stepping-stone to starting his own business. One thing he learned during those years was, "It's better to be a part of a bigger system. It takes away some of the risk when you have a recognizable name, and it makes financing easier to get," he says.

He set his sights on the Dallas market and has never looked back. He identified some key sites and by 1997 had opened his first Golden Corral in Dallas. An SBA loan helped him meet the financial criteria and get things off the ground. There's been no letting off the gas since.

Throughout his years in franchising, rapid growth has been a critical part of Perales's strategy. "With one you can fail easily, but with several you can support the network," he says. Recently, his brand of rapid growth has been remarkable by any standard: nearly 170 units acquired in just the past few months.

Perales has previously ventured out of his core markets of Dallas, Orlando, Houston, and Tampa but says that's not his style. "We can be more effective with the operation when it's all centralized, and I like to keep it all close," he says. He points to the economies of scale this strategy creates in areas such as management, marketing, HR, and training.

As busy as he is building his empire, it's not all business for Perales, who continues to be a big community player. He co-founded the Latin America/DFW Fund to raise money for Latino-based programs and initiatives, and he has supported programs that encourage Latino students to stay in school. And with nearly 400 franchise locations, he provides job opportunities in the communities where he does business. Today those jobs number more than 10,000.

"Finding the right people, training, and retaining them is always challenging," he says. "And different concepts have different training demands, policies, and procedures."

Next up for Perales is dozens--and dozens--of remodels. There is a "new" Burger King look, and his organization has already remodeled four of its Dallas locations and three in Florida. He says about 80 more Burger King remodels are ahead and then he'll turn his attention to revamping some of his Popeyes units. As if all the remodeling weren't enough, he's currently building two new Popeyes in Oklahoma City, one in South Texas, and three Burger Kings in Dallas. His newest deal with Arby's calls for him to build 15 more locations over the next five years.

Far from done building his organization and helping the communities he serves, Perales continues to have an open mind toward the future. "When you have a proven track record as a franchisee," he says, "franchisors come looking for you."

Whether it's a conversion, a new build, a refranchise, or a remodel, Perales has the dedication, experience, and resources to make it happen. And at almost 400 units and growing, he is one dominant dominator.

Name: Guillermo Perales
Title: President and CEO
Company: Sun Holdings, LLC
No. of units: 398: Burger King (172), Popeyes (73), Arby's (52), CiCi's Pizza (49), Golden Corral (33), T-Mobile (12), and Del Taco (7).

Personal

Age: 50
Family: Wife and three children
Years in current position: 15
Years in franchising: 15

Key accomplishments:
We have helped get more Latinos into franchising, both as franchisees and suppliers. I feel I have been a leader and a role model in this community. I'm glad that my business has been able to provide so many jobs for people--more than 10,000. I'm still proud to be the largest Hispanic multi-unit franchise operator in the country.

Biggest mistake:
Buying into the Denny's franchise without any financial disclosure.

Smartest mistake:
When we first bought Popeyes, the price seemed high at the time. But it's been a good brand for us and has helped us establish markets in Texas and Florida.

How do you spend a typical day?
I try to begin every day now jogging. It starts me out with the right frame of mind. Then it's on to phone calls and emails. Then a lot of internal meetings to evaluate opportunities and expansion. Our people know what they're doing and I respect that.

Work week:
Even though I am now 50, I still maintain busy work weeks. I'm still putting in 70- to 80-hour weeks. I want to be available for whatever might come up. I travel a couple of times most weeks to association meetings, conferences, my stores, or other meetings. I'm part of our weekly manager's meeting and I'm reviewing financials.

Favorite activity:
I try to spend time with my family whenever I can, especially now that the kids are older. We like to go to Colorado, skiing together, and I like to play tennis.

Favorite stuff/tech toys:
It's been a BlackBerry for a long time but I see a new iPhone in the future.

Do you have a favorite quote or advice you give?
Persistency.

Best advice you ever got:
Persistency.

How do you balance life and work?
It's tough. I try to find a balance with exercise, work, travel, and family time. You just try to keep an even balance there.

Exercise:
I always strive to make it to the gym three times each week. Sometimes it happens, sometimes it doesn't. I still play tennis when I can. But I've really gotten into jogging and yoga and try to do it every morning before I start the day.

What do you do for fun?
When I do get away from my business I like to travel and spend time with my family. We just returned from a two-week cruise in Europe.

Books/magazines recently read/recommended:
Mostly trade and business magazines. I read 20 to 30 different publications regularly, like Multi-Unit Franchisee, QSR, Franchise Times, Restaurant News. It's one of the best time investments I can make and helps me stay up to date on the industry and trends.

Management

Business philosophy:
Organic growth through a lot of new construction and searching for purchases. Since day one we have focused on growth, building, and buying. We've also consciously been trying to stay strong in our Texas and Florida markets (Dallas, Houston, Orlando, and Tampa).

Would you say you are in the franchising, real estate, or customer service business? Why?
We're in franchising but we definitely do all three.

What gets you out of bed in the morning?
The thought of discovering the next great move for our business.

Management method or style:
We are a large company, so I have learned that I must delegate responsibilities to people I trust. We have brand directors for each of our different brands. We have a controller, CFO, four attorneys, a leasing director, and marketing manager. I delegate to them and trust them to take care of things. I rely on my brand directors and their expertise to keep those brands operating effectively. If there's a problem, I will step in.

How close are you to operations?
I'm close, but at 400 units I rely on insight from my brand managers. But I do see the numbers every week and visit my stores. Believe me, I keep an eye on cash flow.

Greatest challenge:
The larger we've gotten, the more exposure we have had to legal trouble. That's one of the reasons we now have four attorneys on staff to help us make sure we are doing everything by the book. On the corporate level, it's difficult to find good people that will stick with you. At the unit level, the problem of employee retention remains. We're always dealing with turnover in this business.

Personality:
I expect a lot of myself and those around me. When something needs to be done, I expect it to be done efficiently and effectively.

How do others describe you?
Demanding but fair.

How do you hire and fire?
At this stage I don't do any hiring or firing at the unit level. But I expect my managers to be on top of things there. I'm keeping my finger on our benchmarks and financials, and when a store is not performing we are not afraid to make a change.

Find good people?
This is really an ongoing problem. We're using the Internet a lot more these days. We promote from within when the fit is right. We also have used headhunters, newspaper ads, and referrals. Finding good people is a challenge, and it is expensive to train new people.

Train them?
Training is essential. We spend millions on training. Each of our brands has its own training requirements and they're all different. We have training managers and we use training stores.

Retain them?
We try to compensate fairly and we offer financial incentives. We have a pretty healthy bonus structure in place. We offer a lot of training and growth opportunities--English classes, if necessary--so people can get ahead, get higher-paying jobs, and later step into management.

Bottom Line

Annual revenue:
Over $400 million annually.

2013 goals:
We will build around 15 new units next year. We will also continue to do many remodels, probably 30 Burger King, 15 Popeyes, 4 Golden Corral, and 5 Arby's remodels in 2013.

Growth meter: How do you measure your growth?
This year was huge for us with the Burger King and Arby's deals. We set development schedules. We like to develop our sites and own the property, that's one way. But we also buy existing franchises from others. So we measure our success based on our development schedules.

Vision meter: Where do you want to be in 5 years? 10 years?
More growth, of course. I would like to add more brands and locations that become available in our main markets of Texas and Florida. That's where we want to dominate. I'm open to looking at new or established brands; whatever the smart decision is for us. The goal is to grow organically. We're always looking for potential new sites and ways to build out faster. I'd like to double our size in 5 years.

How has the most recent economic cycle affected you, your employees, your customers?
I think it affected those in the fast casual segment more than it did those in QSR. For us, our brand diversity allows us to weather different financial storms. It seems like when one of our brands struggles we have another to pick up the slack.

Are you experiencing economic growth/recovery in your market?
In Dallas, my perception was that the recession hit later and the recovery started sooner than most other metropolitan areas. We're now seeing double-digit growth at our stores in Dallas.

What did you change or do differently in this economy that you plan to continue doing?
Minding our expenses. We kept growing but we stayed focused on fundamentals and bottom-line numbers.

How do you forecast for your business in this economy?
Through benchmarking and year-over-year comparisons.

Where do you find capital for expansion?
We used to rely mainly on banks, but when the economy went down we had to get more creative.

Is capital getting easier to access? Why/why not?
It seems to be opening up again. But the requirements are much more stringent. Banking is becoming more of a relationship and more local. For example, we began working with BBVA Compass a few years ago with less than $1 million, but after getting to know each other the lending relationship expanded to close to $30 million. They have been very supportive and helpful and even invited me recently to their national board of directors.

Have you used private equity, local banks, national banks, other institutions? Why/why not?
We had mostly used banks and our own capital in the past. But, for example, when the economy was rough we brought in an equity planner to help us sustain growth with our CiCi's brand. There are other solutions out there.

What kind of exit strategy do you have in place?
Not ready for that yet.

What are you doing to take care of your employees?
We provide English classes and are working on a scholarship program.

How are you handling rising employee costs (payroll, healthcare, etc.)?
The new health insurance will be a challenge. Hopefully, if Republicans return to power it will go away. Otherwise, we will have to raise prices to comply.

How do you reward/recognize top-performing employees?
Recognizing performance and providing a healthy bonus/incentive plan.