I’ve been blessed over my career to have met a lot of fascinating and accomplished people in the global restaurant industry. On my short list of coolest (and most accomplished) restaurant industry CEOs is Henry McGovern of AmRest Holdings.
In May 2011, I made a trip to visit with Henry McGovern at his corporate headquarters in Wroclaw, Poland. The CEO, his team, and the story of his company made such an impression on me that I couldn’t wait to write up a brief profile and share what I learned and took away from our meeting.
In my professional opinion, AmRest is one of the greatest modern success stories to be found in the global restaurant industry. Both the CEO and his company should be on the radar of any respected industry media members, analysts and investors.
Founded in 1993 in Wroclaw, with a single Pizza Hut franchise, AmRest has since grown to become one of the largest and most profitable restaurant companies in Central and Eastern Europe, with a growing international presence and aspirations to continue their trajectory and rank as one of the top 10 largest restaurant companies in the world by 2020.
I’ve heard a lot of bold growth claims in my day. Our firm fields new client inquiries from 700+ foodservice companies per year spanning more than 50 countries and I can’t tell you how many times I’ve heard “we want to be the next McDonald’s/Chipotle/etc.” But after hearing AmRest’s goals over two days with McGovern and his team — and taking into account what they have already accomplished — it became easy to visualize them achieving all that and more.
The company’s motto is “Anything is possible” and the results garnered by that way of thinking speak on behalf of AmRest and its founder. In 2016, the company’s sales exceeded $1 billion USD and its capitalization now hovers around $2.1 billion USD. From a single Pizza Hut location, AmRest now has a global footprint with 1,400+ restaurants in 13 countries and more than 30,000 employees under Mr. McGovern’s leadership. Truly impressive.
As impressive as the growth, profits, and overall success of AmRest is already, it is increasingly clear the company is just getting ready to hit its full stride.
When you meet the AmRest top-brass you notice something, and they’ll be the first to point it out: there isn’t a “restaurant guy” among them. What does that mean, given that they’re running one of the most successful restaurant companies in the world? It means that these are men succeeding in spite of deep (pre-AmRest) restaurant industry experience, rather than because of it.
There’s a saying I like to use: “The world’s best swordsman need not worry about the world’s second-best swordsman — he need worry about the guy that’s never picked up a sword before; because he’ll do something he ought not do and the world’s best will end up on his sword”. The point is that often those who best innovate and turn a competitor (or industry) on its head are those who look at it with fresh eyes, more curiosity, and more determination; not necessarily those with the longest resumes or most experience.
You will not hear an AmRest executive bragging about how smart or accomplished he is, how entitled he is, or how “right” he is based on that experience. What you will notice, however, is curiosity, humility, logic, reason and a deep desire to leapfrog rather than benchmark.
I’ve been very privileged to have worked with some amazing emerging-brand concepts, companies and CEOs over the years, some of which have gone from ‘emerging’ to ‘emerged’. I’m noticing a pattern here. When you look at the list of “emerging brands” curated/tracked around the world you will notice there are a lot of companies led by executives that are, like AmRest’s executive team, “not restaurant guys”. This may also be in part why, as a consultant, I have seen them. It seems these types of companies partner with those who can best help them accelerate their skills in certain areas (proven best practices, shortcuts, technical stuff, etc.) but lead with a notion of being industry outsiders, rather than insiders.
I’ve noticed another pattern lately. Some of the fastest-growing companies are lead by CEOs who share a few distinct characteristics. A new profile is emerging — one of a hip, fun, visionary that is at once charismatic and self-effacing. Their charisma, humility and sense of humor attract better and more engaged employees, partners, media, franchisees, investors and business opportunities in general. Examples are Robbie Brozen of Nando’s, Lane Cardwell (numerous big-brands), Steve Ells of Chipotle (pre-scandal, of course), Todd Graves of Raising Canes, and of course, Henry McGovern of AmRest. These are the types of leaders who are also driven more by giving and contributing to our industry than they are by extracting.
Marketers in the CPG (Consumer Packaged Goods) world are characterized by their sharp analytical and data-driven approaches. For now, I think this is a good way to balance the predominantly intuition-based management approach of the industry’s old guard, with the more modern (and often more radical) views of the industry’s up-and-coming innovators. Analysts can crunch the numbers and find patterns that yield entirely new ways of looking at the data. We have a few such analysts on our team; they are gifted code-breakers and fact-driven marketing practitioners.
When AmRest hired Chief Marketing Officer (CMO) Darek Drewnicki, it brought a similar background to the organization. At the time, Drewnicki was among the new breed of restaurant marketers who was far more data-driven than their predecessors.
In an era where everything can be measured, an analyst (such as those top CPG-types) is the restaurant marketing equivalent of a cipher. They bring an entirely new dimension and perspective to the chain restaurant marketing department.
Case in point: For years now I’ve drawn out for clients on a notepad a series of empty circles — four across by four down with just one colored-in square among them — as a tool to communicate our philosophy that humans are conditioned to see only what’s different and how that plays in to restaurant branding. In all the years of performing that exercise — drawing it all out hidden from view and then suddenly revealing it while asking “What’s the first thing you see?” — I have never had anyone respond as AmRest’s CMO did. While most immediately (and I long thought “correctly”) responded, “The colored square”, Darek studied the sketch intently before replying that he was “looking for the pattern”. I was stunned. This was it. This was what I had been hearing/reading about. This was one of those CPG minds. One of those who look past the obvious to try and categorize the dots in a new way that reveals patterns. These CPG guys see things very differently and it’s pretty thrilling to have one on your team. By the way, he was equally humble, energetic and as quick to deflect a compliment as McGovern was.
Restaurant franchise systems have long struggled to strike the perfect balance between strict adherence to standardization/consistency and adaptability to new markets. This challenge has become more pronounced as restaurant companies expand globally. On the one hand, part of what “makes” a franchise system is consistency – the Big Mac (for instance) tastes exactly the same no matter where you are in the world. On the other hand, a rigid and indiscriminate application of brand standards can snuff out the kind of innovations new entrepreneurs/franchisees entering the system can contribute. They may also open a hamstrung franchisee to potent attacks of more localized competitors who leverage localized market knowledge and business-building approaches.
One of the things that struck me during our site visits of some AmRest restaurants is that they had a lot of flexibility to blend the best of the global franchise systems with their own localized knowledge and business savvy. We refer to this as “Brand Translation™,” whereby the essence of a brand is kept intact but it is adapted (or translated) subtly in to foreign markets (exactly the kind of work we love to do).
A few AmRest examples: Within their KFC business they conceptualized new non-core menu items (such as their B-Smart Box and Krusher’s non-carbonated drink line); sell fresh locally-sourced chicken versus frozen; and also sell beer on the weekends. Within their Pizza Hut business they launched a successful by-the-slice concept (sold from a small window on a busy square in Wroclaw) for the late-night crowd and also focus much more heavily on fresh, locally-sourced produce than any Pizza Hut you’d find back in the States.
In 2009, AmRest acquired 106 Applebee’s in the United States (primarily in the Atlanta and Denver markets). As we all know, Applebee’s has been taking a beating in the US in recent years. When I first learned of the acquisition I was admittedly worried that AmRest may have swallowed a small dose of poison that would later make for some really nasty stomach cramps (many of you that follow my blog/newsletter know my thoughts on the industry shifts that are impacting low-check average casual dining chains who are innovating/evolving too slowly). Come to find out, McGovern soon turned the nose-diving Denver Applebee’s units – 16 of them – around so well that his stores became among the highest-performing in the entire system (on a comp-store percentage, I believe).
How did he do it?
With a big-bang!
When acquiring 16 money-losing restaurants at once, you know that you’re going to have to focus resources in such a way that gets both quick and sustainable results. There are a lot of ways to skin that cat. While some might have taken one restaurant at a time and remodeled in a phased approach, McGovern and his team shut down all 16 stores at once, gave them an overhaul, and re-opened all 16 at once. Ka-bang!
This is another example of the “broken window theory” in action. As the theory goes: when a window is broken it makes it okay to break more windows. Malcolm Gladwell explored this in his book, The Tipping Point. He discovered how New York City cleaned itself up by repainting the subway trains every time they got hit with graffiti and also by fixing broken windows in abandoned buildings. In essence, if the trains were cleaned/repainted all at once — and maintained each day — there was less propensity to damage the trains (or break windows). Likewise, when a restaurant chain undergoes massive and holistic transformation in a big-bang-style as McGovern orchestrated in Denver, consumers get it: something is new and different and can be considered with fresh eyes. Such was the case with transforming one of the worst-performing Applebee’s markets in the system into one of the best-performing.
Success favors the bold.
In 2011, AmRest acquired La Tagliatella , an Italian concept born in Spain and popularized in France. AmRest is a company with bold ambitions, a highly-capable team, deep pockets, and a vision for the future. You can’t live in Spain without knowing about La Tagliatella, which offered both market vitality and universal Italian appeal. In the years since, the concept has been aggressively expanded via company-operated and franchised restaurants on a global basis. And, if AmRest has its way – which I rather hope and envision it will – consumers will eventually be just as familiar with La Tagliatella no matter where in the world they live.
Over the years I’ve been approached by dozens of hedge funds, venture capital firms, and respected industry investors asking for help finding new acquisition/investment opportunities. Recessions often spur on even more interest and certainly a flurry of acquisitions, divestitures, and chain shakeups. Some are profit-minded and some are value-minded. You soon get the sense which firms are just deal-hunting and which ones are looking to truly add long-term value for all involved. AmRest is not only a well-funded and growth-minded company, it is a company intent on growing in to new markets around the world both through acquisition and joint-venture partnerships. If you’re reading this and are with an established/respected foodservice concept in an emerging market, you may want to start getting more familiar with AmRest. It’s a good company to know; especially if you’re growth-minded and believe in the motto “Anything is possible”.
A motto is a “phrase meant to formally describe the motivation or general intentions of a social group or organization” (Wikipedia). A manifesto is a public declaration of principles or intentions. I believe a company should have both. Naturally, AmRest does.
McGovern has woven into AmRest a culture rooted in the motto “Anything is possible.” It is clear the company got where it is today by truly believing and behaving in a manner consistent with that motto.
Imagine going back to 1993 and sitting with Henry in that first little Pizza Hut in Wroclaw. If he had described then the AmRest of today how many people would have actually believed in his vision? When today they hear that he aspires to grow AmRest into one of the top 10 largest restaurant companies in the world, do they see that future for the company as clearly as they can trace it backwards from today?
As Henry Ford once said, “Whether you think you can or can’t, you’re right”.
Surround yourself with believers. Devil’s advocates and naysayers are much easier to find and much less useful than believers.
Biggest take-away from the meeting?
If you’re tracking which companies and executives in the global restaurant industry that are doing something, you’ll want to add McGovern and AmRest Holding’s to your short-list of ones to watch.