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 CEO’s 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 with you what I learned and took away from our meeting.
In my professional opinion, AmRest is one of the best 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, analysts and investors.
Started in 1993 in Wroclaw, Poland with a single Pizza Hut franchise, AmRest has grown into one of the largest and most profitable restaurant companies in Eastern Europe; with aspirations to continue their trajectory and rank as one of the top 10 largest restaurant companies in the world by 2020.
Now I’ve heard a lot of bold growth claims in my day. Our firm fields new client inquiries from 700+ foodservice companies per year from 50+ countries and I can’t tell you how many times I’ve heard “we want to be the next McDonald’s” (or something similar). When you hear AmRest’s goals – after two days with McGovern and his team – and taking into account what they have already accomplished – it’s easy to visualize them achieving all that they set out to do.
The company’s motto is “Anything is possible” and the results garnered by that way of thinking speak on behalf of AmRest and McGovern. In 2010, AmRest posted revenues exceeding $900m USD and EBITDA of nearly $100m USD. From a single Pizza Hut location, AmRest now has a global footprint with 600+ restaurants in 10 countries and more than 21,000 employees under McGovern’s leadership. WOW!
As impressive as the growth, profits and overall success of AmRest is already, it is very clear this company is just getting ready to hit its full stride. The story of this company is just unfolding.
A few things I took away:
1. “Not Restaurant Guys” – When you meet the AmRest top-brass you notice something…actually, they point it out…there isn’t a “restaurant guy” among them. Well, what does that mean given that they’re running one of the most successful restaurant companies in the world? It means that these are guys that are succeeding in spite of deep (pre-AmRest) restaurant industry experience rather than for it.
There’s a saying I like to use/paraphrase: “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 to me 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 the ones with the longest resumes or most experience.
You will not hear an AmRest executive bragging about how smart they are, how accomplished they are, how entitled they are, or how “right” they are based on how experienced they are. What you will notice instead is curiosity, humility, logic, reason and a deep desire to leapfrog rather than benchmark (benchmark is a nicer way to say copy, by the way).
I’ve been very privileged to have worked with some amazing emerging-brand concepts/companies/CEO’s 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 “not restaurant guys”. This may also be in part why, as a consultant, I have seen them. It seems these types of companies’ hire-in consultants that can help them accelerate learning in certain areas (proven best practices, shortcuts, technical stuff, etc) but that they lead with a notion of being industry outsiders rather than insiders.
2. New breed of CEO’s – I’m noticing another pattern lately. Some of the hottest and fastest-growing companies are lead by CEO’s that share some distinct characteristics. A new profile is emerging. It’s one of a cool, 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 opportunity in general. Examples are Robbie Brozen of Nando’s, Lane Cardwell (numerous big-brands), Steve Ells of Chipotle, 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 taking and extracting.
3. CPG-types are incredibly analytical – The most successful casual dining restaurant chain on Earth is Darden Restaurants. Both being based here in Orlando we’ve cherry-picked staff from one another on a few occasions. The word I’m getting lately from the inside is that there’s a dramatic shift in Darden’s hiring profile. Since Clarence Otis took over as CEO, the marketing ranks are being filled with ex-CPG types (Consumer Packaged Goods).
Marketers in the CPG 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 ‘ole grey-dogs’ with the new 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.
AmRest has recently brought on a new Chief Marketing Officer (CMO) – Darek Drewnicki – that brings just such a background to the organization. He is among the new breed of restaurant marketers who are 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 on how humans are conditioned to see only what’s different and how that plays in to restaurant branding. In all the years of doing that exercise – drawing it all out hidden from view and then suddenly revealing it asking “what’s the first thing you see?” – I have never had anyone respond as AmRest’s new CMO did. While most immediately (and I long thought “correctly”) said, “the colored square”, Darek studied the sketch intently and so within a few seconds I said, “okay, time’s up; it’s the colored square you noticed, right?” to which he replied, “Yes, I saw that, but I 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 and try to see and categorize the dots in a new way that reveals patterns. These CPG guys see things very differently. It’s pretty thrilling to have one of these types on your team. By the way – he was equally humble, energetic and as quick to deflect a compliment as McGovern was.
4. Globalization and the importance of “Brand Translation™” – 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; and 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 in 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 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 (we love doing that kind of work by the way).
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.
5. Big Bang Revamps – 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 U.S. 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 has turned the nose-diving Denver Applebee’s units – 16 of them – around so well that his stores are among the highest performing in the entire system (on a comp-store percentage, I believe).
How did he do it? How did McGovern and his team transform the 16 Denver locations from bust to boom?
With a big-bang!
When acquiring 16 money-losing restaurants at once you know you have your work cut out for you and 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 this cat. What some would have argued to do in a situation like this one in Denver is to take one restaurant at a time and remodel in a phased approach. What McGovern and his team did instead (and oh how I wish we’d advised this but, alas, they did it entirely on their own) was to shut down all 16 stores at once to give them an overhaul and then open 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 that something is new and different and again consider a brand 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.
6. Hot Concept: La Tageliatella – The latest acquisition of AmRest is an Italian concept born in Spain and popular in France. The concept is La Tageliatella. I won’t say much here to be sure I share not only far less than I know but far less even than has been disseminated publically to the investment and analyst community about La Tageliatella and AmRest’s plans for it. Suffice to say, AmRest is a company with bold ambitions, a highly-capable team, deep pockets, and a vision for the future that would have you count the world’s top restaurant companies using only your two hands and reserving one finger for them. Envision here not a middle finger but the one Doctor Evil from Austin Powers uses when he fantasizes global domination. You can’t live in Spain without knowing about La Tageliatella. If AmRest has its way – which I rather hope and envision it will – you’ll be just as familiar with La Tageliatella no matter where in the world you live. Add this one to your “Hot Concepts” list.
7. Acquisitions and Partnerships – 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 concern 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”.
8. Motto’s & Manifesto’s – 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. AmRest does.
McGovern has woven into the AmRest DNA a culture rooted in the motto “Anything is possible”. It is clear AmRest got where it is today by truly believing and behaving in a manner consistent with their 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 and that he would build what he has today? 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 special and are stand-outs, you’ll want to add McGovern and AmRest Holding’s to your short-list of ones to watch.