01 Oct 2002
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What's Cookin'

Four Views from the Frontlines of the Food Industry
by Julia Hanna

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by Julia Hanna

As a student at HBS, Joe Fox would unwind from a long week of classes by baking a batch of lemon squares or chocolate-chip cookies. Fox, who owns Community Bakery in Little Rock, Arkansas, says he never imagined he'd one day make his living absorbed in the business of food and its many challenges, including long hours, the unending demand for consistent quality, and attention to detail. Like the three other alumni from the Class of 1977 interviewed for this article, Fox came to the restaurant industry by an indirect path, but now finds himself completely immersed in its unique complexities and rewards.

The National Restaurant Association projects sales of some $408 billion for the industry in 2002; with 11.6 million people on its payrolls, the restaurant industry is the nation's largest private-sector employer, attracting 46 percent of every dollar spent on food. Despite these statistics, the industry (with the exception of a few star chefs or fast-food empires) maintains a relatively low profile — due in part, perhaps, to its tough, unglamorous realities.

“Anyone who does a good job in the food industry and makes money works really, really hard,” says Keith Garner, owner of Pasta Cuisine, a restaurant and catering business in Oakland, California. Garner was employed as a strategy consultant for a venture capital firm when he and his wife, Lee Bendig (whom he describes as a “foodie”), decided to open a fresh pasta retail store in 1989 with a few seats for lunchtime customers. On the first day of business, Garner recalls, “there was a line out the door — we sold out of everything we'd made by 2:00 that afternoon, closed, worked all night to make more food, and sold out again the next day.” The business grew 8 percent each month for the first fifteen months. For a while, Garner served as chief pasta maker, accountant, and general business manager while also working a full-time load of shifts.

Today, Pasta Cuisine employs approximately twenty workers; eight make up a “core” group that has been with the business for over ten years. In an industry with notoriously high turnover, developing strategies for hiring and retaining good workers is an ongoing conundrum. Garner's approach is simple: “We try to challenge workers with new responsibilities and reward them with increased pay,” he says, telling the story of an immigrant worker who started as one of Pasta Cuisine's dishwashers (“dirty, hot work,” Garner adds) and worked her way up to sous-chef.

At Sweet Tomatoes, a San Diego–based chain of more than ninety buffet-style restaurants serving fresh salads, soups, pastas, and breads, CEO Michael Mack has implemented a flexible system that allows hourly employees to change their schedule with as little as one day's notice — a powerful tool for retaining young workers with hectic private lives. In the upper ranks, Mack notes that typical managers in other restaurants work seventy to eighty hours each week, inspiring the grim phrase “burn 'em and turn 'em.” By offering managers a forty-hour week at comparable pay, Sweet Tomatoes (with sales estimated at $210 million for fiscal 2002) has had little difficulty recruiting experienced employees, with surplus tasks handled by managers-in-training.

Mack, a former consultant in heavy manufacturing and petrochemicals at Bain & Company, bought the Sweet Tomatoes chain from its original founders in 1983 with partner Tony Brooke. “We wanted to get involved in something more entrepreneurial,” he explains. “We saw the restaurant business as a service industry that would be successful based on the organization's productivity, focus, and sense of purpose, rather than a proprietary technology.”

Nick Castaldo is CEO of Miami-based Pollo Tropical, a chain of 54 quick-service restaurants offering grilled chicken and Caribbean-influenced side dishes, He says he appreciates the democratic aspect of a business that rewards practical experience and a strong work ethic. “People who apply themselves can work their way through the ranks,” he observes. “For many workers — particularly here in South Florida — it's their first experience in the American economic system.” Castaldo's own path to the industry began in brand management for Clairol; in 1980, he was recruited by Burger King Corporation and left five years later as vice president of advertising. Explaining the leap from hair products to hamburgers, Castaldo notes, “In the Seventies, the restaurant industry was primarily focused on operations. As the industry matured and became more competitive, the larger corporations began to hire employees from companies that are known for their strong, traditional marketing skills.”

With approximately $100 million in annual sales, Castaldo attributes Pollo Tropical's success to a “high-value equation” that features freshly prepared food of restaurant quality at fast-food prices. “While the quick-service business has tried to take the labor out of food preparation, we've gone in the opposite direction,” he comments, describing homemade specialties such as sweet plantains, black beans, and fried yucca in mouthwatering detail. “Typical industry practices like ‘boil in the bag' and ‘freezer to fryer' have resulted in commodity-like, homogeneous food.”

"When you get right down to it," says Community Bakery's Joe Fox, "this is a labor-intensive business in which the quality of the product is determined by the individual effort of the person doing the preparation." When he arrived in Little Rock in 1981, Fox noticed that Arkansas' capital was devoid of bagels and the New York Times. When he approached Community Bakery's owner to see about renting kitchen facilities to do some entrepreneurial baking, she offered to sell him the business instead. (Fox also now owns the area's distribution operation for the Times and the Wall Street Journal.) From 1996 through 2001, Community Bakery's sales grew at an average annual rate of 5.3 percent, totaling $2.6 million in 2001.

To monitor the quality of Community's baked goods, Fox employs an enviable tactic: "I eat," he laughs. "I'm always nibbling and testing - my favorite is our chocolate-chunk cookie."

No Typical Days
An excellent set of taste buds is one obvious asset in the food business, but other qualities and skills were mentioned more frequently. "You have to keep a cool head and be flexible while maintaining a real sense of urgency," Pollo Tropical's Castaldo remarks, adding, "The idea of a ‘typical day' is not typical in our business." He says he tries to limit office work and meetings to three days a week and devote the rest of his time to impromptu, on-site visits. "The rubber meets the road in the stores - it's important for everyone in the corporate office to remain focused on that fact and get out there with some regularity."

On store visits, Castaldo puts himself in the customer's shoes. "Is the line moving? Are people behind the counter smiling and operating as a team?" After canvassing the "front of the house" (undetected by employees, if possible), he makes his way to the "back of the house" to observe the kitchen's complex choreo-graphy. Castaldo says there's nothing like a good day in the field: "When you see employees who take pride in what they're doing and long lines of happy customers, it's terrifically satisfying."

"One of the best aspects of the business is that you get immediate feedback," adds Pasta Cuisine's Keith Garner. "It's a good feeling to serve someone lunch and have them tell you how delicious it tasted."

"Producing good food is a pleasure," Fox says simply. "It's gratifying to produce a tangible product and watch it sell."

"Consistency" was the watchword mentioned most frequently as the key to success. "You have to figure out where your niche is and serve it well," Garner remarks. "Pasta Cuisine provides high-quality family dining at a reasonable price; it would be a mistake to put a $45 bottle of wine on our menu."

When consistency suffers, it doesn't take long for it to affect a restaurant's reputation, he adds. "If a customer has the best dining experience ever, he might tell four people - if something went wrong, he'll probably tell ten. Before long, everyone has heard a story about someone's bad experience."

Putting Out Fires
So what about the bad days? The business of preparing and serving food is a source of some of the most memorable, most humorous (in retrospect) horror stories, and anyone who has worked in the industry agrees that they occur under the best of circumstances.

Fox recalls a wedding cake delivered to a reception with a missing middle tier (it was mistakenly sent to another wedding). Castaldo tells the story of a Pollo Tropical restaurant manager facing down a lunchtime crush with a diminishing supply of bread rolls - the manager, he says, looked out the window and happened to see the delivery truck outside with its hood up and the engine in flames. "He was such an entrepreneur that he ran out with a blanket, extinguished the fire, grabbed the racks of bread, and hightailed it back to the store. It's funny, but hair-raising."

Mack, the former Bain consultant, speaks frankly of his "naïveté" when it came to expanding Sweet Tomatoes' reach. "Opening one restaurant and opening fifty restaurants is not a linear equation - it's exponentially more complex," he says.

Clearly, the importance of learning from one's mistakes is as significant in the food industry as it is in any endeavor. And there seem to be plenty of rewards for those willing to take their chances in a business that is infamous for luring many to the craggy rocks of failure. "It's a fast-paced, exciting, competitive business," says Castaldo. "It's also fun, because everybody you run into can relate to it as a consumer - everyone eats out."

"I actually like working behind the bakery counter a couple of mornings every week," Fox remarks. "Little Rock is a pretty small town, so I get to see a lot of people I know and meet new folks just by waiting on them. That's a very enjoyable aspect of this business."

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Featured Alumni

Featured Alumni

Class of MBA 1977, Section H

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