01 Oct 2002
Four Views from the Frontlines of the Food Industryby Julia HannaTopics:
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
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 Diegobased 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
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
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
"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
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
Class of MBA 1977, Section H