Recipe for Growth

Recipe for Growth

By Sean Roth

Real Estate Editor

To meet soft-spoken 49-year-old Rick Akam you'd never know he is a restaurant-growth dynamo who has worked his Ray Kroc magic at two major restaurant chains.

As the president and CEO of Hooters of America, Akam guided that chain through the dramatic governmental hearings in the mid-'90s, increasing its market presence from 190 locations to 344 in eight years.

In November 2003, Akam went to work as chief operating officer at Raving Brands! in Atlanta. Although he only worked there for 15 months, during his time as COO of Raving Brands!, the chain's primary brand, Moe's Southwest Grills, grew by 120 restaurants to 185 stores. Similarly, the Raving Brands! Mama Fu's Asian House franchise group grew from one restaurant to 20.

Akam started his career as a food runner at Bennigan's Grill & Tavern, where he was eventually promoted to general manager. He opened Bennigan's first downtown Chicago location in 1982.

Now Akam is turning his attention to the only Lakewood Ranch-based restaurant chain, First Watch Restaurants Inc., which currently has 52 locations that bring in about $1.1 million each annually. The chain, known for its profitable - albeit slow - growth is about to mushroom. With a $35 million investment from the Greenwich, Conn.-based private equity firm of Catterton Partners, First Watch has changed its expansion projections from a maximum of eight restaurants a year to 25 annually for at least the next five years. The investment also kick-started the creation of a franchise program for First Watch. The key to this growth strategy was finding a chief operating officer who understood the steps necessary to execute the plan.

This is when Akam entered the picture.

"His biggest attribute is his experience," says Ken Pendery, president and CEO of First Watch. "He has a great background in working with companies that are growing quickly. The key for us is that he fits.

When you look at three of four people that have similar experience you have to look for personality and a person who will fit well into the corporate structure we have created, and (Akam) does that."

Developing the franchise program and handling the expansion largely falls to Akam. Franchising is a new priority for First Watch. In the next five years, Pendery projects that franchise restaurants will make up as much as 40% of the chain's locations.

GCBR sat down with Akam to talk strategy at his Lakewood Ranch office.

How did you get started developing restaurants?

I'm an operator at heart. I came up through the system learning at Steak and Ale and Bennigan's. It was really just luck that drew me to Hooters. A couple guys and I were originally going to open a Colorado Joe's Steakhouse. I took a trip to look at the concept in Denver, and when I got back to Florida, one of the guys wanted me to check out a place with him called Hooters. Back then there was just the one in Clearwater. At the time, I just knew I wanted to get in on the ground floor of something.

The concept just evolved, and we developed more restaurants. We eventually moved the operations to Atlanta, and I was made vice president of operations. A couple years after that Bob Brooks gained control ... and I was made executive vice president.

It sounds like a good move; Hooters is a pretty hot restaurant concept?

We struggled initially. The first restaurant didn't do as well as we had hoped. Eight to nine months later, we opened a second one in Jacksonville, and, thankfully, that one did well. By then we had started to get some penetration in Florida, and the name had started to get out.

In 1986, we did our first two in Atlanta. It was a much slower ride as we began to migrate up north. Fortunately, we had some good franchisees, and we continued to gain market presence.

The idea was a little different, but the focus was still on good food and good service. Even though the Hooters girls are put out in front, they are just the gimmick to get you in the first time. If the food is lousy, you aren't going to come back just because of a pretty server.

Cleanliness and customer service are still the foundations.

When you were president at Hooters you faced a pretty serious threat from the Federal government. What was your strategy?

What you are talking about was the (Equal Employment Opportunity Commission) saying we couldn't hire only women as servers. We had a lot of conversations. At the end of the day, we realized whether we won or lost would be up to the public.

So we did our little march to build awareness and to get on TV. I still remember going with the VP of marketing into the D.C. pressroom. Within a couple minutes the story was on the air. It was so much in our favor that we knew we did the right thing. It was really through the public that we were able to work through that issue.

You had great success at your next job with the Raving Brands!; how did you accomplish such incredible growth?

The Raving Brands! was very well established in Atlanta. There are over 40 Moe's in Atlanta. I was fortunate to see the emergence of fast casual restaurants. It was a very, very intriguing opportunity that presented itself.

The Hooters concept was still viable. I still enjoyed it, but the management at that point was starting to shift the focus to outside businesses, (such as the) airline, racing and golf. The Raving Brands! gave me a good opportunity to focus on growing restaurants. I knew the concept and knew it was viable.

When I joined in November 2003 Raving Brands! had a lot of things already set up, such as the franchise system. I was just brought in to insure the support and foundation was there. To make sure the personnel was in place. I learned then that the key was really to surround yourself with good people.

I was fortunate to have been recognized by management for my potential talents, so I pride myself in being able to develop extremely good people.

Why did you decide to join First Watch?

I really wasn't looking for something, but I got an offer so I came down and talked to these guys. I found that they were really passionate about what they do. They really focus on values. The company prides itself on quality food and friendly servers. They also had a great niche business focusing on breakfast and lunch. There is really no leader in that segment of the market.

I also knew they had just received enough capital to build at least 20 stores a year. It kind of reinforced everything I had been hearing about them.

I spent a lot of time with Ken (Pendery) visiting the store in Sarasota and taking a trip to Columbus, (Ohio) and Phoenix prior to accepting employment.

It was an offer I just couldn't pass up.

What is the biggest hurdle to franchise growth at First Watch?

The biggest hurdle for this business is finding quality franchisees. We know our model works. We also know it works in different locations like Kansas City.

How do you appeal to the right franchisee?

I think it is just by being patient and strategic with our franchise partners. I know it is easier to say, but it comes down to relationships ... to supporting our franchisee's growth. It is really a partnership.

Will the franchise program follow the standard pay system?

Yes. There will be a franchise fee and an annual gross revenue charge. As it expands we will likely charge a national advertising fee.

Design wise there have been a number of conversations about who and what we are. We don't anticipate changing much the way we look in other places. We recognize there may be a need to regionalize some of the food items. But we will keep the open, airy light-colored (restaurants). This is what we are. (Pendery expects the franchise system to begin in 2006).

On the company-funded expansion end of the business, what is your major challenge?

The biggest challenge overall in the industry is people. We could build all these buildings today, but you can't do that without the people to run them. My position is really vice president of people. It's my job to identify strategically where to find the people in the various markets and to get the right people in place.

Other than that the growth will be relatively easy. We have someone from the real estate industry out searching for locations. We are not starting from scratch. The foundation was laid by Ken Pendery, Ken Cruley, Joel Petersen and others in September or October of last year. A lot of work is already being done.

How many of your future managers will come from your existing locations?

I suspect not a lot, because we are going into new markets. Some will be willing to move, and others won't. It just depends on where people are at that stage. We certainly have a number of highly talented managers.

With 48 new locations to open by 2006, where do you hope the company's expansion will be geographically?

We anticipate by 2006 we'll be still staying east of the Mississippi (River). It's just the history of the company; most of our growth has been directed at the Southeast.

How do you think First Watch will match up in the breakfast market?

I think First Watch will very much distinguish itself above its competitors. It has a completely different service standard. For one thing, it is not just a breakfast place; our lunch traffic is tremendously strong. Our restaurants are busy from 7 right up to 2:30.

It's also a different environment. Theses restaurants just have a totally different set of standards for employees. This just really goes to the culture these people have created. It has been preached and taught and continues to be executed.

That is the real test: can the company maintain its culture as it grows? Given the right people sending the right message it can.

So it comes down to training, how will your training be different?

I would say at least our initial training is pretty comparable. It is really the ongoing server meetings, where we distinguish ourselves, where we preach.

We are also a family environment. People see each other everyday, and we need to keep that culture.

How is the development of the franchise plan progressing?

I really just got started. I literally just moved in a week ago (March 10.)

In general, though, there are two elements to it. One, you have to create a way to find the franchisees. Second, is the development side ... building the whole franchise support element. Making sure that our franchisees can be trained in a reasonable time and operating.

The two sides go hand in hand. You can't sell a car until you have a service department to work on it. Without the training support system you can't sell the franchise.

What are you looking for in a potential franchisee financially? And where would you look for them?

We would prefer someone who can develop four to five restaurants in a single marketplace, someone with the financial ability to do so.

We would typically advertise in national publications. The biggest way to build attention for a franchise is through word of mouth. Already, we have a request for a franchise for Louisville, Ky.

We are probably going to do some development on the East Coast of Florida ... probably in Ohio and we are considering some backfill in St. Louis and Kansas City. We are also looking at other stores in markets we are already in to create some efficiencies.

What is your growth goal farther than two years out?

By 2008, I hope we are at 200 restaurants.