Jack Butorac is both the CEO of Marco’s Pizza and a franchisee under a separate company that owns or manages 34 of the chain’s 340 stores. “The way that [founder] Pat Giammarco and I set up the the company, it’s just the intellectual property, trademarks and franchise agreements. We agreed we didn’t want the company to own stores, but I wanted to own stores, so I started a separate company.”
Butorac, who joined Marco’s as a consultant in 2002 and took a majority ownership stake two years later, has been ramping up expansion in recent years — franchisees opened 61 new stores last year and are on track to beat the goal of opening 100 more in 2013. He spoke with me last week to share some thoughts on franchising, leadership and how to build a company that can thrive in a downturn.
Marco’s has restaurants in 29 states and the Bahamas and Panama. How did those two countries become the first international markets?
I didn’t want to do international, I had no desire to do it. [Executive VP] Dave Black, the former president of Domino’s, got a call from a former franchisee in the Bahamas who had sold his stores and wanted to do another pizza concept. I politely asked Dave Black to leave my office. He walked back in every day for 30 days straight and asked about the Bahamas. The franchisees turned out to be fantastic guys, they do all the heavy lifting and it turned out to be a great deal. They have the highest volume stores in our system, so then we did the same type of thing in Panama.
I’m still focused on development domestically. We’re also now in discussions in India, but with international it has to be a case where they would do the heavy lifting under a master franchise agreement. We have too much to accomplish domestically.
What’s it like being both franchisor and franchisee?
What I like is that we have common goals. If a franchisee is not successful, the company is not successful. We have to work together to be competitive. One thing we’ve really worked on is to be one, to be unified. We allow a lot of our franchisees to join in product testing, so they can give feedback. It’s not that the franchisor dictates what goes into the store, that world is over. We have to work together.
What are the leadership challenges when it comes to keeping franchisees consistent with the brand’s mission and quality while giving them leeway to run their restaurants?
The hardest thing is to serve a consistent product across the country. To do that you have to have ingredients that are the same across the country. We have a distribution company that handles hundreds of stores, we also have a distributor that handles the remaining part of the country and we have a unique clause in our contract — if they don’t deliver my ingredients to the store, we have the right take the contract away from them without a penalty.
Additionally, one of the biggest challenges when you grow rapidly is how to keep the culture the same and maintain the core beliefs. One of our suppliers, who grew his company from $1 billion to $9 billion in 12 years, and acquired a number of companies, mentioned a company called Partners in Leadership. We started a dialog with them back in July of last year. They’re in demand and it took them a while to realize we are going to be a force to be reckoned with. We started working with them at our franchise convention back in May. Then we had two meetings and we’re working on making sure our culture goes from the top all the way down to the store level.
We have to have the same culture and beliefs, we have to talk the same language and communicate effectively with each other in all departments.
How has the company’s focus on cost-cutting changed since the recession?
What happened during the recession is we worked with the franchise community, we’ve gone through every line and every item that makes up a line on the profit and loss statement, to see what we could cut without changing our product ingredient standards.
COO Brian Stevens, who has been with us eight years and came from Yum!, his focus is increasing profitability at the store level. He put together teams of franchisees and corporate people for a competition to see who could come up with the best ideas. We had the first round several weeks ago. I sat there as an observer and it was exciting to hear ideas about how to achieve our goals with simple things.
We’re in the pizza category and it’s no secret that there’s a lot of discounting. We may be the only concept out there that doesn’t. We have a high-quality product, we don’t have to give it away. now we have a way to measure that, to make sure that the store-level employee doesn’t accidentally give a discount that’s not meant to be had; franchisees can improve profits 6% just by paying more attention. Some 72% of people who try our product will buy it again — that’s a very high percentage.
We do give product away. When new stores open, we go to the local businesses within a mile of the store and offer a free order of pizza at a certain time of day.
What are your biggest challenges now?
The biggest threat to us today — and I don’t see a lot, I’m not afraid of competition — is government. I was at a convention last week when the government announced the delay in Obamacare. That was good, because we’re concerned about how to manage it, how we can be the best employer and attract the best people. I don’t know what government is going to do. The more they get involved in our business, the more concerned I get. They haven’t done a lot of things well, hopefully this will be the first. They seem to want to get more involved in regulating our activities. We like things like the sensitivity to obesity, it’s on target and it helped us come up with low-fat alternatives. It’s one reason we created salads and did what we did with the subs. So, we want their advice but don’t want to be dictated to.