Marcus and Simple Greek (formerly My Big Fat Greek Gyro)
This was another good episode from a business lessons standpoint. Basically everything that could go wrong had gone wrong by the time Marcus arrived. My only complaint as usual is that the 42 minute show limitation left a great deal on the cutting room floor.
This Greek fast food business is located 15 miles south of Pittsburgh in the small town of McMurray, PA. It’s operated by Mike and Kathleen, a married couple, who opened it ten years ago. They also have a lot of help from Kathleen’s two adult sons, Michael and Andreas. Their goal has been to develop a franchise model that can be sold nationally. At the time of filming there was one store owned by the family and four franchises.
One word: disaster. Everything was a disaster when Marcus showed up. The food was low quality and half of it was frozen. The menu was confusing with non-Greek items such as hamburgers added. There was not even a hint of branding with every location shown having a unique look that often had no hint of Greek to it. The relationship between the master franchisor and its four franchisees was non-existent. Mike and/or Kathleen simply showed up on the first of every month to collect their royalty checks. The franchisees received no guidance and felt completely abandoned.
It should be noted that they had paid an upfront franchise free of $10K as well as paying a monthly royalty of somewhere between 4 to 12%.
As mentioned the menus were a mess due to non-Greek items having been added gradually. The addition of burgers, fries, cheese sticks, and tater tots was probably driven by a need to compensate for lackluster sales by the Greek items.
No one in the family really had any idea about what is entailed in creating a franchise business. Moreover, the franchisees seemed to have no clue as to what they should expect in terms of support. What quickly happened is that all the parties simply stopped talking to one another. It was a shock to discover that the four franchisees had never met each other until Marcus pulled them all together for a sit down.
As I was watching and thinking about the people issue, I found myself wondering if any key player was going to turn out to be “all talk and no action” as we have seen in some previous episodes. It turned out that all everyone really needed was some direction from Marcus to have their enthusiasm and commitment restored.
Let’s just say the stores can be very profitable if operated properly. The family run store made a profit of $100K on $300K in sales. Unfortunately the franchisees are struggling for the most part. However, there was no pending cash crisis threatening to shut the business down when Marcus arrived.
Marcus decided that he could turn the operation around and offered $350K for 55% of the parent company (aka “master franchisor”). All of his capital was to be used to rebrand the existing locations starting with the poorest performer. Once all the existing stores were in the black there would be something to sell to prospective franchisees.
The was an interesting case because My Big Fat Greek Gyro basically had nothing proprietary around which to build a franchise system when Marcus was called in. One could argue that it had a catchy name but even that had to be dropped for trademark reasons if the company was to go national. So Marcus basically had to reinvent the entire concept from scratch. The only assets he could keep were the people including the franchisees.
The new growth strategy included:
– Reinventing the concept from a mom & pop shop to something cool, trendy, and more upscale
– Coming up with a new name (“Simple Greek’)
– Developing proof of concept by first making the existing four franchises profitable
– Improving communications between franchisor and franchisees
After all of the above were implemented franchise opportunities could be marketed nationally.
Do you remember Rumsfeld’s famous quote about known unknowns and unknown unknowns?
…there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know. – Donald Rumsfeld
This business was a perfect example of people stymied by the unknown unknowns. Not only did they not know how to operate a franchise business but they also seemed unaware of the fact that help was readily available. As a result they just tried to muddle through and lost years in the process.
Here’s one of the best insights I can share with you about small business. Most are badly managed because the owner is a technician instead of a trained manager. Sometimes the owner is an engineer expert in tool and die making. Sometimes the owner is a barber expert at cutting hair. In this case the owners were skilled at serving low quality Greek food. This is why so many small businesses either stay small or fail. The technician owner doesn’t have the business and management skills to grow the business beyond a certain level. In many cases, they are oblivious to the fact that the expertise and information are out there waiting to be tapped. In others, they know it’s there but avoid it because further growth would require them to step out of their comfort zones.
Fortunately for Mike and Kathleen, they now finally have access to the expertise and capital that can take them to a new level. Marcus is revealing the unknown unknowns to them and guiding them through the fog.
If you can’t afford consultants and Marcus is not an option, there are always books and courses the small operator can learn from. Moreover, an owner can offer to buy lunch for another owner to pick their brains. There’s also free counseling from SCORE and other programs. Mike and Kathleen should have been studying up on how to design and build a franchise business long ago instead of burying their heads in the sand.
If you’re not growing, you’re dying.
ABL (Always Be Learning)