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From his office in a Dallas corporate high-rise, Roland Dickey Jr. can look down on the shack where his grandfather Travis opened a brick-pit barbecue 70 years ago. Originally a lunch counter selling brisket and beer, along with potato chips and bottled milk, Dickey’s is now a $150 million national franchise operation, with 175 employees and 168 franchise stores in 34 states. How does a family-owned business go from Texas destination to national chain? Organic growth, fanatic attention to detail, and smart financing, says Dickey Jr., the company’s third-generation president and chief executive officer. He spoke recently to Smart Answers columnist Karen E. Klein; edited excerpts of their conversation follow.
Karen E. Klein: How did your grandfather start the original Dickey’s Barbecue Pit in Dallas?
Roland Dickey Jr.: In 1932, after he’d served in World War I, he started working in his parents’ coffee shop. [Then] he took over a rickety bar whose owner was a drunk, and he started serving beef brisket, pork ribs, and sausage from the Texas Hill Country. He added milk and buttermilk to the menu and pretty soon there was always a line out the door and it became a kind of Dallas institution.
My dad and my uncle took over after my grandfather keeled over and died on Dec. 7, 1967, while he was cutting a sandwich in the middle of lunch service. My grandmother could live off the income of that one store, but my dad and his brother needed more income to support the extended family, so they each opened stores for themselves.
The chain grew during the 1970s when there was an oil boom in the north Dallas area followed by a banking and real estate boom. At the high-water mark, there were 14 corporate-owned stores. Now we have seven corporate stores in [the] Dallas-Fort Worth [area] and one in Colorado.
How do you make the decision to expand?
For us, it was always kind of by osmosis. By the 1980s, we had a lot of requests to franchise but my dad didn’t want anything to do with that. Finally, in the mid-’90s, a couple guys bought franchises and started going multi-unit around the Dallas-Fort Worth area. We never advertised, but after 10 years they really filled out the local market and we couldn’t grow anymore.
The only time we ever made a strategic decision on expansion was when we decided to grow out of Dallas in 2003. At that point, we had to make a larger investment to get national brand awareness.
The recession was tough on a lot of restaurants. How about Dickey’s?
We had a tough time in 2008 and we focused on sustainability. For six months, we saw a decrease in franchise interest and we stopped advertising. We also had 12 percent erosion in our corporate catering. I was nervous. Every day I would send our corporate employees out to our stores from 10:30 a.m. to 1:30 p.m. to greet customers, bus tables, refill iced teas, and help out however they could.
How has the downturn affected franchise sales?
There is tons of liquidity out there but there’s just not enough credit. When we first started growing outside of Texas, our franchisees could get 7(a) loans from the [Small Business Administration] and spend $500,000 to put in a whole new store.
In mid-2009 we changed to a low-cost model to take advantage of the tons of second-generation spaces out there from all the sub shops and coffeehouses that got caught opening at the wrong time. We go in and find landlords who [...] are willing to pay tenant improvement allowances to finish off those spaces. If we estimate the cost at $120,000, we ask the landlord for half. That way we put our franchisees in for $60,000 net and tell them they should get a multiple of their investment out of that store in a year.
How are you keeping startup costs down?
These second-generation spaces are already outfitted with hoods and grease traps, and they’re [Americans With Disabilities Act]-compliant. All we have to do is cosmetic finishes, paneling in the dining room, add a barbecue pit, put in computer systems and signage out front. There’s an ocean of secondhand equipment out there; I have an employee who sources all kinds of secondhand fixtures and furnishings from local auctions, EBay (EBAY), and Craigslist for our owner-operators.
What are your priorities as a franchiser?
I’ve studied the growth trajectories of the big chains very closely. There are two ways you can run a franchise outfit: You can sit back from the corporate office and let the stores figure things out on their own, or you can be proactive. We work very hard to make everything as simple as possible in the stores. Every single day, all their invoices from the day before are online at 7:30 a.m. Every single day, they know if they’re making or losing money and they can benchmark everything.
Years ago, we found that a lot of franchise owners would outsource all of their bookkeeping to their CPA. He might get it back to them a month later. If you don’t know whether you’re making or losing money, you should be in a different business. If you don’t know, I guarantee you’re losing.