ARJUN:
Michael, you have had an amazing career full of high impact and you have inspired people. Building multiple global franchise brands, consulting, serving on boards, investing…it’s a complete portfolio. Looking back, what's your secret to building brands?
MICHAEL:
I'm not sure there is a secret. The answer is really just identifying something that you believe has potential, and grit; working hard and building a solid foundation, being patient and surrounding yourself with people smarter than you are, as well as making the investments necessary to build a strong foundation. I'll use that phrase quite a bit. If there's a secret, it's that you can't build anything unless it has a good infrastructure and a solid foundation.
ARJUN:
I love that you are talking about seeing the potential, working hard, and building up a strong foundation, but there was something hidden there when you talked about surrounding yourself with people smarter than you. How do you stay that humble? With all of your accomplishments, it would be very easy to say, "Hey, I'm the person," but you always celebrate everybody else on the team. Where does that humility and respect for people come from?
MICHAEL:
I don't know if that's humility. It's a fact. I'll hire someone who is in charge of real estate and they know a heck of a lot more about real estate than I do, or construction, or marketing, or supply chain; any of the things that I, as a specialist, can't do. My specialty is being able to have the vision. Everybody has a good idea. It comes down to being able to execute that idea. If I've got a secret, it is that I'm able to communicate the vision. I communicate the idea to people who come in as generalists in the first place, in a very small startup, and then they slowly graduate into their specialties or we bring in additional specialists. When I say that they're smarter than I am, they're smarter at their individual pieces than I am. They aren't better at being able to see the vision and how all those puzzle pieces fit together. That's the skill that I bring to the team.
ARJUN:
That is brilliant. To me, it's like having thread and all these amazing beads. You're getting the right beads to create this amazing structure. As you've looked at a lot of brands inside out, and not just brands you've worked on, what are some reasons brands fail to win big, and are unable to sustain growth and success over time?
MICHAEL:
I think it really comes down to principles. The founders, or the CEOs, or the stakeholders may put their profits above the needs of the organization, or the needs of the franchisees, or the needs of the other stakeholders. To build a strong foundation, one needs to sacrifice, even compensation for a number of years. Typically, we say it takes a thousand days before you can start expecting to be profitable and to be able to go on to the next stage. Oftentimes founders or entrepreneurs want that fast tip. Their goal is to make money, or to sell the company. My style is really to be a builder; to build a solid foundation and then be able to go ahead and grow it as large as that foundation will support. If I want to build something really big, I need to build a really big foundation. That takes time and resources, not necessarily money. It takes focus on doing what's right for the organization for the long-term. That may be five years, or that may be 10 years. I look at Jeff Bezos. He lost money for an awfully long time, and he's got the biggest company around. Amazon went many years without being profitable, but they did a very nice job of building a very solid foundation upon which they're building now.
ARJUN:
I think anyone that is exploring becoming a franchisee should hear that song you are talking about; the lyrics being, “Wait 1,000 days to be profitable.” It’s about first putting the structure in place to make sure that they win. Too many times in the world of franchisee and franchisor, there's a conflict because both tried to twist each other's arms. I really think that recipe for long-term success and comparing yourself to Amazon is really fascinating.
Let's go back to 2013. You already had a very successful career, but then you founded Teriyaki Madness. You literally, in a professional sense, fell in love and the search stopped there. You committed and you jumped in with all your heart, all your passion. What made you commit 100% to the brand? What did you see that others didn't?
MICHAEL:
Commitment is a strong word there. I call it burning the boats. Typically, when a successful Navy would invade, they'd burn their boats so there was no retreat. It was success or else. That's the sentiment I think strong entrepreneurs have. They're all in. Fear is a great motivator for me. The fear and anxiety of building a company, while questioning whether it will work or not, drives me, especially in the early days of an organization. As sick as that may sound, that is one of the things that I really like about being an entrepreneur.
I really think one needs to focus. I call it mind share. I’ve seen that in the roughly one thousand franchisees I've worked with in the past. They think about their business in the shower. They think about their business while they're brushing their teeth. They think about their business while they're at their kid's soccer games. They think about it all the time. When we say it takes commitment and hard work, that doesn't mean you're going to work 60 or 70 hours a week waiting tables or building your business. It's constantly thinking about it. It's living it. It's that mind share of, you're in it to win it. It really does pervade your thoughts at all times.
ARJUN:
I love this whole concept of burning the boat and showing your commitment. No retreat, you are in it to win, and to win together. When I left Papa John's, franchisees left me with a positive reinforcement. They said the number one thing I contributed to them was trust. That was what they cherished most about our relationship, because once there is trust, everything else is easier.
Let's talk about these current tough times that none of us anticipated. Every brand is going through very difficult times. What is the one resource, other than unlimited funding, that you feel you need the most to come out very successful, and why is that one of the most critical resources for you?
MICHAEL:
I am actually going to push back on the unlimited funding. I think having unlimited funding, or ample funds, is not necessarily a healthy thing for a startup business. I recently heard this phrase: “Successful entrepreneurs are delusional with skill.” The entrepreneurs that I’m around have an overwhelming, positive mental attitude. You can ask them, “What happens if it doesn't work?” They’ll give you this blank look like, “I never thought about that. I never think about what happens if it doesn't work.” Sure, there's fear, there's anxiety, but they just think about what they need to do to make it work. There's an answer to every problem. There's a solution somewhere. Especially in trying times.
To be a true entrepreneur, your job is to be positive almost to a delusional state, and to be able to execute in ways that other people haven't thought of. When you ask how we have thrived during COVID, the answer is a little bit of luck, a lot of foresight, and a lot of investment in the foundation and infrastructure. We invested a tremendous amount of money and resources into technology, and third-party delivery, and off-premise food. That's why we're up 18% year over year, which is just an amazing number. That is really due to knowing what the future was going to be. It’s my job to know that. We built towards it. We just didn't know that COVID was going to fast-forward us three years to get there.
ARJUN:
There is an answer and a solution to every problem and once you find it, then of course it can be made better constantly. It is really fascinating. You have worked with 1,000-plus franchisees, and restaurants are a passion. So let me ask you about those two things. What is a common misconception in the restaurant industry, and a common misconception about working with franchisees, that you would love to debunk?
MICHAEL:
The biggest myth is the failure rate in the restaurant industry. I think that industry attracts a lot of folks who are not necessarily prepared to be business owners. Everybody eats. Everybody likes a particular food. Not everybody is ready to be a business owner. But the business model works, and if you’re willing to pivot and grow and evolve, then it absolutely works.
You said something that caught my ear, that the franchisor and the franchisees are twisting each other's arms. In a really good culture, in a really good organization, with a really good community, we all work toward a common theme. Sure, there are outliers in that. There are folks who don't get it, despite how much we screen, but that's what we screen for. We screen for community and cultural match. If there's a cultural match within the community, if everybody's rowing the boat in the same direction, they can collaborate to create a really strong organization that's built for growth for years to come.
You also threw out the word trust. That's our job, 100 percent of the time. It is convincing a franchisee that we have their best interests at heart. When we explain it in terms of being a growing franchise, wanting them to be successful so they will expand and help us grow, which is our goal, we can have mutual goals, and then it starts making sense. We really want them to be profitable because we have the long-term view. That's really where trust comes in. It is making sure that there are clearly communicated mutual goals.
ARJUN:
This part of the conversation is taking me back to my days at Papa John's and when I knew John Schnatter. The technique I learned there was to not only build trust, but to live trust. John also wanted to make sure that every quarter he called every franchisee to ask if they were making money. If they were not, he would do anything to solve that, including stop collecting royalties, because that was his goal. He called himself the Chief Franchisee Making Money Officer. That was his only goal other than his passion to make pizza. I really love that you are talking about that, not only that as a concept, but how to walk the talk. It's very fascinating and thank you for taking me back to those incredible days.
Let me change the topic a little bit. If you were not in the restaurant industry or the franchise industry with your passion and vision, where would you be?
MICHAEL:
I think I would have built businesses and been an entrepreneur, no matter what I would have done. I tend to see things a little bit differently. I like point of differentiation. I like to see different ways to do things. I definitely see the big picture. I think that is my special gift or core skillset. And I love building businesses. I love helping folks achieve what they would like to achieve in any organization that I build. That's incredibly satisfying. I've been doing this for a while. I sold a few other franchisors when I discovered Teriyaki Madness. I probably could have gone fishing for the rest of my life, but I'm a builder. I get great satisfaction. It's not a focus on money. It's not a focus on creating millions. It's a focus on building, and that's really where the satisfaction lies. I don't know where, or what industry I would have been in, but I would have had to have my own business.
ARJUN:
I love that. You spoke of your talent of seeing what others don’t. I really feel that in a world where most of us are ready to find a solution and jump into action, the person who pauses and sees what others don't has an amazing advantage. Where did that skill come from? How did you build that? How do you work on it? Are there any secrets as to how you see what others don't?
MICHAEL:
I heard Mark Cuban tell a story about how entrepreneurs jump out of planes and build the parachute on the way down. I think that is just the absolute best way to visualize it. I don’t have great impulse control. Perhaps that has its negatives, but as an entrepreneur, I strongly believe being willing to move forward and take risks, or being able to take measured risks, and being able to just execute, is the key to everything. People ask me how I built the business, or how they should build the business, and I never have an issue sharing because so few people can actually execute. I'm willing to help them, but I can't execute for them. It is the same with franchisees. They're going to have to execute on the business model and do what the operations manual has outlined. Execution is a big key to everything.
That delusion is also important to have in that entrepreneurial journey. My very first business was a large corporate catering company when I was 27 years old. I asked my dad to co-sign my bank loan for $30,000, and the banker told me that he was doing me no favors by giving it to me because he thought I would fail. Every time I drive by that bank, I still think about that story. It's being able to see something and being able to jump. My father said to me, “If it's such a great idea, why isn't anybody else doing it?” That's a death question for entrepreneurs because there's always a little bit of difference in the way that you can do it, or there's a big difference in the way someone else can do it. If you let that question gnaw at you, it will just take you down.
ARJUN:
This next part of our conversation is about rapid questions and quick answers. No more than seven-word answers. The first one goes beyond restaurants. What is your advice to anyone, in any walk of life, to be a successful leader?
MICHAEL:
Communicate the vision and listen.
ARJUN:
I love that. How do you define a big win?
MICHAEL:
I don't know that I can. Success is the journey. It is enjoying the journey.
ARJUN:
You have had a great, amazing journey and, of course, more big wins are ahead. Let’s talk about words that matter to you. If you hired me as an intern what are a couple words that you would never want me to forget?
MICHAEL:
I think the best way for me to answer that is, in our culture we say, “The answer is always yes, unless it's no.” That means that we strive to find a solution. We strive to say yes. We strive to collaborate, unless we just simply can’t, and it doesn't support the mutual goals of the community. There is a solution to every problem.
ARJUN:
I love that. So, with all the wisdom you’ve accumulated, what if today’s Michael could go back in time and meet that young Michael, the kid who's just graduating from high school, getting ready to take that $30,000 loan in a few years? How would you advise him? What would you whisper into his ear about his life's journey ahead?
MICHAEL:
I don't think it would be anything. The journey is about the discovery, and the journey is about making mistakes, and the journey is about learning and becoming wiser. That would take the mystery out of it.
ARJUN:
I love that. Michael just has to discover on his own and that's the adventure. That's good advice. When I talk to somebody like you, with 30 years of experience, it is clear that success is not random. Successful people have a process. Are you comfortable talking about your workday? What's the first thing you do? What's the last thing you do? Is there a ritual, or a practice, or a process that you're comfortable sharing?
MICHAEL:
You know, I go in phases. I develop unhealthy habits like everyone. I get triggered by email. I'll look at my phone, first thing in the morning, and get that little adrenaline rush from solving a problem or seeing some issue, and then other times I'll go a long time without doing that. I work out and I live a healthier life. The last thing I do is really try and appreciate what I've got. I find myself whining about my personal or professional issues and there are billions of people who have much bigger problems than I do. There are so many who haven't been dealt as good a hand as me. I think an appreciation, not for what I've accomplished, but for my luck of the draw, and a desire to not squander that luck is probably the ritual that I try and have every day. I know that sounds like a poster hanging on someone's wall, but it really is about putting everything in context.
ARJUN:
I really appreciate you connecting to the human side; knowing that we are all human. There are days we all feel that our problem is the biggest. A few years back, there was a golfing contest on the national level, and there was a golfer who made it to the top 20 with one leg and one arm. Seeing him compete at the highest level, and seeing his frustration when he got eliminated was inspiring because I could see in his eyes that he came to win. He saw himself as a winner. It really put things into perspective. It's not about what we have. Sometimes life does give us a tougher day than others, but it is about how you go through it. I really love that you touched on that. Michael, this is a fascinating conversation. So, if you were in my shoes, what would be one thing you would ask yourself that I haven't asked?
MICHAEL:
These are the questions I ask franchisees who want to join our organization, who want to be part of Teriyaki Madness: “What drives you? What are you trying to accomplish here? Why do you want to be part of Teriyaki Madness?” If their answer talks about high profit margins, or that they believe they can achieve their goals, those are red flags. They're not necessarily getting into it for the right reasons. Are they going to take pride in what they're doing?
Why do I do things? Why have I had the career I've had? It really is about building. It's about asking people around me what they want. That is an amazingly powerful thing. When people are negotiating with me on a contract for vendors, they don’t ask, “What would you like? What do you want?” It is such a simple question. I will answer truthfully, and if I can get it to employees, or franchisees, or vendors, or to anyone, I'm going to work really hard to get that. If I can't do it, I can reset the expectations and perhaps that will work with the person I'm talking to. That's a very long answer because it's something I have to process as I'm answering that. That was out of left field, thinking about what I would ask myself. I've never been asked that.
ARJUN:
I really love that you said each one of us should answer that very straightforward question of what drives you? You need to know that. You want to be at the intersection of what you love to do and what you are good at. Life is too short to work on things that you're not passionate about.
MICHAEL:
It's really understanding, in addition to that, what motivates others. What do they want? If we focus our careers on helping other people get what they want, we're going to get what we want every time.
If people are considering building their own business, they need to be honest with themselves. There needs to be that delusion regarding what they can accomplish, but one needs to be really honest about how much hard work it is, how much commitment, and passion, and sacrifice it takes. I have talked to a lot of folks who say, “I'd like to own my own business so I can control my time.” When you open your own business, the last thing you own is your time. You'll get there, but it takes a while. That's really the return of investment on those thousand days. It's not necessarily profitability. It's taking control and pushing the business to where you want it to be. It's about grit. It's about knowing you can go further than you think you can. You can work harder than you think you can. You really have to have a desire to commit and put your whole being into something. I see that as the difference between success and not being successful. It is that piece of committing all the way. Don’t hold back because you're worried about being humiliated or failing. People sometimes get in their way.
ARJUN:
Michael, thank you for a fascinating conversation, and an important one for somebody who is starting their career, somebody who is reinventing, or somebody who is very successful taking it to the next level. There were some key nuggets in there. Thank you.