A small restaurant is the quintessential family business. Mom’s at the cash register, dad’s behind the griddle, little sister is taking orders and older brother is busing tables.
As the business expands, however, the family tree can’t possibly cover everything from cooking to finances to real estate. The “need help” signs go up in the window and employees, often with resumes built on restaurant experience, are hired to fill gaps.
But many local restaurant chains, long removed from their mom-and-pop past, need so much help they’re reaching beyond their own industry. Like large restaurant companies across the country, they’re increasingly dipping outside of the food service sector for management expertise to give them an edge over their competitors.
“Historically, the restaurant business has promoted from within. Today, the pool of talent is not deep enough to support the demand. In effect, that forces them to look outside,” said Chris Von Der Ahe, a senior client partner at Los Angeles-based executive search firm Korn/Ferry International.
Private equity firms and the public markets have a hand in this supply and demand picture. As their involvement in the sector escalates, they drive restaurant companies to accumulate revenue through expansion and to shake up underperforming management teams. In this competitive environment, the call for effective executives regardless of where they come from mounts as restaurant companies vie to stake out a lucrative corner in the marketplace.
“Most importantly, what the restaurant sector looks at today are points of differentiation,” said Julia Stewart, chief executive of Glendale-based IHOP Corp., which has more than 1,200 units nationwide. “If you looked at some of the more successful companies and looked at top management, you would probably find that there have been some changes and not everyone has been there 25 years and has a restaurant background.”
At IHOP, as with other restaurant companies, recruiting for high-level spots is largely based on communication skills, leadership potential and the ability to mesh in the corporate culture, as much as specific restaurant credentials. Those assets are crucial in the restaurant business where developing healthy relationships with people, whether customers, cooks or board members, is an indicator of success.
“The key here is that it’s talent we are looking for. We can teach someone how to make orange-flavored chicken,” said Linda Brandt, chief people officer at Rosemead-based Panda Restaurant Group Inc. Panda has more than 800 units and expects to open 175 eateries this year.
In fact, Korn/Ferry has found that cultural and behavioral factors not the titles on past business cards are the principal reasons why people fail or thrive in their careers. “It really gets down to how they fit,” said Von Der Ahe. “If you recruit somebody who is not a good cultural fit, you will find that they will have issues, for example, motivating the team.”
Diverse culture
Outside help, though, isn’t appropriate for every restaurant position. Restaurant operations are usually left to those who work their way up the inside ladder, although that is slowly changing, too. Panda, for example, has been attempting to lure operations people from the healthcare and retail industries.
Chief executives are rarely plucked from the outside sector. There are exceptions: Greg Brenneman, who left Burger King Holdings Inc. in April, came from Continental Airlines Inc. and Bain & Co. Inc. to right Burger King’s ship.
Von Der Ahe said employees from other industries acclimate best in the financial, marketing, technology and human resources positions at restaurant chains. Executives recruited for those positions often come from consumer products and specialty retail companies. According to Korn/Ferry studies, about 44 percent of incoming chief financial officers at restaurant companies are from outside the industry.
For most new entrants into the restaurant sector, though, there is some adjustment time. The industry is faster paced than many others. Customer feedback in restaurants is instant, for example, while it could take weeks or months to gauge consumer reaction in other fields. The service orientation can catch someone who is accustomed to reporting solely to higher-ups off guard.
To aid the transition, restaurant companies frequently provide training when employees come from outside. Stewart said new executives often spend time in the restaurants and meet with representatives from various divisions in the company.
Thomas Conforti, chief financial officer of IHOP, is one “outsider” who made the change. Before joining the restaurant chain in 2002, he worked at Walt Disney Co. and KB Home, and had no restaurant experience. That didn’t stop him from making the jump to a restaurant company that was on the move, changing its business model and trying to boost its stock price.
“The caliber of people in the restaurant industry is high. It is such a large industry and it has a diversity of challenges. Running a four-wall restaurant is a microcosm of business everything conceivable can go on,” Conforti said. “Those are the elements of job contentment.”
