Sometimes college degrees are necessary in business. Sometimes they’re not.
Russ Umphenour would make a good poster child for the latter group. He used what he learned by working in fast-food restaurants — supplemented by reading hundreds of business books to compensate for his lack of formal training — to become the largest Arby’s franchisee. When he sold out seven years ago, his business had grown to 775 stores with nearly $900 million in annual revenue.
Since 2008, Umphenour has been CEO of FOCUS Brands, an Atlanta-based franchisor for a half-dozen fast-food chains — Moe’s Southwest Grill, Schlotzsky’s, Cinnabon, Carvel, Auntie Anne’s Pretzels and for the international market only, Seattle’s Best Coffee. Systemwide revenue from more than 3,700 stores around the world is estimated at $1.6 billion. The company is owned by Roark Capital Group, an Atlanta-based private equity firm.
Umphenour, 68, talks about how he built his Arby’s business, as well as the need to change his leadership style to run FOCUS Brands.
Q: Would you please describe your background?
A: I learned hard work and integrity from my parents. I grew up in Nebraska. My father was a small town preacher. We were poor. From my earliest recollection, I was always selling something door-to-door, whether is was vegetables out of our garden, Christmas corsages or as a newspaper boy.
I went to college in Springfield, Mo., but never graduated because I literally changed majors every semester. I had no clue what I wanted to do — like a lot of kids today. Then I went to Flint, Mich. They let me teach school on a provisional certificate, as long as I continued to work toward a degree.
I quickly realized that I was not making enough money as a teacher and got a part-time job at Arby’s. It was 1967 and I worked at the 19th Arby’s ever built. I worked three nights a week and one weekend day, and I fell in love with the business. I loved working with kids and I loved working with food.
Q: How did you begin to turn that love into money?
A: The franchisee in Flint gave me the opportunity to be a manager at another store in Michigan. Then I became a supervisor over three stores. And then I got the chance to work in Birmingham as a supervisor. We were able to make some quick changes there and stop the red ink.
The owner came to me and offered me a raise. But I said, “How about giving me the chance to buy stock instead?” They sold me 20 percent of the stock and let me pay for it over five years.
We were doing well, and I wanted to grow the company to 100 stores. In 1973, I traded my stock back for 10 stores in Atlanta and Birmingham. I was 29 at the time.
I also had to sign a personal guarantee for a $333,000 bank note. I didn’t have that kind of money. I think the most money I ever made in any one year was less than $20,000. I remember going home and telling my wife that if this doesn’t work out, we were going to be paying this note for the rest of our lives. Fortunately, she was very supportive.
The lesson is to take educated risks and take risks where you know you can impact the outcome. I had faith in myself. Looking back, I was just young enough and dumb enough to believe I could do anything.
Q: How did you build your business into becoming the largest franchisee for Arby’s?
A: I learned the business from the bottom up, from a food cost perspective, from a labor perspective, from a leading people perspective. I had six years of learning and I had the formula down.
I tell young people today: “Don’t underestimate the value of working for someone else.” A lot of kids get out of school and quickly want to go into business for themselves. But it’s better to learn the business first.
For me it boiled down to some very simple things. Number one is to hire the right people in the restaurants. They need to have a smile and like to talk to customers.
Number two is to clean up the stores, paint them up, fix them up. Number three is to make sure the product quality is good. Finally, begin marketing in small ways in the community.
Q: Anything else?
A: A lot of the restaurants we bought over the years were not maximizing their cost structure. The franchisee had high food costs.
We went about it scientifically. We had a theoretical food cost model of what the costs are supposed to be, allowing for waste and other things. We taught managers how to run their businesses. A food business is like a miniature manufacturing business. Everyday, you’re assembling all kinds of different food. You’ve got to be sure that you are cost accounting down to the last sesame seed.
Also, on three separate occasions we grew too fast. Once, we were days away from bankruptcy before we were able to sell a few stores and skate through. We grew too fast at a time when the economy was going the other way. We took on debt too rapidly.
Managing risk is something I learned better as I got older. I still have that internal belief that I can put a team together to fix things. But there’s another piece of that risk — you have to determine what is going on with the economy and with your competition.
Q: In your current job running FOCUS Brands, you’re no longer a franchisee. You’re running the franchisor. How has that changed your leadership approach?
A: When I was at Arby’s, I got to make all the decisions. But coming here was a different world. I knew I had to adapt my style.
My boss is a private equity company and I had not had a boss in 32 years. I also have to adapt to the fact that I have strong presidents running each brand, so how do I let them do that without getting in the way? I’m also in a role where it’s more about influencing franchisees. You can’t tell them what to do. They’re independent business people.
Our goal everyday is — how do we help our franchise partners make more money? We have to be centered on them. It’s outside this building. It’s outside of who we are as the corporate group. If you get too much focus on the ivory tower, then ultimately the company goes down hill. We’re just regular people in a different role. We don’t have stripes on our shoulders.
The most important thing is to listen. While we own the brands, at the end of the day our franchise partners are dealing with the customers. They’re going to have ideas, like for new products or how to grow the business. Leadership all starts with listening.
Each week, Sunday Business Editor Henry Unger has a candid conversation, called “5 Questions for the Boss,” with a top executive in Georgia. Some remarks are edited for length and style.