- WHITE PAPERS
Most high schoolers only dream of a life as good as the one Dave Brandon was living in 1968.
Bo Schembechler, the revered head coach at the University of Michigan, wanted the farm boy living near Ann Arbor to play quarterback for the Wolverines, and offered Brandon a full scholarship.
But about as quickly as his dream came true, it began to lose its sheen amid time on the sidelines. Built around the option play, Michigan's offense had little use for a drop-back passer like Brandon, and he was relegated to the role of back-up punter and kicker.
"Back then, Michigan only threw the ball if they were way ahead or way behind," said Brandon, now chairman and CEO of Domino's Pizza, based in Ann Arbor. "I was a bit of a square peg in a round hole."
Still, just being a Michigan player had its privileges. Brandon's teams won three Big Ten championships, and went to the 1972 Rose Bowl. And while his playing time was minimal, Brandon made all the right moves off the field. His grades were good, and he made a mentor of Schembechler. The coach, he said, taught him the value of goal setting, and demonstrated the wisdom of recruiting players for attitude before talent. Today he preaches those same messages to his staff and Domino's store operators.
While Schembechler never called on Brandon to lead Michigan down the field to victory, Brandon's name did leap to mind when Procter & Gamble recruiters asked the coach for recommendations in 1973.
"He said, 'You've got to talk to this Brandon kid,' " Brandon recalled. "That recommendation really was what got me going and involved in business."
Involved indeed. In the quarter century since, Brandon spent six years in sales and management for Procter & Gamble's food products division, and 20 years at Valassis Communications, Inc., a promotions company. After 10 years in sales and marketing positions there, he served 10 more as the company's CEO. Under his leadership, Valassis grew from a $30 million firm with 75 people, to a publicly traded $2 billion industry leader with a staff of 1,400. Three times under his leadership Valassis was ranked among the Top 100 Best Places to Work by Fortune.In 1998, Bain Capital, a Boston-based private equity firm, bought a 93 percent stake in Domino's, then a 38-year-old company with sales of $3.3 billion. In March of '99, after a national search for Monaghan's replacement, Bain hired Brandon as Domino's president.
Epiphany in a Dorm Room
Brandon tasted his first Domino's pizza in 1969. Hungry one night, he asked his roommate if he'd like to go out for a pizza. The roommate smiled wryly and told him he didn't have to go anywhere. A mere phone call, he said, would get it delivered.
"Domino's brought it right to the room, and I thought, 'Wow, life is good!' " Brandon said. "That store was one of Tom Monaghan's first."
But not nearly the last for Domino's founder. In its ninth year, Monaghan's company was just a couple dozen stores strong. By the time Brandon replaced him 30 years later, it included more than 6,200 domestic and international stores.
However, it also had an atrocious store-level employee turnover rate of 158 percent -- 60 percent higher than the restaurant industry average. To complicate matters, the company would have to adjust to the leadership of a newcomer, who was vastly different from the founder. Where Monaghan was a somewhat solitary and single-minded, risk-taking entrepreneur, Brandon was a charismatic communicator, who deliberately sought others' opinions.
"I'm more of a professional manager, very open and communicative," said Brandon. "I don't think that was something Tom was really comfortable with. He is a very conservative and formal kind of guy, and I'm far more casual. You wouldn't see him out there on his feet in front of a bunch of people talking and interacting."
Those aren't negatives, said Brandon, just different approaches. Entrepreneurs like Monaghan, he said, build empires out of nothing, and professional managers like him move them to another level.
"Tom has been incredibly supportive and positive when called upon in recognition of my leadership," said Brandon. "I think a lot of entrepreneurs who've owned something for that long would have trouble handing the baton to someone else. But that's not been the case with him."
The period immediately following Brandon's appointment was a bit mysterious for store operators. They knew Brandon lacked real-life pizza experience, and they wondered how someone without it would alter the course of the company.
Brandon put himself through the Domino's store employee training program, and then hit the road to visit hundreds of pizza stores in that first year. His mission, he said, was to open communication between him and operators, so he gave them his personal e-mail address and phone number.
"When he came, he didn't say what we were going to change, he just said that change is good," said Freddie Wehbe, a Domino's franchisee of five stores in Gainesville, Fla. "Now we understand, and I like his leadership. I really feel this is going to be a great company in a few years."
Brandon said that first year's work helped establish positive rapport with the operators, and to reinforce that, he now travels to a different market each month to hold "town meetings" with franchisees. He also works every New Year's Eve -- one of the company's busiest nights - on the make line in a Domino's shop.
"He has a reputation as a team builder extraordinaire, and as a result of his work with us, our volunteering has picked up a lot," said Susie Gross, president of The Parade Company. The Detroit firm is the business arm of the Michigan Thanksgiving Parade Foundation, for which Brandon is chairman. "He has this can-do attitude, and he's taught us how to keep raising the bar higher and higher by setting goals."
Whether Brandon's changes at Domino's are working remains to be seen, he said, but preliminary reports look promising. Store-level employee turnover is down to about 100 percent, which he's encouraged by but "not bragging about yet."
When Brandon took over Domino's in 1999, he said the company was healthy. Three years later, it's approaching fighting trim. In each of his 10 quarters there the company has posted record earnings before interest, taxes, depreciation and amortization (EBITDA). During his tenure it has grown by 900 stores, and set annual earnings records twice. In this year's third quarter, which ended September, systemwide sales increased 6.3 percent to $856.8 million, and net income rose 66.7 percent to $7.9 million. EBITDA for the period jumped 7.5 percent to a company third-quarter record $36 million.
During the same period, domestic same-store sales increased 4 percent, and international same-store sales increased 3.2 percent, marking the thirty-first consecutive quarter of international same-store sales growth.
Public Competition, Private Friendships
Such figures are positive, to be sure, but are they good enough to motivate Bain Capital to take Domino's public -- something industry observers say is inevitable? That's a question Brandon said can only be answered by Domino's board of directors.
"You have to ask what the investor sentiment is now for companies in our industry," said Brandon. "A couple of years ago ... we were a 39 year-old company with high single-digit revenue growth, and that looked pretty boring in the dot-com economy.
"Today that's changed dramatically. Companies with 42-year track records with predictable revenues and sustainable profits are far more respected and interesting today."
John Schnatter has had all those same thoughts, having taken Papa John's International, the company he founded in 1985, public in 1993. Interestingly, the 39-year-old founder, president and CEO of the company is somewhat of an amalgam of Monaghan and Brandon: entrepreneurial to the core, yet a young, progressive businessman. Like Monaghan, Schnatter grew up making pizza, but like Brandon, Schnatter now spends the majority of his time in the board room of a mature company. Those experiences have helped lay the groundwork for a friendship between the two.
"We first got together when we had some trade issues to discuss. He called me, set up a golf game, and we've been friends ever since," said Schnatter, whose 2,900-store company is in Louisville, Ky. "I really admire the way he thinks: very rationally, he doesn't personalize anything."
Schnatter acknowledged that the two will always be strong rivals, but he said their companies' positions in the marketplace should never block their interaction, especially if their discussions could serve others.
"Just because we're competitors doesn't mean we can't sit down and have a cup of coffee and talk about things that could benefit the industry," said Schnatter. "Dave is sincere about what he believes in, and I like that in him. And from what I'm seeing so far, he's done a really nice job at Domino's."