Jim Grote: Casting dough upon the water

Dec. 27, 2004 | by Steve Coomes

Jim Grote is contented, wealthy, healthy — and back at the helm of the company he founded: 182-unit Donatos Pizzeria. After selling the chain to McDonald's Corp. in 1999, he bought it back last December.

"It was a win both ways," said Grote. "McDonald's was a great company. The whole thing was a great experience."

And a learning experience as well: a 43-month-long course in operations done the Golden Arches way, the scientific, calculated way.

Donatos' pre-McDonald's product trials were simple: Get customers' opinions on new dishes and if they garner enough thumbs up, put them on the menu.

McDonald's did much the same, said Grote, but to the nth degree. Using focus groups involving as many as 150 people, McDonald's questioned participants about every facet of Donatos' products and restaurants. Once collected and distilled, their answers set the direction for Donatos.

"Those focus groups determined what you were going to sell, what the product was going to be like, what your store would be like. It was helpful," but to a limited extent, Grote said. "It's a really good tool, but there's a danger of letting that drive your decisions beyond your instincts and what you know about the business. It's got to be part of the equation, not the answer to it."

In fairness, Grote said, that process is necessary for a large company like McDonald's, whose decision makers are charged with refining and streamlining every process. "There's a tremendous amount of skilled talent involved with that. It's an amazing thing to see."

Trials and triumphs

For years Grote dreamed of selling his company to a larger one that could grow it exponentially. McDonald's then-CEO Jack Greenberg tried to grant Grote's wish, but never could.

McDonald's had every intention of spreading the brand far and wide, Grote said, and for the first year of the partnership, it was all systems grow. But by 2001, McDonald's was having second thoughts about how to grow the pizza chain.

Perhaps most telling is Grote's admission that Donatos wasn't prepared for the growth at the speed McDonald's wanted. To add stores quickly, Donatos had to pull its best managers from its most successful stores, plus it had to teach those managers how to serve customers in its new dine-in units.

"Before the sale, we'd always been carryout and delivery. But after the focus groups, it was decided that we were going to do dine-in, too," Grote said. "We'd never had that hospitality element in our operations."

Almost immediately, the dine-in units struggled; 23 new Donatos units were opened and closed in Atlanta alone. Worse yet, older Donatos, without their experienced managers, suffered as well.

Grote credited McDonald's with recognizing the problem and stepping in to teach Donatos its training system. McDonald's kept working with Donatos, helping train Grote's team and refine its systems. That help may have arrived a little too late to reverse the losses, but Grote said those lessons are the most valuable he received while at McDonald's. They've also positioned the pizza company for future growth through franchising, which should begin in 2005.

"The way we trained people in the stores was raised to a whole new level during those four years," said Grote, recalling how Donatos trained its people prior to McDonald's ownership. "Before, the manager became a manager because he was the best pizza maker. Well, that didn't necessarily mean that manager was the best businessman for the job."

Now every Donatos' store management team is thoroughly cross-trained to set standards. Each person must master every role in the store, the goal is to prepare them to manage another store.

"This allows us to take a manager away from a store without leaving the store with untrained people," Grote said. "We've found that there's a $5,000-a-week variance between a store run by a really good manager and one run by a rookie manager. That shows how important it is to find the right manager."

Welcomed responsibility

Owning Donatos again is a bit of a mixed blessing, Grote said. While he enjoys calling the shots, he's also had to reassume some tasks McDonald's handled, such as choosing an insurance carrier and setting up 401k. The responsibilities are heavy again, he said, but they're not weighing him down as they did before the sale.

When people ask him, " 'Why would you ever go back and put all this responsibility back on you?' And I have to say, 'Well, it's like somebody else had my kid for a while.' So I guess I welcome that responsibility."

The leadership pressure is different now, Grote said, and mostly because his McDonald's experience made him a wiser man and a smarter operator. Not only did it help him see the pizza business in a new light, it uncovered the business potential of his daughter, Jane Grote-Abel.

"(McDonald's Donatos president Bill Rose) saw things in her that her dad might not have," Grote said. "He saw her afresh and she really flourished during that time. And now she's the chief operating officer."

Does that ensure her ascent to the Donatos throne when her father retires? Grote smiles and nods, but said he's not leaving anytime soon.

"I can't believe how getting the company back has energized me," he said. "Part of that energy is coming from Jane and the young team I've got around me, and part of it is just being challenged in a new way. As far as my time here goes, though, I'll be doing something with it as long as there's Donatos."

Topics: Case Studies , Independent Operation

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