Franchise Capital Of America
From 2,000 feet in the air, Rocky Mount, N.C., is a dusty stretch of asphalt and sun-baked buildings sitting amidst a patchwork of fertile green fields and stands of Southern pine. The muddy Tar River, its waters bearing legendary quantities of shad and striped bass, meanders across the countryside. Tobacco, soybeans, rural roads, one expects. A few country stores and a bank.
One does not expect Fast Food, U.S.A.
And yet, Rocky Mount, a quiet backwater of some 40,000 souls, is in all probability the fast-food franchise capital of the United States. It is the home of Hardee's Food Systems Inc., the fourth-largest hamburger concept franchisor in the country after McDonald's, Burger King, and Wendy's. It is also the home of no fewer than five growth-oriented franchise companies, enterprises that operate not one or two but dozens or hundreds of the giants' outlets (see sidebar, page 108). And then, of course, there are the outlets themselves: Howard Johnson's, Pizza Huts, and Taco Bells, in addition to the ubiquitous hamburger heavens. "There's no doubt about it," drawls a local businessman. Fast food is the largest generator of wealth in Nash County."
Hardee's, with 2,038 restaurants in 37 states and nine foreign countries is the biggest company around, and the progenitor of many of the others. But if there is one company in Rocky Mount that is regarded as a model, an ideal toward which all would do well to aspire, that company is Boddie-Noell Enterprises Inc. (BNEI). "They've been dedicated to business in a unique way since Day One," observes Spruill Bunn, the president of Hardee's, and other citizens voice similar sentiments. The consensus among local business folk, in fact, is that if Tom Peters and Bob Waterman had come to Rocky Mount, they would no longer be searching for excellence.
In 22 years, the Boddie brothers have transformed a single Hardee's restaurant into a sophisticated franchise company that operates 208 Hardee's restaurants in five states, grossing more than $210 million a year. In so doing, they have mastered what Peters and Waterman describe as one of the most difficult of managerial feats: sustaining the native entrepreneurial spirit and style that sparked a company's creation, while building it into a large, complex organization.
"When you head back north," one waitress suggests, "tell them about Nick and Mayo Boddie."
Sitting at a table at Carleton House -- the only non-fast-food restaurant the Boddies own -- Nick and Mayo attack their fried chicken with unabashed enthusiasm. Today, both men are in their fifties, casual Southern gentlemen in crisp slacks and handsome V-neck sweaters who also happen to be millionaires. But they grew up during the Great Depression, and remember its lessons well. "This," says Mayo, holding up a wing that has been gnawed clean, "is the way that we were taught to eat chicken."
"Heck," says Nick, "I've got a sister who eats half the bone."
Their father, Nicholas Bunn Boddie, was a farmer -- tobacco, corn, and cotton -- in Nash County, but he lost his land in 1933. The family's plantation, a once-grand estate of 10,000 acres that had by then dwindled to 700, was sold off. "We moved into a little house that our mother's mother owned," recalls Mayo. "We had a cow and some chickens, and our mother and daddy used to go to a farmer's market to sell chickens or eggs. If it hadn't been for that, and relatives giving us food, I don't know what we'd have done."
Mayo, the president of BNEI, and Nick, its executive vice-president, eked out about a year's worth of college each, but then went to work in small family businesses: Nick in a hotel that an aunt ran, Mayo for a Texaco distributorship that his father had obtained. By 1961, they had parlayed their interests and diligence into a motel and restaurant of their own, Carleton House; three independent service stations; and two laundromats. "We've always worked hard -- my brother used to cut pulp wood in the winters, and I pumped gas and changed tires," Mayo explains, "because we were always looking for something better."
That year, a combination of old friends and a new business seemed to provide exactly what they had been looking for. Leonard Rawls, who had attended Rocky Mount Senior High School with the Boddies and had since become Mayo's accountant, was also keeping the books for a restaurant in Greenville, N.C., owned by a man named Wilbur Hardee. He and another high-school buddy, Jim Gardner, had made a deal with Hardee to franchise the latter's charcoal-broiled-hamburger concept. Together, the three built the first Hardee's restaurant in Rocky Mount, which even today is dishing out cheeseburgers and Cokes at329 N. Church St. Rawls tried to interest the Boddies in a franchise. At first, the brothers declined. "My gosh, Leonard, how in the world are you going to make money selling hamburgers for 15 cents?" Mayo remembers asking. Then they saw how well the first Hardee's did. So Nick, Mayo, and an uncle, Carleton Noell, a tobacco executive who had helped finance Carleton House, purchased four franchises for $1,000 to $1,500 each. (Today, a similar franchise might cost $10,000.) The first Boddie-Noell Hardee's opened in Fayetteville, N.C., on January 22, 1962.
The first day, it sold $167 worth of burgers, fries, and shakes. "Course we opened that afternoon," Mayo is quick to point out. The store thrived for about six months, until a McDonald's opened down the road. "We were doing $20,000 to $22,000 a month -- that was good in those days -- and then, whammo! They cut us in half." But the Boddies persisted, recovered their market, and soon added a second unit, in Kingston, N.C., and a third back in Fayetteville. "We were really hungry," says Mayo, "hungry to do something, and we figured, if somebody else could do it, then we could do it as well."
Soon a simple but successful strategy evolved: Open a restaurant, get it running properly, then borrow the money for another. "Mr. Noell, he loved borrowing money from banks," Mayo says with a laugh. Sometimes, in order to keep the growth going, they talked landowners into extending second mortgages on property.
"We never had a goal as to how many units we wanted," Mayo notes. "I'm not against goals -- I think they're great -- but they're somewhat confining."
Because the Hardee's corporation itself was so young, BNEI was obliged, as well as inclined, to do much of its "earnin' and learnin" on its own. That and the close personal ties between the two companies' founders made for a relationship with more give-and-take than most franchisor-franchisee arrangements. The two companies, in effect, grew up together, relying on each other for support and innovation. (Mayo points with pride, for example, to a biscuit breakfast program introduced by BNEI and eventually adopted by Hardee's.) And both have secured their niche in the marketplace. "We've shared in the pitfalls and in the rewards," notes Bunn, an observation with which Nick concurs.
"It's been a two-way street," he says, "and it's been good for both of us."
"Good," no doubt, is an understatement. As Boddie-Noell Enterprises grew, it seemed to become virtually a legend around Rocky Mount -- a company with a reputation for excellence that extended to its founders, its products, and the quality of its management. "They're wonderful people who've earned everything they've got," is the tribute of Jim Gardner's brother Gerry, head of one of Boddie-Noell's competitors.
In part, the Boddie brothers' success is a tribute to personal site selection, unrelenting attention to detail, and a paternal commitment to their employees -- in short, to the hands-on management style that almost invariably characterizes the best entrepreneurial companies. Even now, when every corporate function from paper-clip ordering to restaurant construction seems to have its own department at BNEI's new headquarters in Rocky Mount, the brothers insist on reviewing each prospective restaurant site themselves. "If you expect your people to do a good job, you've got to give them a good place to start," says Mayo. The company's real-estate department employs all of the standard criteria (population, traffic flow, competition) to pinpoint possibilities, but the Boddies don't sleep easy, or sign anything, until they've walked the land themselves.
Their approach may be a legacy of farming, or it may be simply an inbred expertise compounded of intuition, experience, and intelligence. But whatever it is, it works better than any formula. A consulting company once tried to sell them on computer-based site selection: The Boddies always open to new possibilities, provided the company with figures on a location. The consultants analyzed the numbers, then rejected them -- the prospective site, they said, wouldn't work. The Boddies went back to their own way of doing things, since the site in question was one on which they had already built a successful Hardee's. In 22 years, they have never had to close a single restaurant.
In the same instinctive way, the Boddies know much about the people who work for them, often considering them almost as extended family. Sitting in Carleton House, a pile of chicken bones before him, Mayo casually recounts his waitress's family history ("her husband used to work for us, but he died a few years ago. . . .), and chats with her when she stops at his table. At the same time, when a dish arrives that isn't quite right, he dispatches it back to the kitchen with precise instructions. It is at once a personal style and a personnel policy that breeds respect and a desire to please.
"With most corporations," observes Rick Sheen, one of two BNEI pilots, "you fly to a city, and management heads downtown to a convention at the Ritz, while you hole up at the airport Hilton. At Boddie-Noell, you stay at the Ritz, too." The result? "It's the difference between working for an employer and working for a friend," he explains. "If Nick or Mayo were to call me up at 3 a.m. and ask me to fly them somewhere, I'd be honored to do so." Not everyone, of course, sees the bright side of this approach to management. Mayo recalls a day not too many years ago when he was driving through a small town and made an unexpected call at a BNEI Hardee's. For a couple of hours he sat in his car, watching what was going on inside the restaurant. There was litter on the floor, he noticed. Customer lines were backing up. A manager was flirting with the help.
As the restaurant was closing, Mayo introduced himself and invited the manager back to his motel for a drink. "Well," he told his guest after a bit, "I'm afraid you're going to have to go." The astounded manager, a glass of whiskey in his hand, looked at him in disbelief.
"I explained that it was nothing personal," Mayo continues, "that I was willing to drink with him, but that I wasn't going to do business with him."
In the Boddies' minds, the point is fundamental. "You can build stores all day, but if you don't have good people to put in them . . ." Mayo leaves the obvious unspoken. BNEI now employs about 8,000 people, and operates two separate training schools, one at Nash County Technical College, and another at the Durham Technical Institute in Durham, N.C. It regards its training program as superior to Hardee's, and others apparently agree: When Guardian Corp. (see sidebar, above) was gearing up for burgers, it put its management trainees through the BNEI program, and now describes its style as "the best of BNEI and Hardee's." Remarkably, in an industry known for high turnover, BNEI has plenty of 20-year veterans, as well as a few members of management who came up through the ranks. Richard Jenkins, for example, senior vice-president of operations, began his career with BNEI as a 16-year-old sweeping up in one of the company's restaurants.
Experience behind the counter continues to be regarded as a prerequisite to an executive position in operations, and once that firsthand understanding has been cultivated, the company is loathe to let it wither. Each year, many of BNEI's 140 headquarters personnel -- accountants, engineers, vice-presidents, and so on -- put on a brown Hardee's uniform and return to the field for a week. "It's our way of reminding ourselves what's really important," says someone who has done it. "That person standing in front of the counter is our chairman of the board."
"Nick and I have always had a strong feeling for people, for treating them fair and treating them right," says Mayo. "That came from our upbringing, our parents." It is a simple philosophy, the corporate equivalent of the Golden Rule -- demanding that others produce and perform as you would like them to, and rewarding them in kind. And it has served everyone well. A generous benefits package, company outings, and free trips for star employees whet everyone's enthusiasm. Area managers, some of whom have no more than eighth-grade educations, may earn as much as $35,000 a year. And Jenkins, as well as others, are symbols of the fact that hard work and ambition can ultimately pay off with a role in management.
The brothers, although adventurous, have been conservative financially; until the late 1960s, for example, BNEI headquarters was a converted laundry room at Carleton House. And indeed, in its 22 years, the company has had only two losing months, in 1974. "Mr. Noell like to had a tizzy," Nick recalls, pausing for a moment to define the North Carolinian's word for a fit. "He never came to operating meetings, but he began to come then." Only recently, the company obtained a $40-million line of revolving credit, making it an unsecured corporate borrower; until then it borrowed only on mortgages. "We never grew beyond our organization," observes Nick.
But grow they did. BNEI is now the largest privately held franchise company in the Hardee's system. It consistently outperforms both other-franchisees and most of the parent's owned-and-operated stores: In fiscal '83, it averaged $979,000 per store in sales, as opposed to an average of $700,000 for other Hardee's operations. (Franchise Enterprises Inc., the closest local competitor, averages $875,000). It has a five-year compound annual growth rate of 22.4% in sales, 29.6% in assets, and 22.3% in net income.
Franchise companies often plateau at about 10 franchises, a size that many bright, hardworking businesspeople can manage by themselves. Growing BNEI to 208 restaurants has required a range of disciplines and a depth of expertise beyond those the Boddies alone could provide. They are the founders, the inspirers, the fatherly figures on whom employees model their approach; they are men who discovered the thrill and the opportunities of entrepreneurship long before the word swelled to mythic proportions. But they also sensed the entrepreneur's limits. "We knew how to buy locations, get buildings built, and sell hamburgers," Mayo explains, "but as we got bigger, we knew that we were going to have to buy some sophistication.
"Computers have come in in the last few years," he continues, "and we still don't know what it's all about. We're entrepreneurial -- we just go out and bust our ass." Both, however, were secure and commonsensical enough to share the management of BNEI with others.
"Nick and Mayo recognized that their child was growing into a major organization," notes Jim Waters, who was an executive with Planters National Bank & Trust Co. in Rocky Mount before becoming BNEI's executive vice-president for administration in 1976. "They didn't want to stifle the entrepreneurial spirit, but they wanted to bring certain disciplines to bear on the company." In recent years, the contributions of Waters and other managers have ranged from the mundane and the practical (job classifications new departments, financial planning) to the inspired. In the latter category are BNEI's new $3.6-million headquarters, a breathtaking building of Alabama limestone; and a management information system that is considered by many to be the most advanced in the country.
Headquarters, a 45,000-square-foot celebration of modern office design, occupied in late '82, is the product of five years of planning, and of the imagination and expertise of Dove-Knight & Associates, a Rocky Mount architectural firm. "Boddie-Noell is a unique organization," notes architect Dan Knight. "They're laid-back but hardworking, with a very open management -- an ideal corporation. We tried to capture some of those qualities in our design."
The building, set atop a small knoll at the end of a grove of pecan trees (the grove is all that remains of the plantation that once stood on the spot), straddles a diamond-shaped atrium of dark tinted glass. "We wanted the building to look as though it was firmly rooted, but at the same time moving, dynamic," explains director of public relations Ray Leister. The first floor, although located beneath ground level, looks out onto sunken patios; it houses BNEI's operations and development groups, along with a luxurious gymnasium for employees (who get a day off for every 25 miles they log on an outdoor track). The ground-level floor, one flight up, holds training and marketing group offices, a cafeteria, a test kitchen, and, at its very center, the data-processing heartbeat of the building, which Waters refers to, quite tellingly, as "The Machine." Upstairs are the accounting offices and executive suites, all of which open onto a central reception area floored in mellow heart pine.
"That openness in the executive area says a great deal about Boddie-Noell," observes Knight.
But the aesthetic appeal of the building -- with its plants, objets d'art, and walls covered with blue suede -- is only half the story. The other half is its efficiency. It recirculates atrium heat, and zone-manages heat and air conditioning automatically via a 20-year computer calendar (which knows, among other things, when daylight saving time will begin in 1994). "If I want to come in on a Saturday morning," notes Waters, "I can phone my sector number on the computer, and it will instruct the building to bring up the temperature in my office." Everything, moreover, is designed with tomorrow in mind. Waters talks with enthusiasm about Stages Two and Three, new wings to be added here and there, movable walls shifting with precision and purpose. "We've already arranged to get limestone in the same section of the same quarry for the new facade," he says.
BNEI's information management system is equally impressive. The 40-megabyte IBM mainframe, 80 terminals, and three miles of coaxial cable in "The Machine" are tied to each restaurant's own computer, and thus to each cash register in the BNEI system. "I can tell you exactly what happened in any one unit," Waters points out. "I can tell you how many customers hit, what went through the drive-in window, who did the best job of suggestive selling, how many coupons we collected, who's over payroll . . ." Waters, a short, stocky man whose energy belies his stark gray hair, taps a few keys on his computer and pulls up the daily figures for Unit 1441, located in the Tower Shopping Center in Raleigh, N.C. Number of transactions, nonfood sales, net sales, paid insurance, total cash, promotion, eat in, eat out, drive through, cash short, tax -- every action of the unit's life is chronicled in glowing green. "Shortages, missing inventories, how many BTUs or gallons of water a unit uses -- we're on top of it every day," he asserts.
So detailed is the information that Waters can tell you, in an instant, how much it costs BNEI to put ketchup on a single burger.
Roger Maloch, product-marketing manager for Management Science America Inc., which wrote BNEI's software, calls it "a very, very sophisticated system . . . requiring 100,000 lines of code."
"They're among the more informed companies we've dealt with," he adds. "They have everything under control, and know exactly what they do and don't need in terms of figures."
In June, the company began installing personal computers in its six district offices, a process it expects to complete by the end of this year. Then, Waters explains, he will be able to turn the information around to district vice-presidents overnight. "I want them to know what they were doing yesterday, today." The managers will then be in an even better position to watch over and improve the performance of the units they oversee.
"When you look at our kind of company," Waters observes philosophically, "you think, 'Well, hell, it ain't too hard to flip a hamburger, throw it on that bread, lay it on the counter, and sell it.' But then you look at the total package, and you see an amazing diversity of disciplines." The business, he explains, is simultaneously capital-intensive ($850,000 to open a unit), labor-intensive ("how do you train and retain all of those people?"), and marketing-intensive. "You spend $2 million to $3 million on an ad campaign, and you hold your breath . . . and then you discover that McDonald's is spending $300 million in ad dollars." He shakes his head with mock dismay. "Now, I don't mind getting in the ring with Ali," he adds, "and I'll do it . . . but I'm going to be carrying a two-by-four." It may be simply a matter of pride or exaggerated expectations, but Waters claims that BNEI can soon catch McDonald's in terms of unit volume.
Be that as it may, the issues of capital, labor, and marketing that Waters raises with such concern sound almost academic. Nick and Mayo Boddie have been turning their native talent and Nash County intelligence to those topics for more than two decades, and now a group of bright and dedicated professionals is fine-tuning their achievement. There seems little likelihood that the apathy that frequently accompanies success will ever shortchange them. "You can't tell me that we can't do what we did today a little bit better tomorrow," says Waters with conviction.
BNEI opened four new Hardee's in the Memphis market in June, and will probably cut ribbons on an additional five by the end of the year. Hardee's outlets alone, however, are not likely to define the company's future growth. "We want to grow with Hardee's as much as we can," avers Mayo, "but, after a while, it's going to be a case of not having enough territory." BNEI is now developing two restaurant concepts of its own -- Mama Jean's Pizza (named after Mayo's wife) and Annie Lou's Country Cooking (named after his aunt, Annie Lou Noell) -- which it hopes to franchise.
All this has meant a busy, productive, and ultimately rewarding career for Nick and Mayo. In 1979, the brothers bought back their ancestral home, Rose Hill, and have since renovated the regal 1790s mansion that was once the old plantation's crowning glory. Corn once more puts up its thin green shoots in those Southern fields, Black Angus graze about the place with quiet dignity. In a way, it seems like poetic justice of an exquisite sort, a case of lost riches found, of Southern honor finally restored. The fact that it was all accomplished through fast-food franchising makes it even more extraordinary.
Unless, of course, you happen to live in Rocky Mount, N.C.