Inc.: Were you hoping to find the next Hard Rock Cafe or Planet Hollywood?
Naddaff: Planet Hollywood is a tourist attraction; I don't think you go there for good food. I wanted something with mass appeal that you can put in multiple locations. I like a concept where you can put a substantial number of units within a single geographic market, so you can cluster them and get more bang for the buck from advertising. Just like Boston Chicken. Just like Kentucky Fried. We run one ad, and we hit 27 stores.
Inc.: How much did you trust the financials people sent you?
Naddaff: We didn't trust them at all. That's why our team would dissect them under a microscope and come to our own conclusion about whether the information we'd gotten was real.
Inc.: How often did it happen that you got numbers that looked great, and then, upon closer inspection, you found you had really gotten snowed?
Naddaff: No, it wasn't that people were lying. It was just that they didn't have the information themselves.
Inc.: What, for instance, wouldn't they know?
Naddaff: Food costs. Labor costs.
Inc.: Aren't those the key things you have to know to run a restaurant?
Naddaff: I would think so. But there were many times we'd get a financial statement that just was not done right, and so we would know that wasn't good information. We couldn't base an investment decision on the information they gave us. So we passed.
Inc.: What were those people paying attention to, if not those costs?
Naddaff: They tended to be looking at how people were receiving the product, or the fact that they were getting written up in the newspaper. A start-up is the hardest thing; I don't fault them. But I couldn't afford the luxury of spending time with people and fixing their businesses.
Inc.: Was there anybody who resisted you by saying, "I'd like the $14 million, but I don't want to be public"?
Naddaff: Yeah, there were a few that, after we talked about it and they understood what it was like to be a public company, with reporting procedures and quarterly numbers, said they wouldn't want to do it.
Inc.: What scares people so much about running a public company?
Naddaff: The amount of money you might have to add, the kind of scrutiny you go under. The fact that you actually put out a prospectus that tells all your secret information. They very jealously guard what they think of as their herbs and spices.
Inc.: Is the company you are acquiring really unique?
Naddaff: I wouldn't call it unique. But I will call it one of the best.
Inc.: One of the best . . . at what?
Naddaff: Management. Very unusual in the sophistication of the management and the technology, the up-to-date MIS reporting systems, and the way it captures information about its customers.
Inc.: So was technology another aspect you looked for?
Naddaff: Absolutely. Today you can have a system that records the amount of times a customer calls and what he orders. He might order chicken 80% of the time. You'll have that information.
Inc.: And what do you do with that?
Naddaff: You send him coupons for a special on chicken.
Inc.: How do you capture that information?
Naddaff: You put out a comment card that says, "Tell us about your experience here." Let's say you get 1,000 cards in a month and you plot those cards on a map. And you find that 70% of your customers are coming from within the first mile of your unit. Maybe 3% are coming from six miles away. So it tells you where you should be advertising.
Inc.: So you liked that the management knew enough to get that information?
Naddaff: More than that, they understand it. It's nice to have that information, but you have to know how to use it.
Inc.: Did you look at all at management below the executive level?
Naddaff: Yes. I find that more and more people seem to be sharing the wealth with employees. I think it is absolutely essential. You have such turnover in the food business.
Inc.: What made you think you could find another Boston Chicken so fast?
Naddaff: I'm not going to sit here and tell you that I have another Boston Chicken. That may never happen again in my lifetime. I'm human, but I don't think anyone will try harder than I will. I believe in myself.
Inc.: As you travel does it bother you to see a million me-too Boston Chicken places?
Naddaff: And so it goes. This is America, land of spin-offs. Look, wherever I go, people call me the chicken man. Why couldn't I be the gene-splicing guy? Or the high-tech guy? No. I have to be the chicken man. I don't look like a chicken, either. I'm a handsome guy. n
