The following June, Schwartz held a proper grand opening. It began in York, Pa., home of a Harley factory. Barr and Schwartz rode their motorcycles side by side, with 500 pumped-up Harley devotees following behind. "We rode with a police escort," Schwartz recalls. "It was a beautiful summer day and I was riding right out in front with Dave. I'll never forget it."
That first year, Schwartz's revenue hit $13 million, and he earned Harley's coveted Gold Bar & Shield award, which recognizes the top 4% of the 650 dealerships in the country for outstanding customer service and sales performance.
Of course, not everything went smoothly. The restaurant, for example, proved to be more of a loss leader than Schwartz had anticipated, dropping $200,000 in 1999. "We were so focused on our unique products"--homemade cole slaw, freshly baked apple pie--"that we didn't realize we had to keep an eye on our food costs," he says. "It became pretty obvious that something was wrong when the restaurant manager kept coming to me asking for a check to cover payroll." In part, the operation was bleeding cash because Schwartz had insisted on creating a restaurant to satisfy his own tastes, rather than one tailored to market needs. It's a common mistake among business owners, but Schwartz could have kicked himself: "I was no different from those old-school Harley dealers who don't understand customer service."
He realized he needed to rethink his strategy. Tired and hungry customers, he reckoned, would be content with a simpler menu--good, basic food that was still several cuts above turnpike fare. "We could either continue to labor over all this high-quality food," he says, "or we could get lean and mean and still give customers what they wanted." So he scaled back, featuring foods that required little preparation. Both the chef, who was a master baker, and the restaurant manager left, and Schwartz brought in an accountant and a no-nonsense cook. Two years later, the restaurant turned a small profit.
But the restaurant was just part of what was troubling Schwartz. "The first two years were spent screaming about the business," he recalls. "We really didn't know how to sell motorcycles; they had been selling themselves. What we failed to realize was that it wasn't about getting the customers in the door, it was about how we treated them once they were here."
In the process of reinventing his business, he had overlooked a critically important element of growth--one that countless entrepreneurs are guilty of neglecting. Revenue had increased to $17 million in 2000, and margins were healthy (close to 8%), but his organization was still in its infancy. In the frenzy to staff up, he had hired haphazardly; there was no selling system on the retail floor; and his own vision of how big he wanted the company to be did not seem to resonate with some of his most trusted managers. Schwartz noticed that when he compared August to December revenue for 1999 and 2000, the figures were nearly identical. He wasn't happy about this, but his efforts to convince his staff that Mike's Famous could be a $20 million to $25 million business were thwarted by employees who seemed perfectly comfortable with the status quo.
It was January of 2001, and Schwartz had just taken courses in profitability and change management at a Harley-Davidson University dealer operations training seminar in Fort Lauderdale, Fla. Schwartz came home with some ideas that he was eager to implement. "After those two courses, I knew I had to develop an organization that was change oriented," he says. "But if I was going to ask my people to change, then I had to change first."
Schwartz's business was suffering from a classic case of prolonged adolescence. It's a phase that many growing businesses experience, and one that a company can remain stuck in indefinitely unless its owner helps it to grow up. And that almost always involves professionalizing the company in a way that will grate on some of its most veteran and loyal employees. Schwartz was beginning to realize that his company was outgrowing some of its people. "It's difficult to try to evaluate longtime employees," Schwartz says. "Your heart tells you to do one thing, but your best judgment tells you what you have to do. I knew I had to rip the business apart in order to build it back up again."
So shortly after he returned from the training seminar in Fort Lauderdale, Schwartz, in his words, "parted ways" with his sales manager, his general manager, and his personnel manager. And he placed ads on Monster.com. Within a month, he had signed on Mark Hollinger as CFO and Kelly Haines as HR manager. Neither had motorcycle dealership experience; Hollinger had been the No. 2 man at a staffing company, and Haines had worked at a long-term-care facility. He also signed on Otis Hackett, the sales consultant who specializes in motorcycle dealerships.
"I've never seen so much traffic"
That year, 2001, was turbulent and chaotic. "The biggest problem was knowing where to start," says Hollinger. "Mike had built a $17 million company, but there were cracks in the foundation." Haines beefed up the company's employee handbook, which laid out everything from a new, more generous benefits plan (predictably popular) to a formal dress code (not so popular). "We had a lot of turnover that first year," says Haines. "We were trying to create structure and accountability." But it was sometimes tough, she admits, "for a 24-year-old girl who didn't know anything about bikes to correct a technician about not wearing the right shirt."
