Lessons From a Blue-Collar Millionaire

It's Takeout Tuesday at Nick's Pizza & Pub, and the air is thick with the smells of hot pizza crust, peppers, onions, and cheese. Eighteen young men and women -- most of them high school age -- form an assembly line between a row of worktables and a long bank of pizza ovens. The kids laugh and shout, even as they focus intently on their tasks.

Nick Sarillo, 47, stands halfway down the assembly line, holding a giant wooden pizza board. As the company's founder and CEO, he doesn't usually work the pizza line anymore. But he is happy to lend a hand when he can, and the kitchen crew needs all the help it can get on Tuesdays, thanks to a program Sarillo launched in March 2009 in response to the recession. A sign in the lobby explains the logic behind the policy:

Kane County unemployment
6.3% vs. 11.1%
Sept. 2008 -- Sept. 2009
½ Price Monday and Takeout
Tuesday are here to stay until the
unemployment lines go away.

That is, customers pay half price for pizza in the dining room on Mondays and half price for carryout on Tuesdays. The effect has been to turn the two slowest days of the week into the two busiest. Indeed, the program proved so popular that it initially overwhelmed the kitchens. "Our promise is to have pizzas ready in 15 minutes with no mistakes," says Sarillo. "We had so many orders that the time got up to 25 minutes. Guests were getting upset. It was OK if I was here to orchestrate, but it got pretty bad if I wasn't."

So what did he do? "I built a system to replace me," Sarillo says. "I put together a checklist of things that had to be done by 4 p.m., so we could handle the volume. It took about four weeks until it could work without me. Now we're nailing it."

There are, according to the trade magazine Pizza Today, 70,000 to 75,000 pizza establishments in the United States. Nearly every town has at least one, and -- except for arguing over which makes the finest slices -- people seldom pay them much notice, let alone think of them as a potential source of business and management wisdom.

And then there's Nick's Pizza & Pub.

Its two restaurants in the northwest suburbs of Chicago have attracted visitors from far and wide who have heard about Sarillo's approach to management and the effect it has had on employees. The numbers tell the tale. In an industry in which annual employee turnover of 200 percent is considered normal, Sarillo's restaurants lose and replace just 20 percent of their staff members every year. Net operating profit in the industry averages 6.6 percent; Sarillo's runs about 14 percent and has gone as high as 18 percent. Meanwhile, the 14-year-old company does more volume on a per-unit basis (an average of $3.5 million over the past three years) than nearly all independent pizza restaurants. And customers, it seems, adore the service: On three occasions, waitresses have received tips of $1,000.

Sarillo grew up around pizza. His father, Nick Sr., owned a restaurant called Village Pizza in Carpentersville, Illinois, which he started when his son was in the eighth grade. When Sarillo opened his first restaurant, in Crystal Lake, in 1995 (the other opened in nearby Elgin in 2005), he patterned it after his father's, right down to the pizza recipe. In one key respect, however, he was determined to make it different. That difference -- and the secret of the company's success -- can be summed up in one word: culture.

Sarillo has built his company's culture by using a form of management best characterized as "trust and track." It involves educating employees about what it takes for the company to be successful, then trusting them to act accordingly. The alternative is command and control, wherein success is the boss's responsibility and employees do what the boss says. Think of the Navy SEALs versus the National Guard. Both approaches can work, but they produce very different cultures. If done right, moreover, trust and track can allow a company to be nimble, flexible, and productive enough to perform at the highest level through good economies and bad.

Sarillo is the first to admit that he is an unlikely spokesman for the benefits of a strong company culture. When he launched Nick's, he had never heard of company culture. A former construction worker, he got into the business, he says, because he had three young children and there was no restaurant in the area at which families could get together, kids could play, and parents could relax and have fun. He didn't have a management philosophy -- at least not one he could articulate. He did believe, however, that he had a choice about how the business would be run. "Everyone I knew who'd had a business told me, 'No one cares like an owner. No one works as hard as an owner,' " Sarillo says. "They said, 'Watch out. People are going to steal.' I set out to prove them wrong. I wanted a place where everyone worked hard and cared a lot; where people enjoyed coming to work, felt good afterward, and weren't motivated to steal. If I couldn't have that kind of business, I didn't want to have a business."

In the end, he built the kind of business he wanted by developing a unique management system. Not only is it strikingly effective, but it's a stark illustration of the notion that good ideas can spring from the most humble of sources. If you look closely, you can identify 10 key ingredients of Sarillo's recipe for building a company culture that delivers.

1. Feel your community's pain; share its joy

Half-Price Mondays and Takeout Tuesdays are symbols of Nick's ongoing commitment to the communities in which it operates. So was a decision in August 2008 to surprise the guests one Thursday evening by picking up the check, in recognition of the tough times many were facing. "It cost us $20,000," says Sarillo's partner, Christopher Adams, "but it created tremendous buzz."

It also reinforced the company's reputation as a community bulwark -- a reputation it has been assiduously building since Day One. The restaurants host fundraisers almost every week, with the company contributing 15 percent of the gross profit generated by the event. In addition, Nick's sponsors two or three large benefits a year, many of them for families facing high medical bills because of a health crisis. For the benefits, the company donates 100 percent of its gross profit for the day, and servers often kick in their tips. "I have never known them to turn away anyone with a legitimate charitable purpose," says Crystal Lake Mayor Aaron Shepley.