Cary and Jacquelyn Albert purchased their first Schlotzsky's Deli franchise in 1995 with a $65,000 personal investment and a government loan. They entered the business carefully, waiting four years to open their second and third stores. By 2005 the Alberts owned six locations in the Dallas area, but amid turmoil within Schlotzsky's upper managemen, they started to sell. By the time Focus Brands--an arm of Atlanta-based private equity firm, Roark Capital Group--took over the company in 2006 they had sold or closed all but one franchise.
That single remaining store had strong cash flow; plus the Alberts owned the real estate it sat on. It proved to be the blueprint on which they modeled the next phase of their business, Albert Enterprises, which landed at No. 1,372 on Inc.'s list of the fastest growing companies in America. It grew to 845 employees and annual revenue of $21 million in 2015, up 280 percent from $5.5 million in 2012 when it employed 125. (With the inclusion of their Dairy Queen operations, the couple generated $25 million in 2015 revenue.)
"The beautiful thing about franchising is that it's repetitive," says Cary, who owns 32 Schlotzsky's Deli locations and four Dairy Queen restaurants. "Once you have a formula that works, it'll work anywhere."
Cary, who turned 50 in October, adds that after more than 20 years in the franchise business, he and his wife have created a successful template. Here are four pieces of advice from the founders of Albert Enterprises:
1. Use the resources available to you.
The Alberts' first restaurant taught them the business of running a sandwich shop--and it also made them realize they should be taking advantage of government funding programs. With a U.S. Small Business Administration 504 loan program--which provides financing to purchase real estate and equipment--the Alberts were able to invest, not just in new stores, but in the dirt they stand on.
By 2012, the company was pulling in too much revenue to qualify for 504 loans. The next step was the SBA's alternative energy program, so the Alberts slapped some solar panels on their next four Schlotzsky's drive-thus to qualify for low-interest loans. It was a $50,000 investment that shaves 10 to 15 percent off their electric bills, and allowed them to reduce down payments from 20 percent to 10 percent.
2. Be your own landlord.
When they first started out, the Alberts learned that if they rented a building for, say, $10,000 per month, they still had to take out a short-term loan to buy equipment, paying roughly $9,000 more per month. But if they purchased the land themselves, built a building and bought equipment all at once, they could take out a single loan, consolidating and lowering their monthly payments. Albert says investing in real estate saves the company $100,000 a year for each location--that's over $3 million for the whole franchise.
3. Expand, for efficiency's sake.
Next, the Alberts learned that for some of their locations, revenue from a single Schlotzsky's was not sufficient to justify monthly payments. Enter franchise number two: Dairy Queen--and the building of multi-unit retail strips. With a Schlotzsky's Deli on one end, a Dairy Queen capping the other, and a tenant or two in between, the buildings pull in more revenue to cover the costs of land and equipment.
4. Treasure your best employees.
Once you have locations up and running, Albert says success is all about retaining good employees. It takes six months to a year to get an employee trained to good proficiency level, he says. But once they're experienced they can do the work of two new employees. Turnover creates inefficiencies that cost companies major dollars every year, so it's important to pay employees for the efficiencies they create by staying with the company.
He claims labor costs as a percentage of his business are some of the lowest in the Schlotzsky's system, but that he pays some of the highest hourly rates. Why? "Because we retain great people and reward them with higher pay. You can't put a price tag on this."
And when it comes to the company's management, the Alberts plan to keep it in the family. Their three college- and high school-aged sons are studying finance, real estate and management, planning to join the family business. "We laid the groundwork," Albert says. "And it's going to be up to them to keep it moving along."