Multi-Unit Franchisee Magazine Issue I, 2013 | Page 34

MEGA

reconnect
las and St. Louis.
This past November, he bought
42 company-owned Arby’s locations
in Seattle and Portland, Ore. As part
of the sale, he agreed to redesign 17
of the stores and will open five new
Arby’s over the next several years.
Before the purchase, Lutfi owned
one franchised Arby’s unit, but before 2001 had owned 28, which he
sold off during the past 10 years to
pursue other brands.
So in a little more than three
years, his company’s annual revenue
has nearly quadrupled from $40
million to $150 million, he’s gone
from 900 to 2,800 employees, and
he’s operating 7 brands in 7 states.
Who knows what he’ll do in another
three years!

we’ve enjoyed for so many years.”
A lot has happened for Lutfi in the
past three years. In 2010, he acquired
21 Jack in the Box units in Northern
California that are now operated
by his oldest son, 27-year-old Metri Lutfi. All units have been totally
re-imaged since the acquisition and
new signage is planned for this year.
In 2011, he acquired five Sizzler
restaurants in Northern California
and signed a development agreement to open five additional Sizzlers
after he completes remodeling four
of the five units (one was already
complete before acquisition). Before
2011 had ended, he acquired seven
Sears Hardware & Appliance stores
in Houston and St. Louis and seven
Sears Appliance Showrooms in Dal-

BOTTOM LINE
Annual revenue: $150 million
2013 goals: Increase sales by 3.2 percent.
Growth meter: Sales and traffic increases.
Vision meter: Where do you want to be in 5 years? 10 years?
We plan to be debt-free with at least $200 million in revenue and operate only
the businesses that are able to generate positive cash flow.
How is the economy affecting you, your employees, your customers? The cost of goods continues to increase with little ability to pass
it on to the consumer. The margins have shrunk and we have little room for
experimentation.
Are you experiencing economic growth or recovery in your market? It depends on the brand and region. The best thing about being diversified is the ability to have balance when one is down another is up.
What did you change or do differently in this economy that you
plan to continue doing? Manage cost with vigilance, eliminate waste, and
focus on guest satisfaction. We thought that we did all these things pretty well
before, but it is different when your margins are shrinking, and you quickly
learn to manage and ask your employees to step it up. They often do.
How do you forecast for your business in this economy? We still
forecast the same way we did before. We ask our managers to provide us
with feedback and we work together with them and the market leaders to
understand the surroundings. We build in price increases and adjust to traffic
patterns.
Is capital getting easier to access? Why/why not? We really have
never had any difficulty with access to capital. We’ve reduced risk by strategy
and have avoided bad or expensive deals. We try to own 20 percent of the real
estate where we do business and use that to leverage for capital.

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Multi-Unit Franchisee Is s ue I, 2013

Where do you find capital for expansion? Local banks for the small
stuff and GE Capital for the larger deals.
Have you used private equity, local banks, national banks, other
institutions? Why/why not? We’ve never used private equity because
we like to control the management and direction of our company. It is great for
some companies, but most likely not so good for us. We enjoy the relationships
that we’ve built over the years with the local banks and GE Capital and hope
that we have been just as good to them as they have been for us.
What are you doing to take care of your employees? Sadly, the
government has gotten into our business and has begun to create mandates
that force us to do things that our employees may or may not need. We always
work hard to ensure that our employees are happy and provide for them as we
continue to grow. We will continue to do right by them, but pray to keep the
government and regulations out of the business of business so we can do what
is right.
How are you handling rising employee costs (payroll, healthcare,
etc.)? We cannot pass it on to the consumer. It is really by cutting costs elsewhere and reducing labor hours.
How do you reward/recognize top-performing employees? We
have monthly incentives that our managers and market leaders administer. We
also promote from within and work hard on improving the conditions under
which they operate.
What kind of exit strategy do you have in place? Our family is a
family business. My nephew Nader and my children are already in the business
and have been in it for many years. We try to build for the future, not just for
the moment. I hope that the second generation will be much smarter than I
was and build this thing to 500 units, domestic as well as international.