August is our annual issue to single out growth chains, particularly the ones that have excelled despite all the odds. This year is particularly interesting because inflation, rising energy and food costs, a new minimum wage hike and a host of other economic pressures have made doing business a contact sport. Part of our annual converage is naming a "chain of the year," which happens to be this year Buffalo Wild Wings. The financials for the chicken wing concept are off the charts, and much of that can be attributed to c.e.o. Sally Smith.
Smith, who spoke at RH's Concepts of Tomorrow Conference a couple years back, is a class act and one of only a few women ever to have run a major restaurant chain in this country. She didn't get the job because she's beautiful (which she is), she got it because she's smart and tough. When she was hired in 1994 as c.f.o. of Buffalo Wild Wings, the concept had 35 units. Two years later she was named c.e.o. Since then, she has engineered a number of brilliant moves that now have taken the company to its current level of 443 units. Smith's plan is to grow the company at an annual rate of 15 percent over the next five years, which would more than double its size. It's an ambitious plan, but I would not bet against her.
Another person I wouldn't bet against is Julia Stewart, the chair-woman and c.e.o. of IHOP, which last month agreed to buy the floundering Applebee's. Stewart will lead the combined company's management team in an effort to return Applebee's to the powerhouse it once was.
The juicy part of this story is that Stewart was president of Applebee's domestic division from 1998 to August 2001, when she "resigned." She got that job after proving at Carl's Jr., Burger King, Stuart Anderson's Black Angus and Taco Bell that she is a charismatic, strong-willed leader who gets results. But the word on the streets was that the many franchisees and the good old boys at Applebee's were uncomfortable with her no-nonsense management style. Whether that's true or not is now a moot point, because she's baaaaack! And it's a damn good thing for Applebee's, because the concept is going to need more than Food Network star Tyler Florence's Aloha Burger to revive it.
Since Stewart took over the lethargic IHOP chain in 2002, its share price has risen 75 percent. "It was a well-recognized brand name," says Oppenheimer & Co. analyst Michael Smith. "It just needed somebody to slap it around a bit."
Applebee's also needs a good waking up, and Stewart may be just the one to do it. A good portion of her turnaround strategy at IHOP was to sell off most company-owned stores to franchisees, which increased the company's cash flow and helped drive up its share price. That plan also involved remodeling stores and sprucing up the menu. She plans to do the same at Applebee's, beginning with selling off nearly all its 508 company-owned units.
Applebee's faltered because it did not change with the times. What was once special with the concept is now bland. It now has a leader who is anything but bland. Hopefully, you can say the same for yours.