John Rothschild, MBA ’73, has been at the helm of Prime Restaurant Holdings Inc. since 1994, overseeing the rise of restaurant brands like East Side Mario’s, Casey’s and Bier Markt. Rothschild discussed his business, his keys to success and his critical failures with David Simpson, Executive Director at Ivey's Pierre L. Morrissette Institute for Entrepreneurship and Director of the Business Families Centre, at a fireside chat held by UBS Bank (Canada) this past July. Below are a few highlights of their conversation:
DS: John, why don't we start off by discussing some of your keys to success. What would you highlight?
JR: Over the years, my primary focus has been the people. It is all about the people. On one side of the counter are our customers. People eat three times a day, which gives you the opportunity to serve and impress your client at three points during the day…and sometimes even four or five, depending on the restaurant.
And on the other side: you have 65,000 employees. How do you motivate them? That employer-employee relationship is everything and I have only hired the people I trusted.
It's also always important for me to be mindful of my employees' personal lives. How many mortgages, cars and back-to-school purchases are your decisions impacting? During the downturn, one of my employees asked me if she was going to be able to pay for her child's saxophone lessons. That is business; it's about real decisions affecting real lives, so I think about the best interests of our people and our business. You know what my pay cut was during the recession? 100%! I was able to live off of savings and decided not to take an income – it just wouldn't be right.
DS: Having lived through the tough downside experience, did you decide to diversify your risk? Did you ask yourself if it was time to de-risk myself or the business, both of which is not mutually exclusive?
JR: My business is trendy. Taking money off the table is important. I did so regularly and invested it. I lived on my income.
Keeping all your eggs in one basket, the business, is risky. Diversify long term wealth preservation for your family. Take some money out of the business in a disciplined, mechanical way and by keeping a piece aside, you can take the risks in the business, but have a nest egg for the family.
However, I didn't have the time or discipline to manage my own money. I choose people I trust and they do it well. Owners have to balance personal wealth and operating company investment.
DS: How did you make the transition from doing what is best for the operating business, to selling to Fairfax?
JR: Fairfax Financial buys companies and holds them for a long time. Fairfax bought the public part out and I was invited to stay and grow the business…
You can't pick your exit or your moments when these opportunities come along. You can just say yes or no. I saw this as the opportunity to make restaurant history. We are now the third largest restaurant in Canada.
DS: What would your one piece of advice be to budding entrepreneurs in this industry?
JR: There is no room for being a "Tweener." Don't get caught in between. The future of food is to scale up and go large or be very small, high touch and tailored, specialized.
DS: John – we've spoken about your successes, and how you managed to pull through the downturn. What would be one of your failings?
Loyalty. Throughout my years there were countless times when I had someone working for me who I was close with. We had worked together for years and had a great relationship. But they weren't able to keep up with the needs of the growing business…a supplier who wasn't capable of meeting our increased demand, or an employee who couldn't keep up with the changing market. And I stayed with them…I was loyal. But it was a mistake because both sides lost out. Had I cut them loose when I should have, they would have been able to thrive somewhere else – I was doing them the disservice.
DS: What makes your company unique?
JR: When at Prime, I had a 5 person board and the majority were outsiders…You don't make great deals by yourself. Marketing is an important discipline and I asked the president of Coca Cola to be on my board to help me with it. Otherwise, I would just be talking to myself. I am a numbers guy (having started in accounting at a Big Four firm), so I plug the gaps with people with talents beyond my own. Often times, CEOs of major companies are happy to be able to give back.
Recognize what strengths you don't have and be honest. I'll admit to you that I don't cook! Don't be afraid to go into an industry where you are not the core expert – you'll be able to find people with expertise who will help you run the business.
Jacoline Loewen is Director of business development, UBS Bank (Canada). Prior to joining UBS, Jacoline served as director of Crosbie & Company Inc., specializing in finance for private capital business, owner-operators and family businesses, specifically acquisitions, restructuring, sales, successions and private equity financing. She has over 20
years' experience working with owner operators, family enterprises and in strategy. Jacoline has authored numerous works, including Money Magnet: How to Attract Investors to Your Business, used as a textbook by various business schools across Canada. She is also a regular columnist for The Globe and Mail.
You can follow Jacoline on Twitter @jacolineloewen or contact her at 416-345-7012.