“I was lying on the sofa, late December of 2000, and I’m telling my wife, ‘I might have lost everything already.’ And she said, ‘You’re a smart guy. You’ll figure something else out.”
That’s Rick Malir, co-founder and CEO of City Barbeque, reflecting on the opening of his second restaurant shortly after the successful launch of his first. It was a move that led to losing so much money that it almost sunk the company.
But instead, the experience began to inform a better approach to growth, one predicated on people — or, more specifically, the right people at the right time. That retooled approach helped City Barbeque, a fast-casual restaurant company focused on “smoker-to-table” barbeque, reach 26 locations and set it on its current private-equity-backed path toward 100 restaurants and a national footprint.
But first, the second restaurant.
Learning to make money
With his first restaurant doing well, the obvious next step, Malir and his partners thought at the time, was expansion. Barely on their feet in the first location, they began pulling staff out to run the second location across town.
“Our operations were undeveloped,” Malir says. “We simply didn’t have any systems in place. All we knew at that time was how to make barbecue in one location. And as soon as we went to that second one, suddenly cash flow just took a tank.”
The restaurants survived that winter, he says, by literally pulling cash out of the register to pay the gas bill when the gas company came in threatening to shut them off.
Malir and his partners jumped in to right the ship and managed to keep it afloat. The third restaurant, launched some two years later in Reynoldsburg, was still a struggle. Something was missing.
“It seems like that’s about all we knew how to do is make good barbecue,” Malir says. “We just don’t know how to make money at it. We didn’t know how to have the systems in place. We really were trying to figure this thing out over the course of a number of years.”
Letting go
When Malir started the business, he wore every hat. His management style, then, was to do everything — accounting, HR, operations, marketing, IT, training, development, etc. As the organization grew, he recognized that he couldn’t continue to do it all.
He first delegated accounting to someone with that expertise. Marketing was next, but that was a little more difficult to let go because he had a marketing background and thought he was pretty good at it. When he finally let that go and brought in a dedicated professional, that aspect of the business helped accelerate the company.
“I read recently that some of the faults of business is the founders will think they’re really good at something, like marketing, and they don’t want to let it go,” he says. “And that actually hurts them.”
While some founders find it difficult to delegate as the venture grows, that’s not the case for Malir. Those early experiences showed him the importance of having the right people to help move the business forward, something that would become essential when City Barbeque began to establish itself outside the state.
Life outside Ohio
The business grew to eight restaurants in Ohio, but Malir says things were still rough. There was a high variability in performance from one restaurant to another, although he saw incremental improvements every day.
Malir felt confident enough to launch his first out-of-state restaurant in Indianapolis and staffed it with an experienced operator. It did well, which gave Malir and his partners more confidence. That set them up for their next move, which would stretch the company geographically farther than it had yet been.
“The next state you would think of would have been, ‘Well, let’s go to Pennsylvania, or let’s go somewhere that’s closer,’” Malir says. “No, I jumped over the Appalachians and went to Cary, North Carolina.”
Malir was encouraged by a customer to explore the market, did so, and saw an opportunity. So they found a location and what he described as an excellent operations person to not just manage that restaurant but develop the team.
The company was highly successful in North Carolina, he says. And many of the bumps that tripped up the business previously had begun to smooth out. City Barbeque, it seemed, was ready for something bigger.
Leaps and bounds
Around 2015, with the company at 26 locations, Malir felt ready to take the next big step. He gathered his general managers and market leader teams and gave a speech, saying, “Folks, I really think we have something special here. I really think we’ve got some legs. We have a great brand. I’m going to be so bold as to think we can go national with this thing.”
Soon after, in 2016, he sold a majority share of his company to Freeman Spogli & Co., chosen because Malir says they were good people who had a lot of industry experience. The deal gave him a way to derisk while retaining a significant say, and a means to ramp up the company’s growth rate by adding knowledge and capital.
Growth under the guidance of the PE firm has nearly doubled since 2016, in large part because the company made key additions to positions in the C-suite and now has an experienced senior team in place. These professionals brought tremendous knowledge into the organization, having worked with operations larger than City Barbeque prior to coming on board.
“Everybody in the room, except for me, the founder, has been there done that with over a hundred restaurants,” Malir says. “So I really rely on them, and I believe that gives us position to take it to that new level because then all that just trickles throughout the organization.”
Maintaining the identity that City Barbeque established is important as it grows. But that goal isn’t achieved through rigid adherence to a set of rules. Instead, he gives each location parameters within which they can work.
“The best analogy I’ve heard is some people put them on railroad tracks, some people put them on guard rails. We want our teams on guard rails to where they can swerve a little bit,” he says.
While Malir wants to give the locations autonomy to make decisions, there are some things that require people to follow very specific rules — the recipes, for instance.
To maintain the company’s artisan approach, it brought in a full culinary director and is pushing a true pitmaster program that includes training with the company’s pit bosses to achieve that level of expertise in a relatively short timeframe.
For people development, the company has a full-time chief people officer who has a great deal of industry experience to head up training and recruiting. In addition, trainers and training teams go on the road to train new restaurants on the company’s standard and quality.
“It’s a system of people, people, people, and you just have to be obsessed with it,” Malir says.
Looking back, looking ahead
Today City Barbeque has 49 locations and has targeted more than 100 locations in the next five years. It has come a long way from that first decade, which was marked with challenges.
“It was just brutal,” Malir says. “I remember every two weeks, on Monday, I would look at our checking account — and this went on for probably 10 years — and breathe if we had cash in there to make payroll.”
But for as big as the company has gotten and as big as it plans to get, Malir is focused on much the same thing that he has been throughout its history.
“I just still worry about sales,” he says. “I just had my head down and always worried about the next deal, and not in terms of private equity or sites, but always the next issue, the next thing of, how do we stay in the forefront? How do we continue to hire great people? So when you’ve got your head down and you’re pushing it every year, after 20 years, you kind of look up and go, ‘Yeah, I guess we are getting big.’ But in my mind, I don’t feel like we’re that big.”
TAKEAWAYS
- Establish systems, processes for consistent growth.
- People make the difference.
- Inflection points offer a chance to re-evaluate.
