Mike Shumsky’s timing wasn’t the greatest when he joined CiCi’s Pizza as CEO in September 2009. It was right about that time the recession began to pummel the Coppell, Texas-based restaurant chain’s sales.
“We had started to see the effects of the softening economy in different segments of the restaurant industry six to 12 months before that,” says Shumsky, who before joining CiCi’s parent company, CiCi Enterprises LP, held similar executive positions with La Madeleine restaurant group, Sonic restaurants and Johnny Rockets.
“In late 2008 and early 2009, we started to see sales slow down at some of the higher-ticket restaurant companies,” he says. “We thought we’d be a little bit more immune to it at CiCi’s, though, because we’re at a lower price point. But toward the end of ’09, we started to feel the softening of the economy in our own business. That’s when it really started to reach us.”
The recession insinuated itself on CiCi’s and its segment of the restaurant market with a sort of slow-motion, delayed-reaction effect.
“In late 2008, when things started slowing down throughout the economy, all of us in the restaurant industry could sense that, yes, things were starting to change, but we went through an initial period of disbelief,” Shumsky says. “Then there was a period of unfamiliarity; that’s what I’d call the next cycle we went through. Then all of a sudden you started to really see it firsthand and believe it. So you go through these levels of consciousness of where the economy is headed and how it will affect you. That’s what I think a lot of people were trying to figure out.”
Sales began to slow appreciably in late 2009, and that’s when it became clear that CiCi’s and its competitors in the lower-price segment of the restaurant market would not remain immune to the recession’s effects.
“We started to see it in the softening of our top line — our sales numbers, our year-over-year growth numbers,” Shumsky says. “And because we basically have a daily sales cycle in the restaurant business, it started to become evident to us pretty quickly that things were starting to slow on the sales side.”
Drill down, do triage
Once the reality of the economic downturn started to settle in, the CiCi’s leadership team took steps to ensure that the data it was receiving from its nearly 600 restaurants in 36 states was timely and accurate. Then it made moves to rein in the company’s growth plans and spending in several areas.
“First, we made sure we had good information and that the results we were getting were reflective of the actual things that were happening in the marketplace,” Shumsky says. “We shored up our communication systems, our internal reporting systems, our financial reporting systems. We converted to more of a daily focus on our business. We started tracking sales daily instead of weekly. We started to drill down deeper into our business.
“The other thing we did was put in conservative stops around the growth plans we had, to make sure we had a good handle on it and that we were growing at a pace that would reflect the new marketplace. We slowed down our people hiring and slowed down some of our growth initiatives.”
Overall, the battening down of the hatches amounted to roughly halving the company’s projected growth rate, and CiCi’s leadership team analyzed its markets to concentrate the slowdown in parts of the country that it deemed riskier in terms of expansion.
“The company had been growing at a rate of roughly 50 stores a year, and we slowed that down to 25 — and that was over time, it wasn’t overnight,” Shumsky says. “In our business, we have a pipeline of real estate and a pipeline of franchisees that would have started a couple years earlier. It takes a number of years to get a franchise approved and to get a piece of real estate approved. So we went back and re-evaluated all of those transactions, and looked at the ones that were high-risk pieces of real estate with the economy changing.
“Those markets that were getting worse — which for us were the Southeast, the Arizona market, the Vegas market, and some markets on the East Coast and in Florida — we looked at those, and where we had development and growth planned in what we considered to be markets that were going to be hit the worst, we went back and re-evaluated them, not only in terms of the franchisees in those market, but also the growth expectations.”
In the company’s core markets where it already had significant penetration and larger, stronger bases of franchisees, it didn’t pull back as much.
“It was kind of a triaging effect,” Shumsky says. “We wanted to make sure we were isolating the more difficult, higher-risk areas of our growth, and then reinvest in those areas that were fundamentally stronger.”
The company used a site analysis tool to determine which geographic areas to invest in and which ones to pull back from.
“We ran the demographic and statistical information through that model to define our top 70 markets in the country, and then broke that down into smaller groups of restaurants,” Shumsky says. “We made sure we were honed in on the quantitative side of our business, both in terms of the financials and in terms of our growth modeling plans. We ran it forwards and backwards, and out of that we identified what markets were at risk and what markets were less risky, and then we worked our way forward from there.”
Listen and support
Next, the CiCi’s leadership team “circled the wagons,” as Shumsky labels the process they went through. They went out into the field and talked to as many of the company’s roughly 570 franchisees as they could — Shumsky estimates they were able to talk to about 85 percent of the franchisees in all — to find out what they needed help with in order to improve their restaurants, in terms of both diner experience and profitability. They did this in the form of a “listening tour” — a series of regional meetings in which the company’s franchisees were invited to talk about what they needed from their franchisor company to run their restaurants more effectively.
At these meetings Shumsky and his team learned there were several aspects of the business that the company needed to improve in order to help its franchisees improve their customer service and their bottom lines. These fell roughly into three areas: marketing support, training and service call response time.
“There were a number of things franchisees told us were important to them in terms of how we can support them better from a franchise support and service perspective,” Shumsky says. “From answering a phone quicker to responding quicker to dealing with their business issues quicker, whether it be R&D or manufacturing issues or product issues.”
A recurring theme the company’s leaders heard was that CiCi’s franchisee training program needed to be streamlined.
“We came back with a message that we needed to revitalize and simplify our training program,” Shumsky says. “This is a restaurant business, and if you have an operations manual that is two inches thick, that’s too complicated for franchisees. We received an awful lot of feedback that we needed to revise our training program, which we have now done. We’ve made it much simpler, much more concise, and we’ve gotten rid of some of the fluff that was in it.”
CiCi’s also reorganized its operations group to make it more responsive and supportive toward franchisees.
“For our district managers, which typically are responsible for supporting franchisees — each one is responsible for 25 to 30 stores — we changed their title to brand excellence managers, and we revised their job description to be more business consultants than managers,” Shumsky says. “We wanted them to be more than auditors auditing franchisees’ operations. We started directing them to provide more advice, more counsel, to transfer more business knowledge to franchisees and their operators. So it wasn’t just their job title that we changed. It represents a significant change in the type of people and the skill sets we now require in those positions.”
Another result of the listening tour is that CiCi’s is providing more detailed and tailored marketing support to franchisees.
“We changed the marketing function, because that was one of the key findings of the listening tour,” Shumsky says. “We’ve added a whole field marketing structure that didn’t exist before. So we now have regional marketing managers that work toward helping franchisees on the local issues they have. These regional marketing managers are not involved in national media at all. We still do national media, of course, but all of the local activities that can allow the local restaurant manager to get out in his or her community to help drive the business on a more localized level, we’ve added a lot of marketing resources in that area.”
CiCi’s Pizza had its annual company convention earlier this year. Attendees at the convention included restaurant franchisees, vendors and corporate staff. The event’s themes were “brand renewal” and “the start of something big.”
“We’re starting to feel like we’re turning the corner,” Shumsky says. “First of all, the economy seems to have bottomed out and we’re starting to see some life there. It’s not exactly vibrant, but you get a sense that there are things starting to happen. And secondly, all the things that we’ve done to invest in our business — technology, training, marketing, changing our organization around — they’re starting to have an impact. So we’re optimistic.”
The company has instituted a handful of improvement initiatives for 2012. The keys initiatives revolve around improving restaurant profitability and growing the company in a cautious fashion geared toward the realities of economic projections for the restaurant business over the next few years.
“We’ve put in a target of saving $70,000 a restaurant for our franchisees this year,” Shumsky says. “In other words, we plan to improve profitability by $70,000 per restaurant. And $70,000 a store is a lot of money. We have a number of test projects in place, and from those tests, it’s looking like we can save at least half of that amount very quickly.”
Key components of the company’s restaurant profitability system include a new labor scheduling system, a new food-cost model, a new point-of-sale register system, reformulation of some food products, centralizing the placement of condiments in stores, changing pizza box designs to use less cardboard, and changing the design and layout of the restaurant buffet to reduce the amount of food wasted by diners.
Lastly, CiCi’s has modified its growth plan to fit economic expectations moving forward.
“We’ve come out of this planning process with a new look at our business, and we’ve labeled it sustainable growth,” Shumsky says. “It used to be ‘Grow at all costs’ in the restaurant industry. You know: ‘Let’s just grow; let’s grow 100 stores, 200 stores.’ You heard all of these industry experts out there talking about the growth they were going to achieve, and none of them delivered.
“So our deal now is sustainable growth. Let’s build a fundamentally conservative, realistic growth model that can grow at a rate of 25 or 30 stores a year over the next eight to 10 years, and do an awesome job with it, making sure we have good site selection, good franchisee selection. We call it our QQ strategy — quality franchisees and quality sites. So that’s what we’re going to do.”
HOW TO REACH: CiCi Enterprises LP, (972) 745-4200, www.cicispizza.com
THE SHUMSKY FILE
NAME: Mike Shumsky
COMPANY: CiCi Enterprises LP
Born: Traverse City, Mich.
Education: Bachelor’s degree in accounting, California State University-Fullerton; MBA, Pepperdine University
What’s the most important thing you learned in college that you use today in your work?
Financial discipline — I learned that in college. And analyticals — the analytical skills have helped me a lot in my business life.
What was your first job?
I worked at Knott’s Berry Farm in Southern California as a candy maker’s apprentice. I worked at Knott’s for 10 years, through high school and my college undergraduate years, and when I got out of school, they hired me in their accounting department.
What important business lesson did you learn from that job?
Persistence. That’s a huge one for me. I’ve gone through lots of turnaround situations, and sometimes you just have to hang in there and stick with it.
Do you have any overriding business philosophy that you use to guide you?
Yeah, I do: ‘Good, better best, never let it rest, until the good are better and the better are best.’ That’ll be on my tombstone. Everyone who knows me knows that about me. There’s always an opportunity to get better at what you do.
What traits do you think are most important for a CEO to have in order to be a successful leader?
Honesty and integrity. Character. People see what kind of person you are through the things you do.
What’s the best advice anyone ever gave you?
‘It’s just tacos.’ I’m one of those driven kind of guys, never happy, never satisfied. One day, a manager I was working with at Taco Bell said to me, ‘Mike, it’s just tacos.’ In other words, don’t take everything so seriously. There’s always a way to figure out the problems you’re dealing with. Be patient, think things through, don’t overworry, respect your own judgment, respect the people around you and lighten up a little bit.