“Most carriers deny coverage for such claims even though their policies clearly say this is covered,” says Steven Schember, senior litigation partner at Schumaker Loop & Kendrick law offices in Tampa Bay.
Smart Business spoke with Schember about builders’ CGL policies, the problems facing contractors trying to file claims for the faulty work of subcontractors, and what is being done about the problem in the state of Florida.
What is happening with CGL ‘completed operations’ policies at the moment?
Right now, by law, insurance companies must pay for any claim filed by a contractor for shoddy work done by a subcontractor who has already completed the job and has left — by going out of business or not being otherwise available.
This policy takes effect if, for example, a general contractor gets a roofer to install a roof. The roofer completes the job, the contractor pays the roofer, and then shortly thereafter the roofer goes out of business. Later, the roof leaks and the contractor must pay to repair the damage and install another roof. The CGL policy should cover this expense and reimburse the contractor.
The problem is that insurance companies — which were very vocal in the press a few years ago about providing this kind of insurance — are now denying the claims that are coming in for this kind of coverage.
Right now, it is law that these claims must be paid because of a ruling in a Tampa appeals court. However, this case is on appeal in the Florida Supreme Court. We are hoping that the decision will fall in the favor of the contractors. But this whole area is in a state of flux, and some states have gone in favor of the contractors, others in favor of the insurance companies. If the Supreme Court reverses the appeals court ruling, it certainly will be a huge blow to the construction industry.
What is some of the confusion surrounding this issue?
The problem is that a lot of contractors don’t even know they have this protection in place at all. And those that do — and try to submit a claim — are getting denied. This has really be a disingenuous move by the insurance company; first agreeing to provide this coverage a few years ago and now denying claims that contractors are filing.
What is the fallout from this move by insurance companies to deny these claims?
Premiums continue to go up because, in part, contractors are paying higher premiums to cover completed operations. In addition, surety bonds, which are mandatory for government projects, are getting very expensive and more difficult to obtain because the bonds are being forced to cover items that should be covered by the CGL policies.
How can a builder be sure that a CGL policy covers what he or she wants covered?
Almost all CGL policies today specifically provide completed operations coverage. However, to insure that they are truly covered, contractors should get in writing from their CGL carriers that they will cover damage to the completed project caused by the faulty work of subcontractors, as is it set forth in the CGL policy. Many contractors not only have their CGL insurance with a particular company, but also its property, auto and other insurance.
If an insurance company balks and doesn’t want to put it in writing, renewal time is a good opportunity for contractors to gain leverage and threaten to seek out another insurance company. I’ve seen this done by contractors and it is quite effective in getting the insurance company to commit to ‘completed operations’ policy in writing.
Are there other things builders can do to cover any exposure they may have not covered by their CGL policy?
The standard CGL policy contains several exclusions — an example being damage caused by spillage or overspray or other contamination by pollutants on the job site, such as painting, spraying, airborne particles, etc. Depending on the type of work done by the contractor, the CGL policy exclusions should be reviewed and removed from the policy where appropriate. It may cost an additional premium but it will be worth it.
STEVEN SCHEMBER is senior litigation partner at Schumaker Loop & Kendrick law offices of Tampa Bay. Reach Schember at (813) 227-2247 or firstname.lastname@example.org.
Mainsail entered the corporate housing industry in 1998 when it built the 360-unit Mainsail Suites and Conference Center in Tampa as an extended-stay training facility for PricewaterhouseCoopers’ international consultants.
“I started out sold out for 10 years with one client,” Collier says.
But when IBM bought out PricewaterhouseCoopers’ consulting practice two years into the agreement, it absorbed a lease on a facility it no longer needed. Collier renegotiated to give IBM some of its money back and opened Mainsail Suites to the public.
Today, Mainsail operates lodging facilities in several major metropolitan areas and has developed a resort in the British Virgin Islands.
Smart Business spoke with Collier about how he finds the best employees to ensure a positive customer experience.
As the company grows, how do you ensure customer service remains strong and consistent across properties?
We generate customer feedback forms. We get hard-copy and e-mails back and automatically our customers get something from us, so we get lots of data. We also leave room for people to write us and tell us how their experience was. We use that as a lesson for the staff.
Another thing we do is send the staff out to see other customer service, good or bad, and let them experience it first-hand so they can fix it and make it better at our place. We’ll stop at other hotels or get on a speaker phone and go through a shop call, when 10 people are sitting around and call up a reservation agent at another hotel or another product and listen how they perform, good or bad.
We’ll say, ‘See how bad that person sounded? How they did not ask the right questions?’ Sometimes bad examples are the best examples.
How do you attract and retain the right employees to ensure good customer service?
We try to put together sort of a culture package. When people come on board, instead of handing them an orientation package of nuts and bolts, we try to give them a sense of what the culture is going to be like.
People coming from big companies, a lot of them are attracted to what we’re offering from a culture standpoint. They meet the boss right away, they get a tour of the property and they get a sense of core values rather than just focusing on, ‘This is what you’re going to get paid per hour and these are your retirement benefits.’
We get a sense pretty quickly as to whether or not they’re going to fit in. We try to go with this ‘hire slowly, fire quickly’ thought process.
How do you find new employees?
We pay a bonus to employees that bring somebody on that we end up hiring. We get word-of-mouth referrals and we do a lot of networking. Then we hire people that we run into that are great.
Somebody who is really awesome that we run into in some service situation, we bring them in for an interview and steal them from other businesses. Not just other hotels, but folks you can tell have the right kind of hospitality spirit. That’s who we want with us.
How is running a company different from simply working for one?
The biggest difference is the financial guarantees that I personally have my neck out for. Those are clearly different when you own your own company.
When you work for a company, the worst they can do is fire you. When you own the company and you feel responsible for all these people feeding their families, not only do you have that responsibility out there, but you also have a financial responsibility for the mortgage. But I wouldn’t trade it for the world. This is a much funner way to go.
How do you handle that pressure?
If you have really good people, that makes it a lot easier because you have sharp people all around you and the chances of something falling through the cracks are much less.
You try to get out and meet with some of your peers. That’s why it’s good to belong to associations. You get a chance to hear some other guys from different backgrounds talk about their issues and how they have solved some of their problems in their companies. You’ve got insurance companies, guys from engineering backgrounds, real estate, big financial guys and people who own restaurant companies.
I wouldn’t say it’s lonely at the top I don’t believe that but you’re facing different issues.
HOW TO REACH: Mainsail Management Group Inc., (813) 243-2600
“The last 24 months have been as hot of a real estate market as I’ve ever seen,” says Russ Sampson, executive vice president and director of brokerage services for Colliers Arnold in Tampa. Sampson has been in Florida for the last 20 years. “It’s absolutely overheated.”
Sampson says studies show that over 1,000 people move into Florida every day. Within the next seven years, up to 9 million people are expected to join them. To create room for everyone, zones have been redrawn to make commercial land residential. The lasting effect means fewer commercial properties, which could soon send lease rates soaring.
Smart Business spoke with Sampson about the forecast for Florida’s real estate market and what companies can do to lock in lower lease rates.
How is the real estate market currently changing?
Investors and people living in the state of Florida have interest-only adjustable rate loans. Now, interest rates are starting to inch up, and they’re getting back to the point where they are a lot higher.
People jumped in at 3 percent, and now the interest rates are at 5 or 6 percent. All of a sudden, their cheap mortgage payment has doubled.
The bottom line is that there is going to be a correction and those adjustable rate mortgages will come back and put some people in a financial bind. That’s a trend I see coming down the pike.
How does this affect businesses?
From a commercial real estate perspective, costs have gone up substantially all across the board. Land doubled in value and sometimes went even higher.
For the first time ever, developers were getting changes in zoning to make commercial land residential. Consequently, you have a growing shortage in commercial property because it has all been switched over to residential.
The cost of construction has risen 20 percent to 40 percent over the last three years. In order to build a commercial project, a developer has to plug in all the costs and expect a reasonable return. Today the rate for an office building, which would give the developer a reasonable return, is more than $30 a square foot for new construction.
The dynamic here is that you have all-time low vacancy rates in the single digits, which means there is very little space available in the existing product type. It should be fueling this incredible real estate boom, but the lease rates have yet to catch up with the rising costs of new construction. In order for new construction to occur, there will need to be significant pre-leasing activity.
We have strong demand, low vacancy rates and high construction costs. It’s an interesting time because the lease rates are going to go significantly higher. Recently, they have gone up by 20 percent in the last 12 months, and I fully expect them to go up another 10 to 20 percent in the next 12 months.
Because lease rates are going higher, existing commercial buildings are becoming substantially more valuable. When those rates rise and get up to the middle to higher $20-per-square-foot range, that’s when you’ll see new construction in office and industrial buildings.
What advice would you give a company in its current lease?
Even if you have a couple of years left on your lease, I’d encourage you to go back and renegotiate deals and extend the lease out as long as you can. Or if you need to move for whatever reason, do it now rather than later. Lock in the longest term you can at the lowest rates, because I believe lease rates are going up substantially over the next few years.
There are very few vacancies, and retailers are doing pretty darn well with all of these baby boomers moving into Florida. Sign longer-term leases and lock in the lower rates, because that’s not going to be the case three years from now.
RUSS SAMPSON is the executive vice president and director of brokerage services for Colliers Arnold. Reach him at (813) 221-2290 or email@example.com.
Today, he’s parlayed that experience into a company that helps businesses across the country flourish by catering to new families just moving in.
Plummer is the founder of Our Town Inc., which works with established local businesses to welcome new families to an area by providing them with $300 to $500 worth of coupons for free products and services.
“I don’t care how much you advertise,” Plummer says. “The most important part of a retail business is getting someone to come in and experience your service. If it’s good enough, they’re coming back.”
Plummer began franchising Our Town last year, and his 30 franchises produce $25 million in annual revenue. He plans to add 30 more franchises this year and is projecting more than 400 within the next six years.
Smart Business spoke with Plummer about how he keeps employees happy while building a prosperous business.
How do you attract and retain top-notch employees?
We believe everyone from our lowest employee who does the most menial task, to our CEO should be treated with respect. We respect our employees to such a degree, we provide benefits that truly are not normal.
We provide employees with $200 a month toward health insurance, which covers 90 percent of people’s full insurance. We pay more than scale. We allow our people to participate in our growth by many having compensation bonuses based on growth.
We have a gourmet chef, and we provide a free lunch every day and a hot meal on Fridays because we want them eating nutritious foods. We don’t want them eating fast food. It’s poor for performance and it’s poor for their health, so we provide nutritious meals and deli sandwiches.
We shut down for four days every year and take all of our employees on a cruise, where we pay 100 percent of the employees’ costs and we subsidize their partner so they only pay $150 for both of them to go on a cruise. And they’re compensated for that time; it doesn’t count against their vacation time.
Every Tuesday, a neuromuscular masseur comes in and he gives each person a 20-minute massage. It usually takes him about three weeks to work through everybody.
After one year of employment, our employees are allowed to contribute 3 percent to a 401(k), and we match it. We do as much as we can to let them know how important they are.
Every business should do that. The result is we rarely lose employees.
How do you ensure you get the best quality people when you’re adding them so quickly?
We do multiple interviews and we employ a simple profile test that takes about 20 minutes to fill out. It tells you, here is what this person is really good at and if you hire them, here is what you need to manage them with and here are ways to effectively get this person more into your system.
I’ve found it to be incredibly accurate. When we’ve hired people off that, the things it said they would need help with, they did need help with. And the way they suggested we treat them to compensate for that seemed to work.
It’s multiple interviews with people who see things differently. Usually it’s three people obviously the manager they report to, and then two others who would look at things from another perspective.
For any business, a bad hire is the worst thing you could have. It creates more work and it puts stress on the relationships; the employee is not happy and certainly the employer is not happy. And then termination is just a miserable thing for everybody.
How do you maintain a cohesive company culture?
Through making sure we don’t forget where we came from and always being accessible to everyone. Our employees know there is no one too big to do anything. Somebody spilled something on the carpet out front, and I went to clean it.
Everyone here is equal, and that’s very important. We read surveys to them from the families who send them in because they don’t know. When you’re sending out 9 million packets, you think you’re a production facility. But that’s not what they are.
So we explain to them that they’re helping these families. The best way is to keep grounded. There is no one too pious or pompous to go out on the production floor and do the things that they do.
We’re all equal, and that goes a long way to making people feel they’re part of a tight-knit group. And we are. Our employees are happy to be here.
HOW TO REACH: Our Town Inc., www.ourtownamerica.com
Those words were spoken by Gen. Dwight D. Eisenhower during World War II. They are just as true now, especially where natural disasters are concerned.
“Think of getting hit by a disaster as taking a trip,” says Mike Kiouses, vice president at Hilb Rogal & Hobbs in Tampa Bay. “A disaster recovery plan is your itinerary. If you don’t know where you’re going, how can you get there?”
Smart Business spoke to Kiouses about how businesses can prepare for disasters and what can be done after they’ve been struck.
What is a disaster?
When you mention disaster in Florida, especially after the last two years, the first thing that comes to people’s mind is hurricane. We have lost sight of fire and other occurrences.
A disaster has three elements: suddenness, unpredictability and significant destruction. Disasters are events of unexpected timing resulting in consequences that are seriously destructive.
Why is a disaster recovery plan so important?
A commonly noted statistic is that more than 60 percent of all businesses that suffer a disaster don’t recover from it. We only have to look at the aftermath of two horrible storm seasons to give the statement credence.
No matter how good a plan is, you can’t predict what will happen if a disaster strikes. And although it is a rare occurrence when everything goes as planned, the planning process accomplishes some important things.
First, it gives a business a road map to get from Point A to Point B, allowing it to navigate the many detours that pop up along the way.
Second, the process of planning makes people think, putting all ramifications of a disaster into a clearer perspective.
Finally, a company that has a plan is a better risk for insurers to underwrite and can positively effect the cost of insurance. A plan will certainly pay off in mitigating claims and uninsured costs.
What should a business plan for?
First and foremost is life safety. The most important asset a company has is its people. Look at what has happened in New Orleans; they are still looking for their people. How can you get back into business without your employees?
Secondly, customers need to be protected. How can you fulfill your obligations to your customers? We all like to think we have customer loyalty, but if you provide widgets and you can’t deliver, your customers may have no choice but to go to another supplier. And you may never get them back.
The planning process is like peeling an onion. Once you start the process, it leads you in many directions. Disaster recovery planning touches on every aspect of your business, from employees to customers, suppliers, bricks, mortar, logistics and the balance sheet.
Another question to ask yourself is if your supplier has a plan. You may not get hit by a disaster, but your supplier might. Where will you be able to get the goods and services that you need?
Where do you begin with the disaster recovery plan?
Small businesses, which usually think they don’t need a plan, will differ from large corporations that already have plans. For those that do have one, when was the last time it was reviewed or updated?
Every company will have different needs since every one has different amounts of exposure to risk. A single-location manufacturer is going to have a different risk than a multiple-location manufacturer. If you’re in the service sector, your plan is going to look different from a hotel or restaurant chain’s plan.
Many companies believe they have built-in redundancies in their operations; they believe they can make up for any losses at another facility. The president thinks that sounds like a good idea, but when it comes time to switch over, nobody knows what to do. This is an excellent example of how a good disaster recovery plan can ease that transition and save the company tens of thousands of dollars.
How does insurance fit into the plan?
Your insurance program is an integral part of your disaster recovery plan, but insurance is not designed to cover everything. Understanding how your insurance program will perform in the event of a disaster is crucial.
Two of the most important areas of your insurance are ‘business interruption’ and ‘extra expense.’ Most companies are underinsured, especially when it comes to extra expense. Some company leaders think all they need to get back in business is a phone and a computer.
The insurance process is really a matter of risk transferring, a service for which you pay a premium. Disaster recovery planning is really about identifying the risk and you ability to mitigate it or assume it. The more risk you can intelligently retain, the lower your cost of transfer, and the more attractive you are to underwriters.
MIKE KIOUSES, vice president at Hilb Rogal & Hobbs in Tampa Bay, can be reached at (813) 261-7973 or Michael.firstname.lastname@example.org.
Credit unions are becoming more popular around the country as members identify with a more personal touch from the people with whom they entrust their money.
“Since we have such a good relationship with our members, they trust us,” says Laida Garcia, executive vice president for Florida Central Credit Union. “We are the experts and they come to us for advice and they trust what we say.”
Smart Business spoke with Garcia about how people can decide whether a credit union is right for their financial needs.
What are the distinctive differences between banks and credit unions?
That is a good question because, obviously, we offer similar products such as deposit accounts and loan products. What really makes us different is our structure. Credit unions are not-for-profit financial institutions. We exist solely to service our members, not to make a profit. We don’t issue stocks and we don’t have stockholders to whom we have to pay a dividend. That’s the biggest difference.
Another difference is that our board is made up of volunteers and our membership is made up of the members and owners of the credit union. They vote for the board of directors and have a very clear voice in how the credit union is operated and what kind of service we provide for the members. It is a democratically owned cooperative.
And in some banks, obviously, when you are a very large customer, you have more influence than the smaller depositor. With credit unions, all members are created equal; whether you have $5 or $5,000, you have one voice and one vote.
What makes good credit unions stand out from the rest?
A good credit union has a philosophical mission to complete or to perform. We are there for our members; we are not profit-driven but rather service-driven, and provide the services our members really need. For example, I don’t know of any bank that offers $300 personal loans but we do, because a lot of times we’ll have a member that has a medical emergency or needs a new set of tires. Even though we lose money when we make small loans, we feel that it is our mission to provide our members that service.
What does stockholder versus member mean, and what is the benefit?
The benefit is that we don’t issue stocks, so we don’t have stockholders to whom we have to pay dividends and profits. What that means to our members is that all earnings are returned to them in the form of lower rates on loans, higher rates on deposits, lower fees and better service, which is a distinct advantage.
Banks have always tried to emulate our personal touch. When we were smaller in size, we always knew our members by name. That has changed as some credit unions have grown in asset size and in number of members. But except for issues dealing with safety and soundness we will always put member service above every other aspect of the credit union. Our members are not merely numbers in a bottom line.
How long have credit unions been around?
Credit unions were formed after Congress passed the Credit Union Act in 1934, and were in Europe long before that. They have always been more service oriented than banks. Through the years, credit unions have gotten bigger with a broader field of membership and the services have been expanded, but the philosophical mission and structure has never changed since day one.
Credit unions have traditionally used direct mail and newsletters to spread the word, but it is important to get the message to the consumer. Credit unions are not just for the select employer groups any more. In the old days, a credit union could only service the employees and families of a specific company. If you were the owner of a small- or mid-sized company and wanted to offer access to a credit union as a fringe benefit, you had to establish your own. Credit union membership eligibility is generally through a common affiliation in employment, church and so on. But many credit unions now are open to the community. We are community-based; anyone that lives or works in our community can join.
LAIDA GARCIA is the executive vice president for Florida Central Credit Union. The company has 10 branches across central Florida and approximately 42,000 members. Reach her at (813) 879-3333 or email@example.com.
Sirois knew he had to focus his attention on the company’s operating systems if he was going to present Checkers as the opportunity that he knew it was and improving the operating systems would improve the bottom line.
“While the company was struggling, it was obvious there were many positive attributes to build upon,” says Sirois, who served as vice president of franchise operations before becoming CEO. “The most important thing we’ve had to do to get it done was to develop a culture where everyone was working toward the same thing both franchisees and employees.”
Sirois and his team of executives had to get the company back on the path of great operational execution if they were going to continue to increase revenue and thus attract franchisees. With franchises comprising 604 of the company’s 804 locations (under both the Checkers and Rally’s Hamburgers brands), they are a key component to continuing growth.
So they developed a plan to improve training, communication and technology to both bolster Checkers/Rally’s revenue and its reputation.
On the go
The company’s unique double drive-thru format and 99-cent burgers were no longer enough to keep pace with the competition.
“We’ve performed very strongly, but the whole industry has gotten quicker at the drive-thru over the last several years, and as we’ve gotten quicker, we’ve gotten weaker in the accuracy department,” says Sirois. “Our customers continued to tell us that they loved our food and they loved our delivery system the double drive-thru but what they didn’t like about us was our inconsistency and their inability to rely on us to do it right more often than not. It was simply, in my mind, getting back in and addressing the basics and providing the consumer with what they relied on us for.”
The proposed solution was a Guest Obsessed training program. The GO program is driven toward achieving excellent speed while maintaining a high level of order accuracy and providing guests with the best possible experience at all of Checkers/Rally’s restaurants in 26 states and the District of Columbia.
A cornerstone of the GO program is to reinforce basic operating standards, such as service with a smile, that are absent in so many quick-service restaurants today.
“We talk a lot about making eye contact with the customer when they’re at the window, that there’s a very limited period of time where we interact with the guest, and we need to make sure we take full advantage by making eye contact, smiling, thanking people,” says Sirois.
It’s the little things that often make a difference and keep customers coming back which is why part of the training involves standing outside by the ordering speaker to hear the difference between short, curt replies and what Sirois calls “smiling through the speaker.”
The second part of the program gives employees a reason to strive for excellence. Sirois believes strongly in incentives and acknowledgment to reward good work.
Checkers/Rally’s makes use of a third-party national shopper program at every restaurant six to eight times a year. He also has internal employees doing secret shopping more often.
“The third party goes to the restaurant, and they order their food according to guidelines and have their drive-thru experience,” says Sirois. “And if that restaurant meets ... specific criteria, that shopper immediately pulls over, parks the car, goes to the restaurant and awards that crew some type of an award depending on what part of the program we’re in at that point.
“It may be ‘Guest Obsessed’ pins. It may be gift cards. It may be any number of things. It may be shirts but some type of immediate recognition that they demonstrated their Guest Obsessed abilities.”
Incentives for general managers are even better. Twice a month, Checkers/Rally’s gives away automobiles in a drawing of general managers who have placed in the top 25 percent of sales growth. And every year, the top 100 general managers and their spouses are taken on a five-night Caribbean cruise.
“We focus on our general manager level because we think that’s the critical position in our company,” says Sirois. “That’s where the rubber meets the road in our business. The general manager hires and oversees the training of the staff. They have ultimate control over costs, promotional execution, guest relations, etc. They are the company to our guests and employees.”
It’s no surprise, then, that Checkers/Rally’s has retention rates well above industry averages, and 75 percent of promotions come from within the organization. And while industry turnover rates for general managers averages about 33 percent, turnover rates for managers who have gone through the Checkers/Rally’s GO program is 13 percent.
“We could save a lot of money this year if we cut out our incentive programs cruises and cars and things like that but we think that’s money we get a great return on,” says Sirois.
The incentives and praise also play into improving Checkers/Rally’s corporate culture which, in turn, encourages people to work harder and drive sales.
“We’re all the time acknowledging excellence and acknowledging achievement, and that’s important because all around them, they’re being viewed as something less than excellent because they’re burger flippers,” says Sirois. “We’ve changed how a burger flipper is viewed in our culture.”
Tools for improvement
With more than 5,000 employees nationwide, Sirois knows that good communication and technology are critical to improving the company’s operational execution.
The company implemented a Web-based system to streamline and foster the exchange of information among corporate, franchisees and employees. The intranet improves the reporting of sales results and makes sure that everyone is getting the same unified message. It allows Checkers/Rally’s to communicate with its employees instantaneously and ensures that information such as promotional and training materials are up-to-date and sent out on time.
“People are able, via that Web site, to ask questions of our training department about materials or if it wasn’t clear to them what we’re talking about,” says Sirois. “It’s usually within 24 hours they get an answer to their question. And that question stays posted up for everybody else in the system, so if one person asked a question that 100 people had, they get the answer, too.”
The company has also spent the past few years upgrading Point of Sale (POS) systems in each of the restaurants.
“It’s very easy for folks to utilize these pieces of equipment,” says Sirois. “When they step up to a touch screen piece of technology, they understand it almost immediately. What that allowed us to do is shorten the time it takes to teach a cashier, for example, how to take orders and ring up things. If I can teach people quicker, that ... shortens the cost of training.”
The new POS system also enables the company to put prompts on the register screens so that employees don’t have to rely on memory to remember to ask if a customer would like fries or suggest adding cheese to a burger.
“All those little slices of cheese add up,” says Sirois. “And by the way, the consumer who forgets to say, ‘I wanted the cheeseburger’ is glad you told them.”
The company has also added timing systems at each restaurant’s two drive-thrus.
“There’s a little digital readout so that not only does each side of the restaurant see what their current time is on that customer, but they see what their average time is so far for that meal period, and they can compete back and forth, which helps improve the speed,” says Sirois.
Even though the company’s turnaround isn’t complete, Sirois is confident that it is now operating at the highest standards and is starting to see the fruits of its labors.
Although Checkers/Rally’s revenue fell from $194 million in 2004 to $187 million in 2005, mostly due to restaurant closings as a result of Hurricane Katrina, the company still posted same-store sales growth 19 of the last 20 quarters. And in 2005, Rally’s was named “Best Drive-Thru in America” by QSR Magazine, whose annual survey ranks the top 25 quick-service restaurants in the country.
But Sirois knows that doesn’t mean the company can relax. He and his executives are constantly analyzing the GO program and technology, a process he compares to a TV show he once saw in which a man was trying to spin plates on sticks.
“By the time he started to spin the seventh, the first one would start wobbling like it’s going to fall,” says Sirois. “And that’s kind of how our program is. As we go through the GO program and work on various parts of the business, as we get two and three years into it, we’ve got to go back to the first wobbly plate.”
Sirois hopes the company’s dedication to accuracy, speed, great service and communication will help Checkers/Rally’s continue to expand through increased franchise operations. It has entered into development agreements for an additional 129 franchised units by 2009.
“Our turnaround and our success has come from us embracing who we are as a double-drive-thru restaurant,” he says. “Our consumers are coming back more often and spending more money with us, and our business is growing as a result.
“The better we do at our execution, the more we get awards like ‘Best Drive-Thru in America,’ that makes us much more attractive to potential franchise candidates and helps us accomplish these goals we have to add franchisees and new franchise restaurants.”
HOW TO REACH: Checkers Drive-In Restaurants Inc., www.checkers.com
AutoNation Inc. is the Hummer of automobile dealerships. Simply put, it's the largest dealership in the country, and Chairman and CEO Michael Jackson's take-no-prisoners attitude suggests he's ready to run over his competitors like a Hummer over, well, anything else on the road.
Jackson was brought in as CEO in 1999 by founder H. Wayne Huizenga to retool AutoNation's hodgepodge of companies.
"Everybody who didn't do it our way, we threw out of the company," Jackson says. "We hired people who did want to do it our way. Was it a battle? Absolutely. Is it over? Absolutely. The idea that you're going to run this business with 350 entrepreneurs all going in different directions is crazy. You're not going to add any value that way."
Jackson, who began his automotive career as a maechanic, arrived from Mercedes-Benz USA LLC, where he was president and CEO. At Mercedes he led a renaissance in the luxury vehicle brand's sales and marketing efforts. He saw a similar opportunity for growth at AutoNation.
"I thought something could be done in automotive retail that had never been done before," he says. "AutoNation was the company that could do that. It (also) gave me the opportunity to work directly with one of the great entrepreneurs of the 20th century."
It wasn't long before Huizenga took Jackson under his wing.
"Wayne is an unbelievable entrepreneur," Jackson says. "We developed a relationship where he was a great mentor. Working with someone from whom I could learn so much was an opportunity I couldn't let go by. Wayne hasn't disappointed me."
Huizenga may have created the company in 1996, but it is Jackson who has built it into one of the largest and most well-run organizations in the nation.
Under Jackson's direction, AutoNation has become America's largest automotive retailer, employing 28,000 people at more than 280 dealership locations representing more than 360 new vehicle franchises across 18 states. The company boasts more than $19 billion in annual revenue and ranked No. 97 on the 2004 Fortune 500 list, outselling all other automotive retailers in the United States.
The company is also the Web's largest automotive retailer of both new and used vehicles, generating $3 billion of revenue in 2003 via the Internet. For his efforts, a group of Jackson's peers last year at the Automotive Hall of Fame voted him "Industry Leader Of the Year."
The automobile dealer industry is extremely fragmented. Only 6 percent of dealerships are owned by publicly traded companies; the rest are operated by entrepreneurs, who are known for their independence. That made AutoNation's growth strategy of acquiring existing dealerships to bring under its umbrella a sometimes-tricky move.
"Five years ago, when I arrived here, that was a huge cultural issue," Jackson says. "It clearly had to be addressed and was going to be the key issue of whether we succeeded or not."
To overcome that issue, Jackson made sure every executive at the company understood and was willing to adopt the newly defined role of executive. Those who couldn't -- or wouldn't -- abide by the new profile were out of a job.
"The profile basically said that we want entrepreneurial energy, high ethical and integrity standards, but combine with that executives who have an understanding of the power of process and who want to be part of something big. And, we wanted people who get extreme motivation by creating something extraordinary," he says. "It's not all about them, the individual."
And, Jackson says, he expects his management team to have passion for their work.
"We had to ask quite a number of executives to leave the company," he says. "And we had to recruit executives who fit that profile. I'm happy to say, today, that's the culture we've created. It's not an issue. Everybody who is with the company is deeply involved in discussing how we do it, but not if we do it. That cultural war is over."
Jackson does not use the word war lightly. Nearly half of the company's executives never fit the profile.
"It took a full five years," he says. "When I started, 10 percent of the executives fit that profile. Fifty percent maybe fit that profile and 40 percent did not. Today, we have 90 percent who fit that profile and 10 percent are on their way there. That's a dramatic transformation."
The result of that transformation is evident not just in the company's top-line revenue of close to $20 billion, but also in its net income, which increased nearly $200 million from 1999 to 2003 as Jackson made the tough decisions and built a new corporate culture from scratch.
Efficiency also improved as a result of the moves.
"We look at every aspect of the business, from how we buy electricity to how we interact with the customer," he says. "And we systematically bring, on a given issue, the best people in the company together to figure out what is absolutely the best practice, best process for the customer and the company, and then systematically implement that across the company."
That would not have been possible in the old days, with each dealer operating independently.
"Everyone in this company (understands) the combined power of entrepreneurial energy with best practice process," Jackson says. "It's tremendously powerful combination. Where (with) small business, it doesn't make sense for all the incremental improvement, it makes sense for us because we apply it to such a (large) scale.
"For us, every time we find a 10-basis-point improvement, it means something. It means something to the existing business, and it means something to everything we acquire in the future. Imagine, by 10 basis points at a time over five years, we have created a 500-basis point advantage of cost over our competition, and we feel we have another 200 (to go). That's a 700-basis point improvement that we're creating in seven years. That's quite something, and it's very difficult for anybody else to match."
Entrepreneur at heart
While Jackson's changes at AutoNation were necessary to grow the business, as a former car dealer, he understood the power of the entrepreneurial spirit.
"Having grown up in retail, but also having worked in a large corporate environment where you get a broader view, you understand how big corporations work," he says. "You understand the power of process, the power of strategy. Without that background, I think it would have been very difficult."
That background has made it easier for Jackson to oversee AutoNation's operations, which are spread across 18 states. The company's largest presences are in California, Texas and Florida, and Jackson says there are no immediate plans to enter the remaining 32 states with physical locations. AutoNation does, however, do business in all 50 states through its Web initiative, a strategy Jackson has supported since the beginning.
"We always believed the Internet was going to change the balance of power between the consumer and business," he says. "You were going to have an educated, informed and empowered consumer, compared to what was possible in the marketplace five, 10 or even 15 years ago. We saw this as an opportunity."
Jackson says that's because informed consumers make it easier for AutoNation to facilitate a quicker, more convenient transaction time. And, with that in mind, Jackson tasked his team with finding ways to embrace the Net.
"We have been able to dramatically reduce our transaction times over the last five years through the arrival of e-commerce," Jackson says. "By having embraced it and not resisting it, by designing all our processes to take into consideration that you have an e-empowered consumer, that has been a big advantage for our customers."
Jackson cites studies that show 80 percent of his company's customers spend time researching cars, prices and loans before they ever contact an AutoNation salesperson or begin an online transaction. The company's processes are designed to be customer-friendly, he says, in an effort to meet or exceed customer expectations.
"It's been a big win for us," he says.
AutoNation's Web component may have exploded over the past few years, but Jackson says growth through acquisition is expected to continue at a much slower and consistent pace.
"The segment has only consolidated 6 percent by publicly traded groups, meaning it's still 94 percent independently entrepreneurial," he says. "It will be a very gradual consolidation. If, in the next five years, that begins to knock on 10 percent, that's about as fast as I can see it grow."
Jackson's arrival at AutoNation heralded a new era for the business in another way. In addition to sweeping away executives who wouldn't or couldn't adopt the new approach, Jackson eliminated those parts of the business that weren't focused on selling cars.
AutoNation, once part of Huizenga's Republic Services conglomerate, also owned Alamo Rent-A-Car and National Car Rental.
"The basic decision I made when I arrived was that AutoNation was going to be very good at one thing, and that's automotive retail," Jackson says. "We're going to be the best in the world at it. Anything else is a distraction."
Jackson's moves were quick. Just three months after his arrival in November 1999, the company exited the vehicle rental business. The spin off of Alamo Rent-A-Car and National Car Rental into publicly-traded ANC Rental Corp. was completed by June of the following year.
By year's end, Jackson had also exited the used vehicle megastore business, closing its AutoNation USA stores.
"Creating conglomerates is very difficult to do," he says. "General Electric has done it. They took 100 years to do it, but I don't have 100 years.
"I'm not sure with how the megastores were created in AutoNation, we could have ever had added value," he says. "There were many things that were done from a consumer point of view that were extremely positive, but the economic model was flawed. And we needed to put that behind and put our capital and our energy where we could create value."
Today, with its singular focus, AutoNation's revenue stream is divided among new vehicle sales at 61 percent; used vehicles at 23 percent; parts and service at 13 percent; and finance and insurance at 3 percent.
"The one number we would like to increase steadily is our service and parts business," Jackson says. "That's the foundation of our business. We service 25,000 vehicles a day. They are complex, highly sophisticated, technical products. We have a lot of added value and a lot of infrastructure that we've built in order to care for those vehicles.
"It's a high-margin business to do our high added value. That's a business we would like to disproportionately grow."
Based on Jackson's record, there's a good chance that 10 years from now, AutoNation will be running over its competitors in that segment of the industry as well.
HOW TO REACH: AutoNation, www.autonation.com or (954) 769-7000