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Knowing when to step aside Featured

10:05am EDT July 22, 2002
If you were looking for a face to put on the word 'entrepreneur,' restaurateur Ronald Sofranko would serve as the poster child. After all, you can only imagine the kind of driven, energetic personality it would take to transform a one-time geophysicist into the almost sleepless entrepreneur that Sofranko has become.

Like many business owners, he slaves over every detail, from napkins to the taste of the beef brisket his five restaurants serve. He tests potential employees, picks the next restaurant site, and raises capital. He has trudged through the tough times and celebrated the good times. He has controlled, in many ways, his own destiny as he has managed to position his restaurant chain for aggressive growth ahead.

Until now, that is.

Sofranko recently made perhaps one of the most difficult decisions an entrepreneur has to make-stepping out of the way of your own growth and ego. He hired restaurant management veteran David Head, who previously was president and chief executive officer of Kansas City, Mo.-based Houlihan's Restaurant Group. His task: to take the company where Sofranko says he couldn't effectively take it on his own.

So how does such a serious decision bode in contrast to the typical entrepreneurial spirit? And how painful a process is it?

This month, we asked Sofranko how he managed to do what most entrepreneurs dread-and where many ultimately fail. His biggest challenge ahead: staying out of the way, of course. Here's how he's faring:

How would you describe your management style up to now?

If there's a management style that's classified as entrepreneurial, it's aggressive, passionate, high-energy, sometimes not enough focus. You're kind of out there shooting a shotgun, perhaps sometimes saying 'would this work?' or 'would that work?' We've seen plenty of changes at Red River over the years, from menu to people and philosophies, and the way we're going to do things. So I think it's a little more like that shotgun. I think that's also indicative of a young entrepreneur. I was 26 when I first started and 37 today.

I think that, as a person matures and your business sense matures, that kind of progresses.

Also my style was that I have to have my hands in everything. It was that way for a long time. I'm not defending myself, but I think, when you're building a company and bringing on people, whether a talented management team or restaurant managers, you want to have your hands in it as much as you can. And I think that is a certain style that is pretty much indicative of an early-stage entrepreneur. That was my management style then.

Now I'm psychologically and personally shifting-or adjusting-this style a little bit to an understanding that I'm not going to know everything. I'm not going to be involved in every day-to-day decision.

Until now, what were you involved in on a day-to-day basis?

Really, everything-finance, marketing, advertising, employee profiling, raising capital, doing site-selection and real estate deals, graphic design, menu pricing, food costing, selecting menu items. Everything that was involved with this program, I was involved in, from top to bottom. In 1987, I was the meat-cutter for three or four years. I cleaned out the grease trap and did the dirty work.

Why couldn't that continue for you?

I think the goal all along was that barbecue was-and is still-an untapped niche in the restaurant industry. As we have grown or changed or evolved-evolved is really the word here-we have responsibilities to people who have given us money to build Red River. If I was the restaurant manager in Wexford today, it would be very difficult for us to grow or for me to spend six to eight months interviewing people for David Head's position or raising capital.

I think there are just these stages you can almost block out, certain time windows, and the ultimate goal. The goal from 1985 to 1998-the same goal-is to establish Red River as the leader in the barbecue segment, first regionally, then nationally. Then, hopefully, if everything works out and all the moons align, we'll be able to give a return to our investors and, at the same time, keep our customers coming back, build sales, keep the menu fresh, and put all of those pieces together.

I've told my manager that our investors did not give us money because we're a charity. They gave us money to provide us with the opportunity to build a business, to make a living, collect a paycheck. And we have to always remember that, at the end of the day, we have to provide a return somehow. That's the goal. It might not be as much as they want, or it might be a big or little return. My best day will be the day when I can write a check back to my parents, back to my family and friends who supported me in 1985, when a geophysicist was looking at barbecue. That will be one of the best days of my life-other than when my children were born.

When did you know it was time to step back and let someone else run the show?

We were building the organization and, because it's my first time around on this road, I probably didn't fully understand the talent it really takes to become a regional or national chain-the kind of talent you really need to put this baby together.

I think when it became apparent was a year or year and a half ago. Things weren't going quite as smooth in operations. We have five units, and there were issues that we should be able to manage pretty easily. They weren't being managed. It was operations-hot food, fresh food, figuring out systems for our sauce procedures or how our sauces were delivered, decor, the interior look and feel. Everything was just kind of...if we really want to be who we say we want to be-the leader in a niche, a national player, the Outback Steakhouse of barbecue-I probably underestimated the talent that it really takes to get there. Maybe I was being naive along the way or whatever.

I also think it came to light when we were out there putting a financial deal together with an investment banking firm in New York, and because the stock market was doing so well, the cash-on-cash returns that a restaurant concept would need would be up to 40 percent or better. The market is maybe at 20 or 25 percent, so if I'm going to take a risk with Red River, I'm going to need 40-plus. Actually, now that the market is coming down, it actually should benefit us in a year from now.

The vision in my mind is the combination of us bringing on a David Head and his management team and some real talent that takes the food up a notch.

The comment I've used so many times is that we were a good restaurant, but we weren't a great restaurant. We were fairly consistent but not always consistent with our delivery at the restaurant level.

Many of the procedures really were me. I never worked at another restaurant chain in my life.

When you're one restaurant, I would never even have talked to a David Head. You talk to the talent you can get. Now, once you get to five, you're a decent-sized little restaurant company, and you have a tremendous growth opportunity. That's why the David Heads of the world come on board. You kind of take what you can get. It's a situation where you try and attract the best talent you can for the stage you're in.

Talk about the transition. With the ego at stake, how do you concede that you need to step back and let someone else take charge. Talk about admitting your shortcomings.

Certainly, there's pride there. You can't let your ego and your pride take over what you really know and don't know. I'm very good at some things. David Head will tell you I'm very good at raising capital. And I'm very good at selling the concept. But am I the operator? No. I know a lot about the business, but I don't have that talent.

The question is, do I still believe in the barbecue niche? Yes. Do I have the talent to take it to the next level? No. To go good to great, that's a big step, but you really need the talent.

My philosophy my entire life has been to keep learni ng, keep getting better and better at what you do, whether it be smarter and wiser, or whatever. I think what we've done with Red River is we have gotten better and better.

How difficult was it to relinquish control-to actually go through that process-to somebody else?

I'm still going through the transition now, but when it's your baby and you look what you've built from ground zero, you're very proud of it. It's almost like you're sending it off to college. You look at what's best for your baby-what's best for the company, but you have to keep in mind that it may be my company, but it's really not my company. Others have bought into it.

I'm actually more proud of the word 'founder' than I am of chairman or CEO because I started this thing. But in relinquishing control, I think you have to look inside and see what's best for the company and the shareholders. I think you have to look at it from the standpoint of, can I take it to the next level? And if you're being honest with yourself, my answer was 'no.'

How hard was it to be honest with yourself?

I'm a very good visionary guy, the one who puts the puzzle together. But I'm perhaps not a good maintainer or a good mature-company developer. I'm a very good early-stage guy.

How tough really is it, then to let go?

It's probably still sinking in. So when I walk into the restaurants now or I hear something that I didn't know about where a decision was made, I initially get a little upset, but I still think that's just the transition.

Even in the last couple of weeks, I found a couple of things. But it was like, OK, Ron, keep your mouth shut.