Growing pains Featured

8:00pm EDT October 26, 2008

Ralph Pfremmer had grown Pfoodman Holdings LLC to $9 million in annual revenue in the St. Louis market, but he knew he’d hit a plateau.

To grow further, Pfremmer needed to expand his on-site catering management company to new markets, a challenge for a company with a limited number of employees.

“Nobody knows us there,” says Pfremmer, the company’s founder and CEO. “And we don’t have this traveling caravan of employees that can just be uprooted. We have to go in and create a buzz about ourselves and recruit employees into our culture.”

Since expanding into Indianapolis and Cincinnati, Pfoodman has grown its 270-employee organization to $12 million in revenue.

Smart Business spoke with Pfremmer about how to expand your company into a new region and why you shouldn’t farm out your employees’ creativity.

Q. How can a business build brand awareness when expanding into a new region?

We’ve got clients moving into new territories, so we’re on their shirttails and we go in with them. Our marketing strategy is to overlay the new footprint wherever we go with the three different elements of our business — educational food service, senior food service and industry food service.

There is a two-year buildup process. During those two years, we’re in the field shaking hands and creating a buzz about our company that’s coming to town. Also, the concept of strategic philanthropy is one I use a lot. It’s basically guerrilla marketing. You go in and attach yourself to a meaningful cause. In our case, we do a lot of work with outdoor living charities.

Q. How do you prepare for the changes that expanding regionally will bring?

Moving into new markets is going to require a lot of change, and it’s going to require more resources. Whenever your company moves outside of your core area, it requires change.

Here, we found ourselves moving from a small business that had always been very approachable by employees and managers into these new markets, and we fear dilution.

One of my fears is not being able to communicate the way I have. It’s actually put me out in the field more, with more urgency to touch the lives of my employees so they really see what they’re getting themselves into.

I created a couple new layers of regional managers, and that costs money. Regionalization requires investment. As a standard of accountability, I’m not hiring regional managers; I’m promoting them from within.

... I realize that I don’t have all the answers as CEO of this business — it’s absolutely not going to be micromanaged as we move from small- to mediumsized, multiunit to multiregional.

We are providing a lot of vision to the regional managers. We have to have an organizational chart that people understand the flow of information from one person to the next as it relates to a region.

So we’re looking at it from 30,000 feet and saying, ‘OK, how is this thing going to flow through, and how much money is it going to cost?’

Q. How do you determine how much the changes will cost?

I hired a financial consultant to help me project out how much this regionalization is going to cost. If I’m going to spend the money, I need to spend it correctly. With travel and transportation costs being as high as they are right now, it’s a moving target to put a finger on exactly what it’s going to cost for this regionalization.

Because we’re an entrepreneurial company, I stand behind the value of not overspending. If we were a publicly traded company, for example, and I had a big bucket of money to spend on the best marketing materials and brochures and my job was to do bid work on who’s going to provide for all these things and sub out our ability to be creative, it would be a different story — and my employees wouldn’t like it.

Q. How do you keep your employees happy?

We’re going to remain as independent as we possibly can and come up with solutions amongst ourselves. Regional managers have to be able to duplicate what we’ve done in St. Louis in order to be successful.

Our business is one of connections. One person knows another; you end up being introduced to somebody based on your presence.

We’re not going to put up billboards, we’re going to meet people on the way and provide a glimpse into our culture. It’s the same way with this regionalization process. We have to go in and kind of start at ground level from a bootstrap perspective and build the culture.

If I get the right regional manager in a certain geographic area that possesses the qualities it would take [to duplicate our success], then I’ve home-grown again. It’s been a home-grown experience, and that’s the franchise.

That’s what we want to do, because it’s more fulfilling. There’s more ownership and buy-in from the employee and then we end up spreading the culture.

HOW TO REACH: Pfoodman Holdings LLC, (636) 230-3310 or www.pfoodman.com