It was broken, and new owner's fixing it

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By Shelly Reese

As businesses go, Dave Devoy has purchased a handyman's special. And he couldn't be more optimistic.

In January 2004, Devoy bought 32 Burger King restaurants in Greater Cincinnati and Northern Kentucky from AmeriKing Inc., a Chicago-based franchisee mired in Chapter 11. Although he made the acquisition for a slim $2 million, Devoy hasn't stopped writing checks since the day he bought the business.

Backed by Marwit Capital, an Orange County, Calif.-based private equity investment firm, Devoy and his team have poured $3.5 million into renovations, landscaping and employee training. More than $1 million of that went into new kitchen equipment alone. Four restaurants - in Covington , Crescent Springs, Erlanger and Eastgate - have been completely remodeled, and Devoy expects to spend an additional $2.5 million on renovations this year.

"When we started looking for franchise opportunities, we were looking for something broken that we could fix," said Devoy, 53, whose Springdale-based franchise operates under the name Fire Grill LLC. "These restaurants were run down, but the problems were clearly operational."

Devoy had 12 years in the fast-food business, including stints with Burger King and Hardee's.

Devoy was confident he could turn the restaurants around. "Historically, Cincinnati has been a very good market - and Burger King is a terrific brand," he said.

Resuscitating a brand

History aside, the brand has taken a beating in recent years. Burger King has been through several owners in the last two decades and hasn't always fit neatly into its new parents' portfolios. In 1997, Burger King became the property of Diageo plc, a British spirits company more interested in its drinks-focused businesses than in American fast food.

Sales began to decline, from a high of $11.4 billion in fiscal 2000 to roughly $11.1 billion during the last fiscal year. U.S. sales were especially weak, plunging from a high of $8.7 billion in 2000 to $7.7 billion last year.

In late 2002, Diageo sold Burger King Holdings Inc. to a consortium led by Texas Pacific Group, an equity investor known for resuscitating down-at-the-heels consumer brands. To Devoy, that sale marked a window of opportunity.

Far from daunted by Burger King's recent performance, Devoy saw a chance to buy a tarnished brand at a value price and to work with the new corporate owners to bolster the brand.

"All brands are cyclical, and Texas Pacific knows they need to make Burger King more profitable for the franchisees - because if they fail, the entire system fails," said Devoy. Roughly 90 percent of Burger King restaurants are owned by franchisees.

But turning a 1,000-employee franchise around takes more than optimism and a fresh coat of paint. During the first three months under Devoy's management, the restaurants continued to experience negative same-store sales, a retail measure of sales growth for stores open more than a year.

By April, customers were taking notice of the spiffed-up restaurants and faster service times. Double-digit same-store sales gains quickly became the norm. Even so, severe weather in December and January dampened Devoy's hopes of achieving 20 percent same-store sales gains during the period.

Still, the trend has been decidedly positive, and Devoy anticipates the restaurants will produce sales of $32 million this year, up from $28 million when he purchased them. He's so confident, in fact, that he's looking to acquire additional restaurants in the area and has let the other Burger King franchisees know as much.

Eventually, he said, he'd like to own all 63 area restaurants, now run by various franchisees.

In the meantime, the team is focusing on getting its own shop in order.

Becky Dunfee, vice president of operations, says motivating restaurant workers, identifying talented managers and promoting from within are central to Fire Grill's strategy.

The company has rolled out bonus programs, worked to accommodate employees with health problems and increased the amount of training available to managers.

"We are going out of our way to make this a place where people want to work," she said. "Because we don't sell hamburgers here (in the corporate office). Our crews sell hamburgers in the restaurants."

Decision-making power

That attitude isn't lost on the rank and file.

"I've promoted two of my crew members to hourly managers and one of my hourly managers to assistant manager," said Sandie Lewis, general manager of the Crescent Springs restaurant. "That really helps with turnover."

What's more, "general managers have decision-making power we didn't have before," when she worked for AmeriKing, Lewis said. For example, when Devoy asked for ideas on getting Burger King involved in the community, Lewis suggested her restaurant partner with local elementary schools. She's now laying the groundwork for benefit nights and plans to showcase local students' art work in her restaurant.

"I'm the one setting up the meetings with the schools," she says. "That's how it should be since I'm the one that's in the restaurant, but with AmeriKing it wouldn't have been me doing this kind of thing."

While managers have more authority to run their restaurants, Devoy and Dunfee have become familiar faces to employees in the field, often bearing prizes such as jackets, calculators, CD cases, watches and cash to reward crews for performance.

For each of the last three months, Lewis' crew has received prizes, including jackets bearing the Burger King logo, for dramatically speeding up drive-through service.

Lewis says she won't be truly satisfied until each of her 22 crew members has a blue jacket. She's 10 jackets shy of her goal.

That determination embodies the work ethic Devoy hopes will take root in all his restaurants. Jackets, tickets to sporting events, company picnics: "On the surface they're little things, but they're really big things," Devoy said. "They demonstrate the culture of a company."