Can the man who built Domino's Pizza do the same with hamburgers?
Tom Monaghan, who founded Domino's Pizza with one store and sold the restaurant colossus in 1998 for a reported $1 billion to Bain Capital, recently launched Gyrene Burger, promising 10-minute delivery of hamburgers.
Now a Naples resident, Monaghan is starting out modestly with two Gyrene Burger stores in town. But watch out, because Monaghan believes the chain could eclipse Domino's. “There's that kind of potential, maybe even bigger,” he says.
The trick is to make and deliver a great-tasting burger to customers within a mile-and-a-half radius of the store in less than 10 minutes using mopeds and bikes. Recently, one of the stores in Naples averaged eight minutes. “If I know anything, it's how to deliver food fast,” Monaghan says.
Gyrene is the nickname for a U.S. Marine and the employees dress the part in military fatigues. They run out of the store, jump on their scooters and salute customers on delivery.
Monaghan has a bigger vision than eclipsing Domino's success. He hopes that Gyrene Burger grows to the point where it can help fund Ave Maria University in eastern Collier County. Initially, a portion of the royalties will go to fund the new Catholic university, but Monaghan has plans to will it to the foundation he created for that purpose.
Monaghan says he's grown tired of raising funds for the university, which he funded with the Domino's fortune in partnership with Barron Collier Cos. “Maybe I can make more money than I can raise,” he says. “One of the things I really missed was the income.”
Monaghan says Microsoft founder Bill Gates called him a couple years ago to join the club of billionaires who plan to give their fortunes away to charity after they die. “I've already given 95% away,” he told Gates, fulfilling a vow to give his fortune to Catholic charities.
“He's very competitive, and so I think he got real bored after he sold his company,” says Gary McCausland, Gyrene's chief operating officer and the man who oversaw Domino's international expansion.
Monaghan, 75, fit and trim from daily Stairmaster workouts, intends to grow Gyrene Burger by selling franchises when the two Naples stores become profitable. “We still haven't got the volume,” he says. “We'd probably have to do 200 burgers a day.”
Monaghan started Domino's with one store in Ann Arbor, Mich., in 1960 after serving three years in the U.S. Marine Corps. By the time he sold it in 1998, Domino's had 6,250 stores and ranked as the world's largest pizza-delivery chain. At one point, Domino's was opening three stores a day.
When he started Domino's, Monaghan says he wasn't sure pizza would be successful and he considered delivering hamburgers instead. “It was going to be my backup if pizzas didn't work,” he recalls.
Now, more than 50 years later, Monaghan plans to do with hamburgers what he did with Domino's. Except now he plans to do it faster.
The key to Domino's success was free delivery of a tasty, hot pizza in less than 30 minutes. Because it takes less time to make a hamburger than a pizza, Monaghan says his employees can deliver a hot burger within a mile-and-a-half radius in 10 minutes. He estimates it takes about four minutes to cook and assemble the burger and another four minutes for delivery. Like Domino's, delivery is free.
Back in 1960, pizza wasn't as popular as it is today and free delivery in 30 minutes was unheard of. Likewise, people today aren't accustomed to having a hamburger delivered to them free in less than 10 minutes. “Educating the customer is the biggest challenge,” Monaghan acknowledges.
Gyrene Burger has no dine-in seats or tables. Most of its business will be delivery, though it does sell carryout. Monaghan reasons that employees can't take care of dine-in customers and deliver at the same time. More people are picking up carryout orders than he prefers, but Monaghan thinks 90% of more of the orders will eventually be delivery.
If anyone knows the formula for consistency and fast delivery, it's Monaghan. “Tom legitimized the delivery business,” says Paul Roney, the former corporate treasurer of Domino's and now executive director of the Ave Maria Foundation. “He always comes up with a little bit of a twist, like the 30-minute guarantee. That's part of his thinking and leadership: He's such an out-of-the-box thinker.”
To consistently accomplish those delivery times, Monaghan had a relentless focus on operations. “He was the best Domino's pizza manager in the company,” says McCausland. “He made a million pizzas himself.”
Monaghan emphasized timeliness through a variety of incentives. For example, he sponsored competitions with prizes such as a Rolex watch for the fastest pizza maker. The company had a Driver of the Week program that rewarded speedy delivery.
In his autobiography, Pizza Tiger, Monaghan explains his reasoning: “The idea of stressing 30-minute delivery grew out of my insistence on giving customers a quality pizza: It didn't make sense to use only the best ingredients in our pizza if the product was cold and tasteless when the customer got it.”
Top executives weren't exempt from being timely. McCausland remembers being late for his first executive team meeting and Monaghan telling him: “You're 12 minutes late, get up and get out of here and set your watch 10 minutes fast and you won't be late.”
On another occasion, Monaghan chided McCausland after ending a jog after 58 minutes that they planned together to last 60 minutes. “We're a time-sensitive company,” McCausland recalls Monaghan telling him. “If you think 58 is 60, how I can I trust you to get delivery times right?”
At Gyrene Burger, Monaghan urges employees to hustle for every order, even it it's the only one. He personally showed them how to run out the door. “Treat every order as if it's the first in the rush,” he says. “Everyone who works here has to run a mile in 10 minutes.”
Monaghan's ability to help others achieve great things is a big reason Domino's became the powerhouse in pizza delivery. Indeed, Monaghan's Gyrene Burger business card has “Buck Private” as his title, not CEO. Buck private is the lowest rank in the Marines. “The boss is a servant,” says Monaghan. “That's why I'm a buck private.”
“I'm big on incentives,” says Monaghan, whose Domino's store managers earned 30% of the profits on top of their salary. “Domino's looked like Mary Kay,” he says.
The profit-and-loss statement is posted in every store. “I share financial information with employees,” says Monaghan, whose openness is unusual for a privately held company. “They want to be in on things.”
Monaghan speculates why most privately held businesses don't share financial information with their employees: “Most businesses are embarrassed to show profits because of how low they are,” he says.
Monaghan always makes sure to chart a path for employees to climb. “Everybody who works here has a ladder,” he says. “I like growth from within.”
For example, in the early days at Domino's, the company was in danger of losing valuable employees who had become successful managers. So Monaghan devised a system that rewarded franchisees for training managers to become storeowners themselves.
After requiring successful candidates to manage a store for at least one year, employees could open their own franchise. The franchisee who had trained them was then eligible to earn a percentage of the royalties from the new owner.
At Gyrene Burger, Monaghan says he'll seek out Marine Corps veterans to operate new stores, and he'll help them finance the acquisition of their stores. “What they have is more valuable than money,” says Monaghan, who has started to advertise the franchises in a magazine for Marine Corps veterans.
The Marine Corps teaches many of the same management skills that Monaghan emphasizes, such as attention to detail, cleanliness and hustle. He'll ask veterans to put about $15,000 to $25,000 into the business and Monaghan says he'll finance the rest.
Monaghan estimates a franchisee can get into business for about $150,000, depending on the amount of work that needs to be done for a location. There is a franchise fee of $25,000 and royalties of 6.75% of sales, with 1% going to the Ave Maria Foundation. Monaghan estimates the store's break-even point is $500,000 in sales.
The menu isn't elaborate, but neither was Domino's. Gyrene only offers two kinds of hamburgers ($5.99), French fries ($2.29) and water or Coke/Diet Coke ($1.15). “It's a pretty simple operation,” Monaghan says.
Monaghan says he's not in a big hurry to franchise. He wants to make sure every detail of the operation works smoothly before growth can occur and avoid some of the near-corporate-death mistakes he made when he was growing Domino's. “I'm not going to get ahead of myself,” he says.
Management tool: JP&R
To evaluate employees and their supervisors at Domino's Pizza, Tom Monaghan instituted what he called the Job Planning and Review (JP&R) system.
An employee fills out a form before sitting down with his manager. Monaghan required this once a month from all his executives when he was building Domino's Pizza and all employees had to go through this exercise at least once every three months.
The form asks the employee to describe in his own language his job functions or tasks. Monaghan says that's the best way to find out if an employee understands what he's supposed to be doing.
On the same page, the employee writes what the manager or the company is supposed to do to help him do his job better. This eliminates many of the petty grievances and helps managers and employees focus on solutions.
The form also asks employees to list goals for the month ahead and how he plans to achieve them. Monaghan says that builds self-esteem as employees achieve the goals they set and helps managers establish accountability.
The final part of the form is for the manager to fill out and share with the employee. The manager rates the employee and the employee has room for comments if he disagrees with the evaluation.
“It's a great management technique,” says Paul Roney, the former corporate treasurer of Domino's. “It helps eliminate surprises in both directions.”
Monaghan went further with top executives. Roney says Monaghan asked for the three or four things he had done each day in the form of a daily report. “When I first heard this I thought this is crazy,” Roney says.
But Roney says he learned to appreciate the daily reports he sent to Monaghan. “It's a communication mechanism, and it's a way to get constant feedback,” Roney says. “It's helpful because it makes you think about what you accomplished.”
Management by Tom
Tom Monaghan grew Domino's Pizza from a single store in Ann Arbor, Mich., in 1960 to a delivery giant with 6,250 stores when he sold it in 1998. Along the way, Monaghan created management tools that helped him grow the company to such lofty heights. These were gleaned from a recent interview with the Business Review, colleagues from Domino's and his autobiography, Pizza Tiger.
- Build dreams by setting exciting goals. “Goals must be exciting or people won't be motivated to strive for them.”
- Goals must be specific. “If a goal is specific, it is easy to communicate to others. This is important, because when you're dealing with a corporate goal, you have to sell it to the people who can help you achieve it. They have to understand exactly what the goal is, they must believe it can be done and they must be convinced that it can be done by them.”
- Communicate goals. “When you tell someone else what your goal is, it gives you reinforcement, added incentive to accomplish it.”
- Work through others. “I realized right at the beginning that I had to do things through other people, and I always tried to hire people who were smarter than I was.”
- Practice defensive management. “Defensive management means taking care of the business you have. I've always said that if you just take care of every single customer, your business will grow by 50% a year ... that's it. You don't need any sophisticated marketing programs. The solution is simple and it's right before your nose.”
- Write it down. Monaghan always carries a yellow legal pad to list ideas and the pros and cons for each one. “I sometimes compare my brainstorming on paper to the drilling of oil wells. My lists are wells, and every once in a while I hit a gusher.”
- Stay focused. Monaghan says he was successful because he focused on pizza, dropping sandwiches from the menu early in his career. “I'm a firm believer in keeping a business simple.”
- Don't operate in the Ivory Tower. Get into the stores. Get out of the office. Visit with customers, employees and partners. “I've always said that our best ideas come from drivers — they're out making contact with customers, and they're usually young and have a fresh vision of how things can be made to work better. We want to share those visions, and any others we can get, all the way up the line.”
- Pay attention to the details. Monaghan likes to quote former Detroit Tigers Manager Sparky Anderson: “It's the little things that win pennants.” Monaghan was known to show franchisees how to clean a store himself during surprise visits.
- Plow profits back into the business. Monaghan always invested profits back into the stores to focus on the long-term prospects of the business, often sacrificing his own income for that purpose.