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Betting on Bob


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  • | 7:34 a.m. July 19, 2013
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Like many entrepreneurs who have created business empires, Outback Steakhouse co-founder Bob Basham is seeking a repeat performance, this time with his newest startup, PDQ.

Twenty-five years after co-founding Outback, now called Bloomin' Brands with annual sales of more than $4 billion, Basham is out to conquer the fast-casual segment with restaurants that serve fresh (never frozen) chicken tenders, hand-cut fries and home-spun milkshakes.

On the way, he says he hopes to make PDQ's top managers into millionaires like he and his partners did at Outback.

In late 2011, Basham and Nick Reader, CEO of Basham's private investment firm, MVP Holdings, opened the first PDQ, which stands for People Dedicated to Quality, on Tampa's South Dale Mabry Highway — a little more than a mile from the first Outback Steakhouse.

There are no burgers, steaks or chicken wings on PDQ's menu, where items are made fresh daily, including sauces. The concept is based on Tenders, a North Carolina restaurant bought by PDQ.

PDQ stores, which cost about $3 million to build, including land cost, have a chic ambience more akin to fast-casual concepts than fast-food establishments. Service is more like a sit-down restaurant than a fast-food joint.

Employees hold umbrellas to walk customers to their cars when it rains. There is no “squawk box” for order taking in the drive-through. It's person-to-person ordering.

In the dining room, there's a large half-circle stainless steel sink, complete with lavender soap, for hand washing. A modern, retro-looking Coca-Cola machine has 100 flavor combinations.

“We do stuff you don't see done in gourmet restaurants,” says Tim Gannon, an Outback co-founder and PDQ's only franchisee.

In the fast-casual category, PDQ's competitors include Pei Wei Asian Diner, Panera Bread, Chipotle Mexican Grill, Five Guys Burgers and Moe's Southwest Grill. Quick-service competitors include McDonalds, KFC and Chick-fil-A.

Though Reader contends PDQ doesn't really have any competitors.

“We don't view anybody as a direct competitor as we are the only made from scratch [quick service restaurant] in the market that we are aware of,” Reader says.

Opening soon near you
By year end, PDQ will open its 25th location, with other openings planned for next year in the Carolinas, Georgia, Texas and Pennsylvania.

PDQ expects to complete the purchase of a nearly 100,000-square-foot-building in Tampa in the fall for its headquarters.

And it paid $670,000 July 1 for 10 acres in Manatee County near Interstate 75 and State Road 70, although the company says its use hasn't been decided. The land may not be for a PDQ or Lee Roy Selmon's, a local concept owned by Basham. The restaurateur says he expects to announce a new concept within six months.

Basham is reluctant to predict PDQ's growth over the next five years. He says growth depends on how fast the company finds great locations and great people. The only way to have quality growth, Basham says, “is to have great operational people involved.”

Basham's partners, including Gannon, envision fast growth and expect PDQ to have hundreds of locations within five years.

While it's a tough job to start a new concept and it requires “some luck” to succeed, Gannon says PDQ has important advantages as a startup when compared with Outback in its infancy. PDQ is well capitalized and Basham's reputation in the restaurant industry helps attract top talent.

“It's a lot easier when you can hire good people right from the start,” Gannon says, adding that many of his former employees and coworkers have asked for jobs.

Gannon, who now has three locations, including West Palm Beach and Boca Raton, plans to open 60 locations in South Florida within the next five years.

Other than Gannon, PDQ doesn't sell franchises. Instead, it forms joint ventures with development partners — the same model used by Outback. “We want to keep operational control to assure quality,” says Reader.

Development partners raise money to buy land and build turnkey restaurants, which are run by PDQ. In return, development partners receive a share of the revenues and other financial benefits. Each location is expected to do $3 million annually.

Jack Murray III, CEO of JKM Restaurant Partners, has known Basham, Gannon and the third Outback co-founder, Chris Sullivan, since 1989. Murray, who has started and sold companies, worked at Plant State Bank when it lent money to Outback for its first joint venture.
Last year, JKM invested $20 million to open 10 PDQ locations in North Carolina and South Carolina.

“It took a great leap of faith,” Murray says.

But Murray says his experience with PDQ over the past year has reinforced his faith in the concept and its founders.

“I'm part of something that's incredible,” Murray says. “It's happening again right in front of us. This will be a national restaurant company.”

While Outback brought quality steak at an affordable price to consumers, PDQ is bringing fresh chicken, hand-spun shakes and hand-cut fries at fast-food prices, Murray says.

“We have to stand out,” Gannon says. “People have to say, 'Wow, I love this place.' We have to get them to talk like that.”

If long lines out the door at PDQs during peak hours are any indication, the wow factor is on.

Sharing the wealth
At PDQ, one of the biggest challenges is finding employees who are passionate about providing standout service. Finding and keeping employees motivated is key to PDQ's success. That's why PDQ shares profit with its managers and provides equity.

“If stores do well, they do well,” Basham says.

With PDQ's expected growth, employees have an opportunity to move up quickly.

“Some of our first hourly minimum wage people have been through management training,” Basham says. “In the future, they'll manage a $3 million a year business.”

PDQ is a cheerleader for its employees, Gannon says. The company recognizes good work and reinforces each employee's emotional commitment to the concept. “We're a team,” Gannon says. “We all work together to make this happen. People work for people, not companies.”

Former Outback CEO Chris Sullivan, who's now developing the Cafe Carmel & Wine Bar concept, contends Outback made more managers into millionaires than any other restaurant company.

Gannon is a believer.

He had $37 in his pocket when he moved to Florida in 1987 to develop the menu for the first Outback Steakhouse, in what he describes as a rundown strip mall in South Tampa. Gannon lived with Basham for more than six months as he developed the restaurant's menu out of the Basham family kitchen.

Today, Gannon is a multimillionaire.

“It's so much fun to be opening restaurants with Bob as a partner,” Gannon says. “This is as good as it gets.”

Basham, who was COO at Outback, is one of Bloomin' Brands largest individual shareholders. His more than 6 million shares are valued at about $179 million.

Both Gannon and Murray describe Basham as jovial, kind and well loved by his business partners and employees.

But that's only part of the reason for his success.

“He's a visionary leader that attract the best management team in the industry,” Murray say. “The collective talent at PDQ will rival any restaurant company in America.”

In addition, Basham knows just about every detail of his restaurants' operation, from the cost of a cup (7 cents) to the wait time for service with a dozen customers in line (four minutes).

“He's an incredible restaurant operator,” Murray says. “It's no mystery he was successful over and over again.”

Bloomin' Brands, one of the largest restaurant companies in the nation, has four other brands in addition to Outback. They are Carrabba's Italian Grill, Bonefish Grill, Roy's and Fleming's Prime Steakhouse. The company went public for the second time last year.

Basham, who resigned from the board earlier this year, shakes his head when asked if he plans to eventually make PDQ a public company.

“Going public is not the goal,” Basham says. “I've been the public company route. It's a lot harder to be a public company now. You have a lot of different bosses and expenses when you're a public company.”

Gannon agrees. He says the bureaucracy involved in being a public company takes away the fun of running a business.

And right now the partners are having fun.

It's as good as it gets, Gannon says.

 

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