Pal’s Sudden Service is almost unknown nationally but loved with cult-like ardor in its Tennessee/Virginia territory. Its 23 funky, boxy double-drive-thru restaurants tell you that Pal’s isn’t like other QSRs, which has been a point of pride since Pal Barger founded it in 1956. The Kingsport, Tenn.-based chain’s menu is limited to a few burgers, hot dogs, sandwiches, breakfast, fries and drinks but its nearly $2 million average unit sales tops every QSR in its territory except Big Mac. Its communications with loyal customers includes its palsweb.com website, newly redesigned by agency Creative Energy, that goes beyond giving menu information: visitors can check movies and buy tickets at theaters in Pal’s markets.
The efficiency of its systems and effectiveness of its training programs are such that Pal’s in 2001 was the first restaurant company of any size to win the Malcolm Baldrige National Quality Award, recognizing business excellence, innovation and leadership. Pal’s responded by creating its Business Excellence Institute (BEI) as a way to share best business practices with others. One BEI client was K&N Management of Austin, Texas, operator of the Rudy’s Country Store & Bar-B-Q and Mighty Fine Burgers chains. K&N became the second restaurant winner of the Baldridge award in 2010.
BurgerBusiness.com talked with Pal’s Sudden Service President-CEO Thom Crosby about its approach to business. Some of Crosby’s remarks follow:
Outside our area people say, “Pal’s what’s that?” We’re a drive-thru-only, quick-service hamburger and hot dog operation. That’s really it. When people ask about us, I pull out one of our business cards, which are four-fold. There’s a photo of a Pal’s on the front. I explain that the core menu is pretty much right there on the front of our building as artwork. That helps explain who we are.
We’re focused on a limited menu. That’s important because we don’t want to confuse anybody about what the brand is about or what we’re supposed to excel at. We don’t want to add anything that takes away our focus. When we first opened up we used to have signs on the outside of the drive lane. We’d have photos of fried chicken and pizza and all the other things you can get at other QSR operations. Nice luscious photos but with a big red theta symbols through them.
Our approach to order taking is different. We don’t believe in speakers. We believe in face-to-face ordering. We’ve run all kinds of tests and we know the best way to ensure that you end up with an accurate order is to start out with an accurate order being called in to production. Since humans are visual creatures, we think it’s better when the order taker and giver can see each other. It’s one of the basic tactics we use to achieve the order accuracy we have. In round numbers, currently we’re making one mistake in every 3,600 orders.
Our idea is that we want to be the best, not the biggest. I’ve had several conversations with others who want to beat their chests about how many units they have on the ground. When I ask them about net profit and how much free cash flow they have, they don’t beat their chests as much. We’re a zero-debt company. We owe nobody the first nickel. We have enough cash to go from the 23 stores we have now to 70 or 75 without borrowing a penny. We are in the process of ramping up our pipeline of leaders, but we’re set on getting it right with every store.
We have 1,100-square-foot buildings doing a touch under $2 million a year in sales. I’ll put our sales per square foot up against anybody’s. We work on the business model of each store to make sure it’s tight, solid and is a well-tuned business system producing the kind of results it should produce.
It’s our firm belief that everybody has a Rolodex of places where they’re going to eat. All restaurants are not options for all the people, only the ones in your mental Rolodex. We think that for breakfast it holds from two and four choices. For lunch it has from three and six choices. For dinner, it’s from five and 10 choices. We want to be on people’s mental Rolodex, so we do lots of things to get people to look at and think about Pal’s.
On our website you’ll see a Thought of the Day. We coordinate that with every one of our restaurants so that what’s on the website is on the reader board [out front of] our restaurants. Instead of a message from us that’s “Here’s a burger, fries and a drink for a price,” it’s something like “Wave at a policeman.” We keep it fun.
In 1998, we had a couple of different ideas for our website. One was the CEO should answer every customer-contact question. If you submit a question on the website’s Contact form, the only place it goes is to my email. I personally answer all of them. I don’t have canned responses. If I’ve had the same question three times today, I’m going to answer it each time. Maybe I’ve had a new thought since the last.
Most restaurant websites are one and done. You go once and there’s nothing to draw you back. So we put in the movie theaters and what’s playing for every market we’re in. And while you’re there, if you want to buy tickets, we’re linked with Fandango. They give us 30¢ cents or something for each ticket sold and we take that money donate it to nonprofit organizations in the region. All those things help you stay on consumers mental Rolodex.
I see so much discussion about using Facebook and what tactics to use and how to win and whatever. There are times we kinda step back and scratch our heads and say, “I don’t understand all this” because to us it’s simple. Facebook is a type of public forum, and there are only two types of people who are going to talk about our brand there: employees or customers. If you want a really strong, positive presence, we say 1) be part of the dialog; 2) be honest with everybody; and 3) if you want the vast majority of comments to be positive about you and your brand, treat all your employees with respect and try to help them have great lives, and treat your customers in a way that creates loyalty. If we maintain our culture on a customer-by-customer basis we should end up with lots of positive comments. We remain part of the dialog, and there are no other tricks to it. We think that’s simply it, and everything else seems like manipulating. We don’t want to manipulate anyone.
We represent our core business by three interlocking rings. The primary business we’re in is we’re a manufacturing concern. We have raw products and preprocessed products such as a bun, and we [combine those] to put out a finished product. Second most important area we’re in is the education business. Unless we can have procedures and practices in place to, first, out hire the competition, and second to out train the competition, we can’t dominate a market. The training is paramount at Pal’s.
We say that all leaders are trainers, are educators. Whether they realize it or not, 24/7 they’re educating. By their attitudes, their behaviors, by the things they focus on, by the reports they ask people to generate for them. Plus in some cases leaders do actually, physical training. At Pal’s, every leader needs to have a coaching and training target every single day. So if I challenge any leader here “What’s your target for today?” they need to have a name and topic. Every day. It has to be a thought-out agenda to drive things forward.
My training target for today is a gentleman named Justin Wilcox. He’s in training to become a store operator for us. Today’s topic with him was about motivating crew people and communicating with crew. As CEO I’m not exempt: Anyone is welcome to ask me my coaching target on any day.
We’re big on the idea that human beings go out of calibration, just like equipment. We see so many operations that have training and they’re so happy when a trainee can pass a test. Then they sign off on this person as “trained” and they usually don’t revisit that person unless there’s a really severe performance issue. At Pal’s we believe testing is not the end. We believe certification is more important than graduation.
Certification means we’re saying take the knowledge you’ve been given and prove to us under full pressure of the busiest periods we have that you can do everything 100% and stay on standard 100% of the time. If they can, we say they’re certified. And then they’re logged in to our system that monitors where everyone is training-wise. Our Training Tracker software system tracks everyone, and it will pop up and say, “These people need to be recalibrated.” It’s a random pull that the software’s doing for us. So it’s challenging us to approach people who are fully certified and say, “The system’s asking us to recertify you today.” We go through the basics, the most critical parts of the flow with them. And then we do an observation to make sure they are still 100% of standard. And that’s going on every day of the year, in all of our stores.
I think there are three issues that cause problems in the QSR sector and even beyond that. One is that chains get into the rapid growth mode and outgrow their culture. The first place you see that happening is with something I call “abdication of leadership.” You see chains trying to “idiot-proof” what managers can do. They put in so many policies and hem their people in with so many audits to keep them on track instead of building true, strong leaders who can think strategically on their feet. So when you see the management team start to abdicate that leadership position, things begin to fall apart. When you bring in managers who aren’t trained and aren’t dialed in and focused, they get into a “cruise” mode.
We’re believers that birds of a feather flock together. If you start having an operation with weak crew training and not a lot of really good leadership by managers, the people who apply there are the same kinds of people. We go the opposite direction. We tighten things up so people say, “That’s who I am. I’m a superstar, hard-working performer who’s never tardy. I’m going to apply to Pal’s. That’s my flock.”
I hear whining and crying about the labor pool. Well, we’re hiring from that pool too. In our opinion, at no time in history has there been a better-educated, more-motivated workforce than there is today. Energetic. Healthy. Amazing. Because that’s the kind of people who are applying to us. We are so proud of the people on our team. We’ve got more superstar people applying to work for us than we have slots to put them.
Third, I see a complexity crisis. People try to put so many policies and procedures in place and then they go and expand the menu and add complexity. You slow down service and make it harder to execute and tougher to balance your costs. And then people will tell you, “I don’t know why business is so hard these days.” We’ve got a simple business model, simple menu, simple supply chain, a wonderful workforce. If people are having a tough time, it’s likely a situation of their own making.
Sometimes I get that itch that maybe’s it’s time to step up and expand faster. But we want to make sure that we hand off all the cultural pieces to each store. I see operations that outgrow their cultures. They can’t pass on their culture so they go from a really great concept with great people to weaker and weaker operations and people who don’t understand the origin of the culture. We’re always asking how we can ramp up but transfer the culture to the new leaders and other team members coming into the company. We’re getting better and better at that all the time, I think. If you start backsliding on having everyone looking at the company through a common cultural lens, that’s when I think you get into some real hot water.