In his authoring of The Deipnosophists (a term originally inferring expertise in kitchen-related concerns), the Philosopher Athenaeus indicated there was a relevant connection between ethics and experiences imbued by edible enjoyment. He wrote, “Every investigation which is guided by principles … fixes its ultimate aim entirely on gratifying the stomach.” That food-for-thought may also apply in one’s investigation of entrepreneurial opportunities, and in this case, there’s a particular pizza franchise which proves being guided by principles is not only gratifying to stomachs, but the business bottom line too.
From its humble origins 50 years ago in the south end of Columbus, Ohio, Donatos Pizza has emerged as an ever expanding franchise comprised today of 158 locations throughout seven states. These numbers are complemented by a more significant figure derived from monitoring data that indicates respective units, on average, yield returns 40% percent higher than competing counterparts. The consuming public loves pizza, yes, but Donatos CEO Tom Krouse leaves no wonder as to why so many foodies are especially fond of Donatos. From his perspective, the explanation is a blend of operating principles and, go figure, pepperonis too.
According to Krouse, the success Donatos has achieved all culminates from early, educational experiences of company founder Jim Grote. At only 13 years old, Grote began working in a Columbus Ohio pizza shop that was run and managed by two proprietors with exceedingly different personalities. One was very people oriented and the other was something of a penny pincher. The first often exceeded expectations of customers with his lovingly liberal application of toppings. The cost-conscious other was miserly with mozzarella, particularly parsimonious with the pepperoni, and in an attempt to cut corners, he went as far to water down pizza sauce in order to make it stretch further. The customers certainly noticed differences in the dishes prepared by the two partners, as did Young Jim. He also observed that on those nights when the generous man was in charge, there was a lot of business, but not so much on those nights when the other worked. What Krouse describes as “an educational turning point” led to another important life lesson Grote had a few years later while working at another pizza place. Accordingly that store’s owner was considering selling the shop to one of his delivery drivers. Turns out, the delivery guy was intentionally doing a bad job. He hoped that by driving down the business, he would later be able to negotiate a better purchase price. Krouse says Grote quickly learned how the actions of one selfish malcontent could negatively impact store owners and customers alike. So, all those years ago, Jim Grote made a vow that if he was ever in a position to run his own business, he would do things the right way and work with the right people. He got that chance after borrowing money from his father as well as the man who would become his Father-in-Law. In 1963, Grote opened the first Donatos, naming it after a Latin term that refers to something bestowed as a gift. After franchising the business, he would go on to bestow each with operating principals that reaffirm service, accountability, respectfulness by treating others the way one would wish to be treated himself, and exceeding expectations too. Krouse says this is why every large Donatos pepperoni pizza is edge-to-edge replete with more than 100 palate-pleasing pepperonis. Who knew principles could be so delicious?
Krouse says that business, sometimes, has many complicated moving parts. “It takes clarity of simple values to filter out the complexities and better focus on the few things that are most important,” he says. At Donatos, beyond the focus on pleasing customers is that relating to the pleasing of Donatos Franchise Partners.
“Sometimes, as a leader you put customers and associates before shareholders. Some companies don’t practice that, but we do. The more our customers and associates benefit, the more our shareholders benefit,” says Krouse.
Store level turnover at Donatos is among the lowest in the industry. Krouse says this reflects not only the success, but a sense of connectivity associates have with the operation. The key to securing that connectivity involves thorough analysis of potential employees. “We take very seriously how and who we bring into the company. We want to know if who they are matches who we are,” says Krouse. Donatos is empowered in this process through an analytical tool called “Zero Risk.” Accordingly, the tool helps administration get an imprint of personality types. The system is used at all levels of personnel, be it CFO or line workers. It measures aspects that include one’s notions as to self awareness, self expectations, thinking style and sense of empathy. Krouse says the method not only helps identify the right people, but helps ensure each is serving in the appropriate capacity.
Communication is another ongoing tool. Donatos maintains consistent contact among supervisors and corporate staff, and with all their partners through digital communication systems. They also utilize video tutorials for training which Krouse says both helps teach young people in a modality in which they’re comfortable, but allows better tracking as to who and what has been trained.
Data doesn’t simply apply to staff either. Krouse says Donatos has invested in tools that enable the company to better understand their customers, and their respective shopping habits. This technology, including that associated with their Internet presence, has helped Donatos secure new customers as well as more frequently visiting customers.
Krouse also says so much of the focus on people is made easier due to Donatos’ platform relating to cooking.
While he won’t go into all the particulars, Krouse describes their operating system, the process for making pizza the same way every time, everywhere, as “unique.” Simply put, Donatos employs the most sophisticated pizza-making system in the industry. The system is designed to apply pizza toppings weights to 1/100th of a pound. Krouse says no one has a system quite like the one they use, and it is capable of allowing someone, even after one day of training, to make perfect Donatos-style pizza. As for the dough itself, Donatos prepares their own through the auspices of their own facility known as “Jane’s Dough Foods” which is then delivered to the various locations. Krouse says franchise partners benefit because Donatos has taken a lot of the guess work out of operations. “There are three living organisms that a manager has to be concerned with,” notes Krouse, “Customers, associates and yeast.” By eliminating variables with cooking and ingredients, Krouse says managers are better able to focus on their staff and customers.
There are appreciable variables for franchise partners. Donatos offers customization in terms of site planning. Their real estate division can help build out stores that align with community demographics. This can result in a sit-down restaurant approach or delivery-only model, or other. Krouse says the strategy is flexibility. This translates to flexibility in financing too. Krouse says investment with Donatos is on the low side and he makes a point about prices charged by other companies. “Some want you to invest millions of dollars, but with our model, one could build more than half a dozen stores and spread throughout an entire market for that price,” he says.
An interesting testament to Donatos potential occurred in 1999. At that time, McDonalds of burger fame was looking for growth vehicles to diversify and drive their future prosperity. After researching more than 60 pizza-related franchises, the respect for the products and culture at Donatos led McDonalds to purchase the chain. It was owned for almost four years, but undeveloped and following a change in corporate leadership, Jim Grote successfully repurchased the business he had helped so capably grow. His daughter, Jane, is now Board Chairman and part-owner. Krouse attributes a quote from her that goes, “We’re not a family business. We’re a business of family.”
And sense of family is a strong aspect of business attention. Krouse says it is imparted in the way professional peers interact with one another, and carries through in the manner that franchise partners work within their respective communities. They partner with school lunch programs and church gatherings and initiatives where elements of family gather.
As for future gathering, Krouse says present emphasis includes markets in Virginia and Washington D.C.
While the plan is very much about growing through franchising, Krouse asserts that it isn’t about numbers, but doing things the right way and smart way. “We want to be the growing and beloved pizza brand, fueled by happy and engaged associates … supported by world class systems and products,” he says.
And building a future doesn’t mean forsaking the past, notes Krouse while reminding, “A business built on principles is good business.”