WEBVTT - Former Dunkin' Donuts CEO on New Book 0:00:00.400 --> 0:00:04.080 You're listening to Bloomberg Business Week with Carol Masser on 0:00:04.200 --> 0:00:07.560 Bloomberg Radio. Yes, indeed, Bloomberg Business Week on this Friday, 0:00:07.600 --> 0:00:11.360 Carol Masser along with Paul Sweeney today. And if you 0:00:11.720 --> 0:00:15.640 begin with the introduction of this book that is just out, 0:00:15.760 --> 0:00:18.439 it says every morning, five million people around the world 0:00:18.520 --> 0:00:21.599 start their day with a cup of Duncan Donuts coffee. 0:00:22.360 --> 0:00:24.919 We know it, I know it well. Uh, it is 0:00:25.120 --> 0:00:28.320 a family business. Was a family business started by our 0:00:28.320 --> 0:00:31.440 next guest's dad, and it's one that he took over 0:00:31.520 --> 0:00:34.839 in his twenties and was a CEO at Duncan Donuts 0:00:34.840 --> 0:00:38.360 for thirty five years. Robert Rosenberg is the former CEO 0:00:38.400 --> 0:00:40.320 of Duncan. He's got a new book at Around the 0:00:40.360 --> 0:00:43.000 Corner to Around the World, A Dozen Lessons I Learned 0:00:43.360 --> 0:00:45.920 running Duncan Donuts. He's also served on the boards of 0:00:45.920 --> 0:00:48.920 Sonic as well as Domino Sonic. We actually talked to 0:00:48.920 --> 0:00:52.440 the former CEO, Clifford Hudson earlier this week, and Robert 0:00:52.520 --> 0:00:55.000 joins us on the phone from Martha's Vineyard. Robert, welcome 0:00:55.040 --> 0:00:59.520 to Bloomberg Radio. My pleasure than well, it's nice to 0:00:59.520 --> 0:01:02.640 have you. You're with us you have had quite a tenure. 0:01:02.800 --> 0:01:05.600 I'm just curious when you took over at the age 0:01:05.600 --> 0:01:09.000 of twenty five did you was there ever any doubt 0:01:09.080 --> 0:01:10.600 that this is what you were going to do, and 0:01:10.640 --> 0:01:13.800 what was it like to step into that position at 0:01:14.040 --> 0:01:17.360 what most would consider a pretty young age. It was 0:01:17.400 --> 0:01:20.559 a breath taking But I did expect. I did expect 0:01:20.560 --> 0:01:22.840 to join the family business. I sort of grew up 0:01:22.840 --> 0:01:25.240 over the store, so figurative late so I did all 0:01:25.319 --> 0:01:28.880 kinds of jobs, went to hotel school, and went into 0:01:28.920 --> 0:01:31.320 the army, went back to graduate school. But I mean 0:01:31.360 --> 0:01:33.640 I did a number jobs, so I knew the business. 0:01:33.640 --> 0:01:36.600 But I mean I never expected at twenty five to 0:01:36.720 --> 0:01:39.280 be to be in a posential to have to assume 0:01:39.360 --> 0:01:42.720 responsibility for the overall business. So Robert, when you do 0:01:42.760 --> 0:01:47.560 assume the top job at the age of instanted to know, well, 0:01:47.840 --> 0:01:50.920 how did you think about surrounding yourself in terms of 0:01:51.280 --> 0:01:55.520 a team. Presumably you'd look for some folks you've not 0:01:55.600 --> 0:01:58.200 only trusted, but that maybe had some skill sets you 0:01:58.240 --> 0:02:00.120 didn't have. How did you build that first team when 0:02:00.120 --> 0:02:02.760 you were there? Some of them I inherited and they 0:02:02.760 --> 0:02:05.920 were terrific, But I had an opportunity while I was 0:02:05.960 --> 0:02:08.680 in graduate school to take a look at the company. 0:02:08.760 --> 0:02:11.960 I had studied strategy and I took retailing under a 0:02:12.000 --> 0:02:14.520 wonderful teacher by name of Walter Salmon. So I had 0:02:14.560 --> 0:02:17.440 an opportunity that the company I took up wasn't called Dunkadon, 0:02:17.600 --> 0:02:20.840 was called Universal Food System, was eight little businesses, sort 0:02:20.880 --> 0:02:24.000 of a Hodge budge. And I had a hunches as 0:02:24.040 --> 0:02:27.400 a kid, as a student that companies can not only 0:02:27.520 --> 0:02:31.799 die as young companies from starvation, not enough capital and 0:02:32.320 --> 0:02:37.080 not enough people, but they can also die of indigestion. 0:02:37.080 --> 0:02:39.359 All right, Now, our company wasn't dying of indigestion, but 0:02:39.480 --> 0:02:42.120 it was certainly suffering from it. So the first thing 0:02:42.120 --> 0:02:44.639 we did as a team was to change the strategy. 0:02:44.720 --> 0:02:47.600 And I also recruited some of my classmates from business 0:02:47.600 --> 0:02:50.079 school right out of Goldman after the Hey they went 0:02:50.200 --> 0:02:53.560 in after we graduated. One of my closest friends went 0:02:53.600 --> 0:02:55.560 to Goldman and took me a year or so to 0:02:55.600 --> 0:02:58.040 get him out, but I ultimately got him out, and 0:02:58.040 --> 0:03:02.799 then he brought another friend from the corporate finance department, 0:03:03.120 --> 0:03:06.880 and so we started to recruit some really extraordinarily talented people. 0:03:06.919 --> 0:03:10.240 Allowed us to punch way beyond our weight in terms 0:03:10.240 --> 0:03:13.040 of a tiny little company. Imagine how hard it was 0:03:13.200 --> 0:03:15.160 to give people to give up jobs at Goldmen to 0:03:15.240 --> 0:03:18.040 come to work for a small donut company and Queensy, 0:03:18.080 --> 0:03:21.840 Massachusetts wasn't easy. Yeah, I bet it must have been interesting. 0:03:22.160 --> 0:03:24.640 You know, when you took over the company, you know 0:03:24.960 --> 0:03:28.160 how big was it, What was the financial state of it? 0:03:28.360 --> 0:03:30.240 You know what kind of growth were you seeing? At 0:03:30.280 --> 0:03:33.720 that point company earned a hundred thousand dollars. It was 0:03:33.760 --> 0:03:37.440 in eight different businesses that were nearing a hundred stores. 0:03:37.480 --> 0:03:39.800 My father bought my uncle out, and my uncle started 0:03:39.800 --> 0:03:43.400 a competitive business. Imagine the dinner conversations about that called 0:03:43.480 --> 0:03:47.240 Mr Doughnut and and they were overtaking us, so that 0:03:47.320 --> 0:03:49.120 one of them, my dad tried to sell the business. 0:03:49.480 --> 0:03:51.400 I traveled with him my second year of business school 0:03:51.440 --> 0:03:53.520 and York to a private equity buyer. He was looking 0:03:53.520 --> 0:03:56.400 to get a million dollars after tacks, as always his dream. 0:03:56.440 --> 0:03:59.760 He was a great educated, weelf made man, wonderful guy, 0:04:00.320 --> 0:04:06.160 um and and so um. That was sort of the 0:04:06.160 --> 0:04:08.120 the lemmas that we were facing at the time when 0:04:08.160 --> 0:04:10.680 I took over. All right, so we talked to us 0:04:10.680 --> 0:04:13.760 about that strategy. In the early years to growth. Was 0:04:13.760 --> 0:04:16.760 it focusing on what you did best, which I'm presuming 0:04:16.880 --> 0:04:20.159 is the donut business. Talked us about your strategy that 0:04:20.480 --> 0:04:23.440 eventually got you to where the company was as a 0:04:23.440 --> 0:04:27.320 more mature company. We basically took the seven or eight 0:04:27.320 --> 0:04:29.560 little businesses and we either closed them down and we 0:04:29.600 --> 0:04:32.320 sold them off, and we took the one diamond in 0:04:32.360 --> 0:04:37.800 the rough, which really um was Duncan, but it was 0:04:37.880 --> 0:04:40.640 more like diners. They sold all kinds of food, scrambled 0:04:40.640 --> 0:04:43.120 eggs in the warning, and they were varied in size 0:04:43.320 --> 0:04:47.400 from eighteen seats to ninety seats. There wasn't anything common 0:04:47.440 --> 0:04:49.679 about it. So we basically decided on a couple of things. 0:04:50.040 --> 0:04:52.800 We were going to focus on one business, focus on 0:04:52.920 --> 0:04:56.040 donuts and coffee, changed the menu. We were going to 0:04:56.160 --> 0:04:59.440 focus in certain markets and build bland and it was 0:04:59.480 --> 0:05:02.960 a stra the g that worked extraordinarily well. We went 0:05:03.040 --> 0:05:06.560 from a hundred thousand pretax profits in five years we 0:05:06.560 --> 0:05:09.080 were at eight hundred thousand pretax profits. We were the 0:05:09.080 --> 0:05:12.960 third company of public after McDonald's Kentucky Fried Chicken. Duncan 0:05:13.080 --> 0:05:15.520 was the third and at the end of the sixties 0:05:15.520 --> 0:05:18.000 when we went public in sixty I mean it was 0:05:18.040 --> 0:05:20.440 a little bit like high tech company. And before you 0:05:20.480 --> 0:05:22.640 know it, the company that we couldn't sell for a 0:05:22.720 --> 0:05:26.320 million and a half dollars before before tax payment was 0:05:26.360 --> 0:05:28.720 now worth I think on my thirtieth birthday something on 0:05:28.800 --> 0:05:32.040 the word of a hundred hundred fifty million dollars market. 0:05:32.839 --> 0:05:37.320 That's amazing. You go ahead, please please go go continue. 0:05:38.720 --> 0:05:42.080 Unfortunate the next five years weren't so successful. A lot 0:05:42.080 --> 0:05:44.719 of focusing began to do the very same time thing. 0:05:44.720 --> 0:05:48.200 My dad changed the strategy, decided we were franchising company 0:05:48.279 --> 0:05:50.920 rather than a donut and coffee company, and I almost 0:05:50.960 --> 0:05:53.920 drove the company off a cliff with everybody following behind me. 0:05:54.480 --> 0:05:57.080 Luckily saw the error of my ways and we were 0:05:57.120 --> 0:05:59.440 able to recover and and that was the beginning of 0:05:59.480 --> 0:06:04.440 really on maturation process of better policies, plans that are listening, 0:06:04.520 --> 0:06:08.280 less arrogance. Uh. It really changed us. We had transformation 0:06:08.800 --> 0:06:11.680 or moments in terms of our management, and we went 0:06:11.839 --> 0:06:14.160 off to the racism for the next twenty years. The 0:06:14.160 --> 0:06:16.279 same team worked together for the next twenty years, and 0:06:16.279 --> 0:06:19.240 we never looked back, Well, what was We've got about 0:06:19.240 --> 0:06:20.479 a minute and then we're gonna do some news and 0:06:20.480 --> 0:06:23.080 come back. But I mean, what was the pressure or 0:06:23.080 --> 0:06:24.560 why did you feel like you had to kind of 0:06:24.640 --> 0:06:29.040 deviate from the strategy, the core strategy. I got seduced 0:06:30.920 --> 0:06:34.840 wrongly by a public market. We were selling US sixty 0:06:34.839 --> 0:06:39.279 times any can you imagine a thirty year old beyond intoxicating? 0:06:39.400 --> 0:06:41.840 And it was seductive. So I decided that we had 0:06:41.839 --> 0:06:44.800 to keep going at fifty percent a year. Wrongly, So 0:06:44.839 --> 0:06:49.279 I was chasing the wrong goals and went weighed beyond 0:06:49.320 --> 0:06:53.960 what our confidence was and began started another food service 0:06:54.000 --> 0:06:56.359 chain called Charles good Light, fish and Chips, and on 0:06:56.480 --> 0:06:59.679 and on. It was negotiating and talking to him about 0:06:59.680 --> 0:07:03.520 opening franchise learning sentence. It was just wrong. It was 0:07:03.560 --> 0:07:06.240 the wrong aiming point. And if you have the wrong 0:07:06.279 --> 0:07:08.919 aiming point and the wrong strategy, it's very little as 0:07:08.960 --> 0:07:11.480 you can build a successful business, and when you've got 0:07:11.520 --> 0:07:13.880 thousands of people and franchise on its in their lives, 0:07:15.120 --> 0:07:18.320 it can be cataclys. So you know one thing I'm 0:07:18.360 --> 0:07:21.560 curious about, Robert, First of all, the for a little 0:07:21.560 --> 0:07:24.440 perspective for everybody, When you did take that CEO job 0:07:24.480 --> 0:07:27.520 back in ninety three, your salary that first year was 0:07:27.920 --> 0:07:30.720 fifteen thousand six hundred dollars, which I wanted to point 0:07:30.720 --> 0:07:34.240 out when I started in journalism some twenty five years ago, 0:07:34.840 --> 0:07:37.440 that was like my first jobs have been when I 0:07:37.480 --> 0:07:39.480 was paid. I think it was a little bit more 0:07:39.480 --> 0:07:42.360 money back then. So listen the book the way you 0:07:42.400 --> 0:07:45.680 write it. You write about six eras, and I'm curious 0:07:45.840 --> 0:07:49.000 if you have a favorite era um during your tenure 0:07:49.040 --> 0:07:50.800 of the company, and if there was a time that 0:07:50.880 --> 0:07:54.960 maybe wasn't so much fun. Well, the time it wasn't 0:07:55.040 --> 0:07:59.520 very much fun was the second as I changed strategy wrongly, 0:08:00.040 --> 0:08:03.480 had the wrong objectives and almost ruined the company, and 0:08:03.520 --> 0:08:05.640 came to the point where the board had said we 0:08:05.640 --> 0:08:07.520 were now a public company, we've had enough of you 0:08:08.560 --> 0:08:10.840 and and we would like you to find a replacement. 0:08:10.840 --> 0:08:12.800 I quickly thought them, I thought that was their job, 0:08:12.840 --> 0:08:15.080 but give me another quarter. I thought we had seen 0:08:15.120 --> 0:08:18.480 the error of our ways, and I in particular, I thought, 0:08:18.520 --> 0:08:21.760 really did come to understand it what we were doing wrong, 0:08:21.840 --> 0:08:26.000 what mistakes were, what our responsibilities as leadership were. And 0:08:26.320 --> 0:08:28.800 luckily they agreed and we never looked back from They 0:08:28.800 --> 0:08:31.320 had the best era. They don't love them, but I 0:08:31.400 --> 0:08:34.000 said the eighties was a good error because it was 0:08:34.040 --> 0:08:37.200 the time that we changed the business in rather dramatic ways, 0:08:38.000 --> 0:08:40.959 some of which worked out wonderfully well, some moderately well, 0:08:42.240 --> 0:08:45.680 but particularly the two things that worked out particularly well. 0:08:46.280 --> 0:08:51.120 One well was a trip to the Philippines where I 0:08:51.200 --> 0:08:53.559 was going to have to explain to the franchise these 0:08:53.600 --> 0:08:56.120 they couldn't take the donuts out of the store, but 0:08:56.240 --> 0:08:58.480 they could, you know, And they were taking them out 0:08:58.520 --> 0:09:04.120 and putting them into theaters and gas stations and convenience stores. 0:09:04.720 --> 0:09:06.920 And when I got there, I found out that the 0:09:07.400 --> 0:09:10.600 wives of the board members were really in business doing this, 0:09:11.120 --> 0:09:13.199 and I didn't have the heart to say no to them. 0:09:13.240 --> 0:09:16.200 And when we started to reconceptualize the business, we began 0:09:16.240 --> 0:09:17.679 to think that maybe they had a better way to 0:09:17.720 --> 0:09:20.600 go to market when you could take the product, whether 0:09:20.679 --> 0:09:23.400 people workshop travel to play a little bit like Coca 0:09:23.440 --> 0:09:26.319 Cola and dad putting it in the bottle, away from 0:09:26.320 --> 0:09:29.040 the soda fountains, selling it everywhere, and that was kind 0:09:29.040 --> 0:09:31.640 of transformational for us. And the other thing was we 0:09:31.760 --> 0:09:34.640 changed the design of our business to to a much 0:09:34.679 --> 0:09:38.320 more self service and that allowed us to really increase 0:09:38.360 --> 0:09:40.400 the amount of coffee and beverage business. And we did 0:09:40.400 --> 0:09:44.280 a shift from being baker excuse me, bakery led to 0:09:44.280 --> 0:09:49.320 the beverage lead and that was a wonderful era. Yeah, so, Robert, 0:09:49.440 --> 0:09:51.559 you talk about it in your book how a company's 0:09:51.600 --> 0:09:55.520 success is determined by how well it adapts to change. 0:09:55.559 --> 0:09:58.560 Here when a lot of change, uh, we're all dealing 0:09:58.600 --> 0:10:00.600 with these days, and so it must be even that 0:10:00.720 --> 0:10:03.520 much more difficult to manage a business. What were some 0:10:03.600 --> 0:10:06.960 of the big I guess pivots you guys maybe had 0:10:06.960 --> 0:10:09.920 to deal with or some big, you know, big events 0:10:10.000 --> 0:10:12.320 that happened that said that said, boy, this is really 0:10:12.360 --> 0:10:14.160 going to impact our business. We need to really pay 0:10:14.160 --> 0:10:18.280 attention here. Well, that's a crisis. In terms of crisis, 0:10:18.320 --> 0:10:21.440 there was probably four or five what I would call 0:10:21.600 --> 0:10:25.599 existential crises. It's going to have spend really spelled the 0:10:25.720 --> 0:10:28.280 end of the business as it existed. The first was 0:10:28.320 --> 0:10:32.520 our contract. We were operating on commissions from supplies, which 0:10:32.679 --> 0:10:36.040 was deemed illegal. Ultimately, before that ever occurred, we changed 0:10:36.040 --> 0:10:38.640 to a royalty system. That was a huge change, and 0:10:39.400 --> 0:10:41.640 when we had two hundred units an there was a 0:10:41.720 --> 0:10:44.560 class action lossus during the seventies. When I told you 0:10:44.640 --> 0:10:47.040 we took our eye off the balls. Some of our 0:10:47.080 --> 0:10:50.520 franchiseess became very disgruntled. They sued us and we would 0:10:50.559 --> 0:10:53.200 declared the class, which would have been cataclismic. At the time, 0:10:53.559 --> 0:10:56.800 the sock was selling an all time low price and 0:10:57.080 --> 0:11:01.280 the basic judgment was about a near a million dollars. 0:11:01.360 --> 0:11:03.079 Much more of the company was worth. That would have 0:11:03.120 --> 0:11:05.600 spelled the end. And then we're in the Hostel take 0:11:05.720 --> 0:11:08.680 over at the end of the eighties, and that was 0:11:08.720 --> 0:11:12.839 a huge ship, so existential threat to the company. Ultimately, 0:11:12.920 --> 0:11:15.120 the the fellow that was trying to take us over 0:11:15.200 --> 0:11:18.439 when lost his empire, and probably w have lost Duncan 0:11:18.480 --> 0:11:21.320 duted if I hadn't found a White Knight, as we 0:11:21.360 --> 0:11:23.560 hadn't found a white Knight to save us at one 0:11:23.600 --> 0:11:26.560 minute to midnight. So there were crises we fit certainly 0:11:26.559 --> 0:11:29.679 nothing like a pandemic, and out of it there are 0:11:29.760 --> 0:11:33.280 lessons Lawrence, how to handle a crisis. Well, you know, 0:11:33.320 --> 0:11:35.360 it's interesting. I feel like as you you talk through 0:11:35.400 --> 0:11:38.200 these stories, it's like one Harvard Business School case study, 0:11:38.720 --> 0:11:42.920 you know after another. Um, I do wonder just real quickly, 0:11:43.240 --> 0:11:46.920 when Starbucks came out in the seventies, were you like, uh, oh, 0:11:46.960 --> 0:11:52.960 now that's it. No, Basically I saw Starbucks as somewhat 0:11:52.960 --> 0:11:56.440 different than Duncan duncalas qs our quick service restaurant from 0:11:56.440 --> 0:12:01.480 featuring convenience and value and people and to go. Starbucks 0:12:01.520 --> 0:12:06.320 was the third place, something between office and home. And 0:12:06.360 --> 0:12:11.200 it was a much more tony offering. I can't pick 0:12:11.280 --> 0:12:13.960 the right exact word, but but it appealed in a 0:12:14.000 --> 0:12:18.120 different way. And and it wasn't so focused on speed 0:12:18.160 --> 0:12:22.800 and convenience and value, much more on ambience and specialty, 0:12:23.160 --> 0:12:26.040 sort of a panache. Now we started to bump into 0:12:26.080 --> 0:12:28.840 each other more recently, but not back in those days 0:12:28.840 --> 0:12:32.120 so much. Robert, I'm sorry, No, go ahead. I'm gonna 0:12:32.120 --> 0:12:34.800 say I've had a lot of egg and bacon on 0:12:34.840 --> 0:12:36.880 a croissant. My husband I can't go into a Duncan 0:12:36.920 --> 0:12:39.079 without getting him some of the old fashioned doughnuts. I 0:12:39.280 --> 0:12:42.240 gotta tell you, Robert, we we have to ask before 0:12:42.280 --> 0:12:44.800 we let you go. What's your favorite donut? Mine is 0:12:44.840 --> 0:12:48.319 Barvarian cream. I love that too. I like a lot, 0:12:48.360 --> 0:12:50.720 but I like a jelly stick or a lemon stick. 0:12:50.800 --> 0:12:52.560 That's that's a cake stick, fill with out a lemon 0:12:52.600 --> 0:12:55.720 and jelly along with Duncan ice coffee. That's my goat. 0:12:57.480 --> 0:13:01.079 I love Duncan Ice Coffee is. I gotta say, that's 0:13:01.120 --> 0:13:03.480 like one of my favorite. What a treat. Good luck 0:13:03.520 --> 0:13:05.920 with your book, and hopefully we can get you back 0:13:05.920 --> 0:13:07.320 here soon because I'd love to talk a little bit 0:13:07.360 --> 0:13:12.200 more about your Yeah, take take care and stay well. 0:13:12.280 --> 0:13:15.920 Robert Rosenberg, former CEO of Duncan there for thirty five 0:13:16.000 --> 0:13:18.400 years Duncan Donuts and his book. Check it out. It's 0:13:18.400 --> 0:13:21.160 a fun read. It's called Around the Corner to Around 0:13:21.160 --> 0:13:23.839 the World. A Dozen Lessons I learned running Duncan Donuts.