Speaker 1: You're listening to Bloomberg Business Week with Carol Masser on
Speaker 1: Bloomberg Radio. Yes, indeed, Bloomberg Business Week on this Friday,
Speaker 1: Carol Masser along with Paul Sweeney today. And if you
Speaker 1: begin with the introduction of this book that is just out,
Speaker 1: it says every morning, five million people around the world
Speaker 1: start their day with a cup of Duncan Donuts coffee.
Speaker 1: We know it, I know it well. Uh, it is
Speaker 1: a family business. Was a family business started by our
Speaker 1: next guest's dad, and it's one that he took over
Speaker 1: in his twenties and was a CEO at Duncan Donuts
Speaker 1: for thirty five years. Robert Rosenberg is the former CEO
Speaker 1: of Duncan. He's got a new book at Around the
Speaker 1: Corner to Around the World, A Dozen Lessons I Learned
Speaker 1: running Duncan Donuts. He's also served on the boards of
Speaker 1: Sonic as well as Domino Sonic. We actually talked to
Speaker 1: the former CEO, Clifford Hudson earlier this week, and Robert
Speaker 1: joins us on the phone from Martha's Vineyard. Robert, welcome
Speaker 1: to Bloomberg Radio. My pleasure than well, it's nice to
Speaker 1: have you. You're with us you have had quite a tenure.
Speaker 1: I'm just curious when you took over at the age
Speaker 1: of twenty five did you was there ever any doubt
Speaker 1: that this is what you were going to do, and
Speaker 1: what was it like to step into that position at
Speaker 1: what most would consider a pretty young age. It was
Speaker 1: a breath taking But I did expect. I did expect
Speaker 1: to join the family business. I sort of grew up
Speaker 1: over the store, so figurative late so I did all
Speaker 1: kinds of jobs, went to hotel school, and went into
Speaker 1: the army, went back to graduate school. But I mean
Speaker 1: I did a number jobs, so I knew the business.
Speaker 1: But I mean I never expected at twenty five to
Speaker 1: be to be in a posential to have to assume
Speaker 1: responsibility for the overall business. So Robert, when you do
Speaker 1: assume the top job at the age of instanted to know, well,
Speaker 1: how did you think about surrounding yourself in terms of
Speaker 1: a team. Presumably you'd look for some folks you've not
Speaker 1: only trusted, but that maybe had some skill sets you
Speaker 1: didn't have. How did you build that first team when
Speaker 1: you were there? Some of them I inherited and they
Speaker 1: were terrific, But I had an opportunity while I was
Speaker 1: in graduate school to take a look at the company.
Speaker 1: I had studied strategy and I took retailing under a
Speaker 1: wonderful teacher by name of Walter Salmon. So I had
Speaker 1: an opportunity that the company I took up wasn't called Dunkadon,
Speaker 1: was called Universal Food System, was eight little businesses, sort
Speaker 1: of a Hodge budge. And I had a hunches as
Speaker 1: a kid, as a student that companies can not only
Speaker 1: die as young companies from starvation, not enough capital and
Speaker 1: not enough people, but they can also die of indigestion.
Speaker 1: All right, Now, our company wasn't dying of indigestion, but
Speaker 1: it was certainly suffering from it. So the first thing
Speaker 1: we did as a team was to change the strategy.
Speaker 1: And I also recruited some of my classmates from business
Speaker 1: school right out of Goldman after the Hey they went
Speaker 1: in after we graduated. One of my closest friends went
Speaker 1: to Goldman and took me a year or so to
Speaker 1: get him out, but I ultimately got him out, and
Speaker 1: then he brought another friend from the corporate finance department,
Speaker 1: and so we started to recruit some really extraordinarily talented people.
Speaker 1: Allowed us to punch way beyond our weight in terms
Speaker 1: of a tiny little company. Imagine how hard it was
Speaker 1: to give people to give up jobs at Goldmen to
Speaker 1: come to work for a small donut company and Queensy,
Speaker 1: Massachusetts wasn't easy. Yeah, I bet it must have been interesting.
Speaker 1: You know, when you took over the company, you know
Speaker 1: how big was it, What was the financial state of it?
Speaker 1: You know what kind of growth were you seeing? At
Speaker 1: that point company earned a hundred thousand dollars. It was
Speaker 1: in eight different businesses that were nearing a hundred stores.
Speaker 1: My father bought my uncle out, and my uncle started
Speaker 1: a competitive business. Imagine the dinner conversations about that called
Speaker 1: Mr Doughnut and and they were overtaking us, so that
Speaker 1: one of them, my dad tried to sell the business.
Speaker 1: I traveled with him my second year of business school
Speaker 1: and York to a private equity buyer. He was looking
Speaker 1: to get a million dollars after tacks, as always his dream.
Speaker 1: He was a great educated, weelf made man, wonderful guy,
Speaker 1: um and and so um. That was sort of the
Speaker 1: the lemmas that we were facing at the time when
Speaker 1: I took over. All right, so we talked to us
Speaker 1: about that strategy. In the early years to growth. Was
Speaker 1: it focusing on what you did best, which I'm presuming
Speaker 1: is the donut business. Talked us about your strategy that
Speaker 1: eventually got you to where the company was as a
Speaker 1: more mature company. We basically took the seven or eight
Speaker 1: little businesses and we either closed them down and we
Speaker 1: sold them off, and we took the one diamond in
Speaker 1: the rough, which really um was Duncan, but it was
Speaker 1: more like diners. They sold all kinds of food, scrambled
Speaker 1: eggs in the warning, and they were varied in size
Speaker 1: from eighteen seats to ninety seats. There wasn't anything common
Speaker 1: about it. So we basically decided on a couple of things.
Speaker 1: We were going to focus on one business, focus on
Speaker 1: donuts and coffee, changed the menu. We were going to
Speaker 1: focus in certain markets and build bland and it was
Speaker 1: a stra the g that worked extraordinarily well. We went
Speaker 1: from a hundred thousand pretax profits in five years we
Speaker 1: were at eight hundred thousand pretax profits. We were the
Speaker 1: third company of public after McDonald's Kentucky Fried Chicken. Duncan
Speaker 1: was the third and at the end of the sixties
Speaker 1: when we went public in sixty I mean it was
Speaker 1: a little bit like high tech company. And before you
Speaker 1: know it, the company that we couldn't sell for a
Speaker 1: million and a half dollars before before tax payment was
Speaker 1: now worth I think on my thirtieth birthday something on
Speaker 1: the word of a hundred hundred fifty million dollars market.
Speaker 1: That's amazing. You go ahead, please please go go continue.
Speaker 1: Unfortunate the next five years weren't so successful. A lot
Speaker 1: of focusing began to do the very same time thing.
Speaker 1: My dad changed the strategy, decided we were franchising company
Speaker 1: rather than a donut and coffee company, and I almost
Speaker 1: drove the company off a cliff with everybody following behind me.
Speaker 1: Luckily saw the error of my ways and we were
Speaker 1: able to recover and and that was the beginning of
Speaker 1: really on maturation process of better policies, plans that are listening,
Speaker 1: less arrogance. Uh. It really changed us. We had transformation
Speaker 1: or moments in terms of our management, and we went
Speaker 1: off to the racism for the next twenty years. The
Speaker 1: same team worked together for the next twenty years, and
Speaker 1: we never looked back, Well, what was We've got about
Speaker 1: a minute and then we're gonna do some news and
Speaker 1: come back. But I mean, what was the pressure or
Speaker 1: why did you feel like you had to kind of
Speaker 1: deviate from the strategy, the core strategy. I got seduced
Speaker 1: wrongly by a public market. We were selling US sixty
Speaker 1: times any can you imagine a thirty year old beyond intoxicating?
Speaker 1: And it was seductive. So I decided that we had
Speaker 1: to keep going at fifty percent a year. Wrongly, So
Speaker 1: I was chasing the wrong goals and went weighed beyond
Speaker 1: what our confidence was and began started another food service
Speaker 1: chain called Charles good Light, fish and Chips, and on
Speaker 1: and on. It was negotiating and talking to him about
Speaker 1: opening franchise learning sentence. It was just wrong. It was
Speaker 1: the wrong aiming point. And if you have the wrong
Speaker 1: aiming point and the wrong strategy, it's very little as
Speaker 1: you can build a successful business, and when you've got
Speaker 1: thousands of people and franchise on its in their lives,
Speaker 1: it can be cataclys. So you know one thing I'm
Speaker 1: curious about, Robert, First of all, the for a little
Speaker 1: perspective for everybody, When you did take that CEO job
Speaker 1: back in ninety three, your salary that first year was
Speaker 1: fifteen thousand six hundred dollars, which I wanted to point
Speaker 1: out when I started in journalism some twenty five years ago,
Speaker 1: that was like my first jobs have been when I
Speaker 1: was paid. I think it was a little bit more
Speaker 1: money back then. So listen the book the way you
Speaker 1: write it. You write about six eras, and I'm curious
Speaker 1: if you have a favorite era um during your tenure
Speaker 1: of the company, and if there was a time that
Speaker 1: maybe wasn't so much fun. Well, the time it wasn't
Speaker 1: very much fun was the second as I changed strategy wrongly,
Speaker 1: had the wrong objectives and almost ruined the company, and
Speaker 1: came to the point where the board had said we
Speaker 1: were now a public company, we've had enough of you
Speaker 1: and and we would like you to find a replacement.
Speaker 1: I quickly thought them, I thought that was their job,
Speaker 1: but give me another quarter. I thought we had seen
Speaker 1: the error of our ways, and I in particular, I thought,
Speaker 1: really did come to understand it what we were doing wrong,
Speaker 1: what mistakes were, what our responsibilities as leadership were. And
Speaker 1: luckily they agreed and we never looked back from They
Speaker 1: had the best era. They don't love them, but I
Speaker 1: said the eighties was a good error because it was
Speaker 1: the time that we changed the business in rather dramatic ways,
Speaker 1: some of which worked out wonderfully well, some moderately well,
Speaker 1: but particularly the two things that worked out particularly well.
Speaker 1: One well was a trip to the Philippines where I
Speaker 1: was going to have to explain to the franchise these
Speaker 1: they couldn't take the donuts out of the store, but
Speaker 1: they could, you know, And they were taking them out
Speaker 1: and putting them into theaters and gas stations and convenience stores.
Speaker 1: And when I got there, I found out that the
Speaker 1: wives of the board members were really in business doing this,
Speaker 1: and I didn't have the heart to say no to them.
Speaker 1: And when we started to reconceptualize the business, we began
Speaker 1: to think that maybe they had a better way to
Speaker 1: go to market when you could take the product, whether
Speaker 1: people workshop travel to play a little bit like Coca
Speaker 1: Cola and dad putting it in the bottle, away from
Speaker 1: the soda fountains, selling it everywhere, and that was kind
Speaker 1: of transformational for us. And the other thing was we
Speaker 1: changed the design of our business to to a much
Speaker 1: more self service and that allowed us to really increase
Speaker 1: the amount of coffee and beverage business. And we did
Speaker 1: a shift from being baker excuse me, bakery led to
Speaker 1: the beverage lead and that was a wonderful era. Yeah, so, Robert,
Speaker 1: you talk about it in your book how a company's
Speaker 1: success is determined by how well it adapts to change.
Speaker 1: Here when a lot of change, uh, we're all dealing
Speaker 1: with these days, and so it must be even that
Speaker 1: much more difficult to manage a business. What were some
Speaker 1: of the big I guess pivots you guys maybe had
Speaker 1: to deal with or some big, you know, big events
Speaker 1: that happened that said that said, boy, this is really
Speaker 1: going to impact our business. We need to really pay
Speaker 1: attention here. Well, that's a crisis. In terms of crisis,
Speaker 1: there was probably four or five what I would call
Speaker 1: existential crises. It's going to have spend really spelled the
Speaker 1: end of the business as it existed. The first was
Speaker 1: our contract. We were operating on commissions from supplies, which
Speaker 1: was deemed illegal. Ultimately, before that ever occurred, we changed
Speaker 1: to a royalty system. That was a huge change, and
Speaker 1: when we had two hundred units an there was a
Speaker 1: class action lossus during the seventies. When I told you
Speaker 1: we took our eye off the balls. Some of our
Speaker 1: franchiseess became very disgruntled. They sued us and we would
Speaker 1: declared the class, which would have been cataclismic. At the time,
Speaker 1: the sock was selling an all time low price and
Speaker 1: the basic judgment was about a near a million dollars.
Speaker 1: Much more of the company was worth. That would have
Speaker 1: spelled the end. And then we're in the Hostel take
Speaker 1: over at the end of the eighties, and that was
Speaker 1: a huge ship, so existential threat to the company. Ultimately,
Speaker 1: the the fellow that was trying to take us over
Speaker 1: when lost his empire, and probably w have lost Duncan
Speaker 1: duted if I hadn't found a White Knight, as we
Speaker 1: hadn't found a white Knight to save us at one
Speaker 1: minute to midnight. So there were crises we fit certainly
Speaker 1: nothing like a pandemic, and out of it there are
Speaker 1: lessons Lawrence, how to handle a crisis. Well, you know,
Speaker 1: it's interesting. I feel like as you you talk through
Speaker 1: these stories, it's like one Harvard Business School case study,
Speaker 1: you know after another. Um, I do wonder just real quickly,
Speaker 1: when Starbucks came out in the seventies, were you like, uh, oh,
Speaker 1: now that's it. No, Basically I saw Starbucks as somewhat
Speaker 1: different than Duncan duncalas qs our quick service restaurant from
Speaker 1: featuring convenience and value and people and to go. Starbucks
Speaker 1: was the third place, something between office and home. And
Speaker 1: it was a much more tony offering. I can't pick
Speaker 1: the right exact word, but but it appealed in a
Speaker 1: different way. And and it wasn't so focused on speed
Speaker 1: and convenience and value, much more on ambience and specialty,
Speaker 1: sort of a panache. Now we started to bump into
Speaker 1: each other more recently, but not back in those days
Speaker 1: so much. Robert, I'm sorry, No, go ahead. I'm gonna
Speaker 1: say I've had a lot of egg and bacon on
Speaker 1: a croissant. My husband I can't go into a Duncan
Speaker 1: without getting him some of the old fashioned doughnuts. I
Speaker 1: gotta tell you, Robert, we we have to ask before
Speaker 1: we let you go. What's your favorite donut? Mine is
Speaker 1: Barvarian cream. I love that too. I like a lot,
Speaker 1: but I like a jelly stick or a lemon stick.
Speaker 1: That's that's a cake stick, fill with out a lemon
Speaker 1: and jelly along with Duncan ice coffee. That's my goat.
Speaker 1: I love Duncan Ice Coffee is. I gotta say, that's
Speaker 1: like one of my favorite. What a treat. Good luck
Speaker 1: with your book, and hopefully we can get you back
Speaker 1: here soon because I'd love to talk a little bit
Speaker 1: more about your Yeah, take take care and stay well.
Speaker 1: Robert Rosenberg, former CEO of Duncan there for thirty five
Speaker 1: years Duncan Donuts and his book. Check it out. It's
Speaker 1: a fun read. It's called Around the Corner to Around
Speaker 1: the World. A Dozen Lessons I learned running Duncan Donuts.