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Whopper Of A Turnaround: At Burger King, The 3G Capital Model Actually Worked

Challenge: Make a 60-year-old ham­bur­ger chain into something cool. Daniel Schwartz accepted that assignment six years ago after 3G Capital took over Burger King and named Schwartz chief executive. He was 32.

Burger King was a tired outfit, with a confusing menu and sales going sideways. Its restaurants averaged half the revenue of McDonald’s. But where there is underperformance, there is ­opportunity. Schwartz slashed overhead at the Miami headquarters. He streamlined food preparation. He dished out stock to middle managers. He shrank the payroll and the capital budget by selling company-owned stores to franchisees.

In the years since, Burger King has become Restaurant Brands International (following some more classic 3G dealmaking). Restaurant Brands is now a growth stock. Bur­ger King opened up 1,000 restaurants around the globe last year, to 600 for McDonald’s. McDonald’s stores still have a bigger average volume, but Burger King’s are gaining on them; in the U.S., BK boosted its average volume per outlet by 30%, to $1.4 million, while McDonald’s had a gain of only 20%. All of Burger King’s success is, of course, in stark contrast to what’s going on at Kraft Heinz, another 3G turnaround that went the other way. In February, Kraft Heinz said it was taking a $15.4 billion write-down, a signal that its classic food brands were losing value.

The situation is different at Burger King. At the parent-company level, where revenue consists mostly of franchise fees, Restaurant Brands took in $5.4 billion last year, up 17% from 2017. McDonald’s revenue was off 8%.

“How many companies that have been around since the 1950s grow the top line at 10%?” says Schwartz, 38.

For a fast-food conglomerate that oversees 26,000 locations with combined sales of $32 billion, Restaurant Brands is quite agile. Three months ago the company introduced the Whopper Detour promotion, in which Burger King offered its signature item for a cent if the customer ordered food on the BK phone app within 600 feet of a McDonald’s location. In February came the 45-second Super Bowl ad featuring historic footage of Andy Warhol slowly unwrapping and methodically eating a Whopper. The BK app topped the charts in Apple’s App Store during the campaign; throughout the Super Bowl, “Andy Warhol” was the most searched term on Google.

Maybe Schwartz can even make his ham­bur­ger chain cool enough for New Age customers. Plans are under way to introduce a plant-protein patty from Impossible Foods, the startup backed by investors like Bill Gates and the venture capital arm of Alphabet. This is a big deal for Impossible, with an expected rollout in 7,000 Burger Kings soon.

The past decade has been a whirlwind for Schwartz, who combined a certain amount of luck—in the right place at the right time—with a large amount of energy. A lanky guy who has a big smile and a tendency to speak with his hands, Schwartz left Cornell in 2001 with a degree in applied economics. Four years later, he landed a job at 3G Capital, the private equity firm that became famous for engineering the Anheuser-Busch InBev merger (and later infamous for the sickly Kraft Heinz merger).

Schwartz became a 3G partner at 27. “The group believes in investing in young people and giving them opportunities,” he says. “I worked hard and proved that I really cared. More so than anything else, I put the business and the firm ahead of myself.” His wife tolerated the long hours, perhaps because, as a physician in residency, she worked late too.

A Burger King restaurant with the brand's new look.

McDonald’s has ruled as America’s top burger for decades, but Burger King is making gains with newly refurbished locations made to resemble this conceptual drawing.

Schwartz went hunting for deals. Burger King looked intriguing. “I’d ask my wife or my mom, ‘If McDonald’s is worth $70 billion, what do you think Burger King is worth?’ They’d say, ‘$30 billion?’ ” Schwartz recalls.

Paying a 46% premium for the publicly traded shares, 3G acquired the chain for $4 billion, ­including debt. Schwartz then raised his hand to help run it. “I wanted to be part of this. And I didn’t want to just sit in an office and get monthly reports.”

At 29, Schwartz became BK’s chief financial ­officer. He sold the corporate jet. He told employees to use Skype to make free international calls. And to get a feel for the whole business, he worked shifts off and on at Miami Burger Kings, cleaning toilets, cooking burgers and manning the drive-thru.

In 2012, 3G took Burger King public again, and Schwartz got the chief executive slot in June 2013. In the next 18 months, Burger King stock doubled, while McDonald’s lost 8%.

Focused as he was on selling hamburgers, he hadn’t left behind his deal-making instincts. ­Rechristened Restaurant Brands, his company ­acquired Canadian coffee chain Tim Hortons in 2014. In 2017 it spent $1.8 billion in cash to get the Popeyes chicken chain.

Warren Buffett is a fan, having put up $3 billion in equity to help finance the Hortons deal. So is Bill Ackman, whose Pershing Square hedge fund owns 5% of the stock; 3G owns 41%.

The second-largest shareholder: the employees, with more than 5% of stock. Thanks to a match for those who invest their bonuses in RBI shares, nearly all 300 middle managers (average age: 37) own shares; at least 100 have become millionaires. Schwartz is sitting on about $100 million in stock and options.

“I’m comforted as an owner when all of the key employees own a lot of stock,” Ackman says. “It makes them much less focused on short-term things. They’re much more focused on ‘Will this make the business more valuable in five years, ten years?’ ”

Recently, Schwartz was moved up to ­executive chairman, and longtime ­Bur­ger King exec Jose Cil, 49, became CEO. “We take bets on people,” Cil says. “When they are ambitious and willing to work harder than anybody because they’re driven by something beyond a paycheck, they want to do something big.”

Schwartz lives in Florida with his wife and three kids. He has been working out of RBI offices in Miami and Toronto, but now he’s going to be spending more time at the 3G office in New York, with assignments that range beyond the restaurant chains. “I’m not gonna be CEO at another company,” he says. “But we aspire to do more, and over time we can buy another business down the road.”

Or perhaps repair some of the ­businesses that 3G already owns. Could someone who has engineered a turnaround at Burger King work some magic on old ketchup and cheese brands? His diplomatic answer: “Maybe you could ask me that question in six months, when I ­hopefully get a little bit closer to the business of Kraft Heinz.”

3G’s business is as much about building as buying and selling. Schwartz says: “Most traditional investment firms, if they were in our shoes, probably would have sold [RBI] many years ago. Not only did we not sell, we bought more brands along the way. We are building this into a big company with a long-term mindset.”

Follow Chloe on Twitter and Instagram.

I cover all things food and drink as a staff writer at Forbes, from billionaires and ag tech startups to CPG entrepreneurs and wine. I head up the 30 Under 30 Food an

Source: Whopper Of A Turnaround: At Burger King, The 3G Capital Model Actually Worked

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This Ex-Googler Built What Is Now A $6 Billion Business And Raised $400 Million For His Next Company

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Many entrepreneurs seem to struggle with following what they are passionate about, versus creating startups just for the money.

Mohit Aron went with passion, co-founded a company that successfully completed an IPO with a valuation of more than $6 billion today, and has raised more than $400 million for a second venture which has already surpassed the billion dollar valuation.

After getting his Ph.D. from Rice University in Houston, Mohit made the move to the Valley. After a stint at Google where he was one of the early employees, he has gone on to create highly impactful ventures that have become a large part of the DNA of our tech today.

In a recent appearance on the DealMakers podcast, he shared his take on following your gut, when to go solo (and not), why you should sleep more, how to incubate a winning startup idea and the algorithm for hiring great leaders (listen to the full podcast episode here).

Google, Hyper-Convergence & Taking Time to Think

Mohit was one of Google’s early tech guys and received, as a result, Google shares at $2 per share. He was responsible for managing a team that had the goal of innovating in the file storage space. Selling those shares gave him financial freedom, and refusing just to stay comfortable he ventured out into building companies from the ground up himself.

Mohit takes a very different approach to cultivate startup ideas than most. Rather than jumping on the first idea, running with it and then getting an office, he has taken the time to build the architecture of those ideas and really get clarity before diving in.

For Nutanix, which became one of the early unicorns, hitting a $6 billion valuation and going public, he first rented office space just to develop and crystallize the idea.

Again, avoiding the seductiveness of getting too comfortable, he began working on his next venture, Cohesity, even before his previous company went public. There he repeated the brainstorming process before creating a new tech success, which raised $15 million in Series A funding from Sequoia in just two days.

Cohesity, a modern data management company, empowers enterprises to back up, manage, store and derive insights from their data and apps, has now raised more than $400 million, including $250 million from its latest Series D round. Investors in the company include Accel, Sequoia, Battery, Cisco Investments, Hewlett Packard Enterprise, Google Ventures, Foundation Capital, Trinity Ventures, Qualcomm Ventures, and the SoftBank Vision Fund to name a few.

The Algorithm for Hiring Great Leaders

Cohesity just celebrated hitting 1,000 employees. Mohit has found huge respect for the recruiting process and putting teams of great leaders in place.

He went into Nutanix with cofounders and then went solo on his second venture, a move he only recommends after you’ve had the experience of launching a startup with others.

Still, he admits it was a steep learning curve, especially when it came to hiring. Most notably there is a big difference in hiring technical and business staff. Today, he says if he started a new venture he would raise $1 million, and use the first $300k of that to use an executive recruiter to source three great executives.

Mohit says he learned the hard way on how to hire leaders. Now he uses a three-tiered process that starts with a comprehensive checklist. This outlines who you want from a resume perspective, the type of leader you need for this stage in your company, and the experience they should have. Maybe you want the person coming from a startup. Maybe you want a person who has done zero to $200 billion in revenue before. Then you have a list of candidates that meet your pre-interview checklist.

Then you go through an interview looking for specific things and asking specific questions. One thing you look for in an interview is that this leader is a great people-person and is a great culture fit. Once the person meets at least 80% of the checklist you have formed for the interview, then comes the post-interview checklist.

The post-interview checklist is all about references. Specifically from either people who reported to that leader or people who’ve been peers of that leader, because those are the one who tells you the truth. They will tell you any red flags.

Go with Your Gut

Mohit warns that “when you hire the wrong person, especially when that person is a wrong leader, that sets the company back at least six months if not more. The damage done is immense.”

He believes the body has a way to tell you if something bad is about to happen, and strongly recommends people listen to their gut. If everything else is pointing in one way, but your gut is saying something else, he says listen to your gut. Don’t hire the leader, and go with your gut and look for the next one. Conversely, sometimes the gut says that this is a great hire, and that’s where, as long as they’ve sort of met the checklists and there’s not a huge red flag there, then go with the gut.

Look at their enthusiasm. Look at the person’s willingness to learn. Those bets can be very rewarding.

What Do You Do With All That Wealth?

Mohit no longer does companies for money. He does it for passion. Along the way, he says it ’s also very gratifying to give back. That starts with what you’ve learned. He says “knowledge is free. Knowledge should not be for sale. So, I freely distribute to anyone who comes to me for advice on how to do companies.”

He gives lectures to share this information. The other part of giving is just financially. He’s given to charitable organizations. He and his wife have a structure set up that when they pass away, a bulk of their wealth is actually going to go into a charity.

As a company, his firm gives to a local foundation in San Jose that takes care of providing jobs to young people. He’s also given to Rice University and the Institute of Technology in Delhi which he attended.

He says “life is about giving, and I think giving brings you pleasure. Unlike what people believe, accumulation isn’t always very pleasing, but giving can be very fulfilling.”

Listen in to the full podcast episode for all the details, as well as how to contact him directly with your ideas and questions (listen to the full podcast episode here).

Alejandro Cremades is a serial entrepreneur and author of best-seller The Art of Startup Fundraising, a book that offers a step-by-step guide to today‘s way of raising money for entrepreneurs.

I am a serial entrepreneur and the author of the The Art of Startup Fundraising. With a foreword by ‘Shark Tank‘ star Barbara Corcoran, and published by John Wiley &…

Source: This Ex-Googler Built What Is Now A $6 Billion Business And Raised $400 Million For His Next Company

The Business Case for Positive Company Culture

Carin Taylor, chief diversity officer at Workday, shared some of the results during a Business Leader Forum at the most recent Workday Rising. Nearly 40 percent of all respondents indicated that unfairness or mistreatment played a major role in their decision to leave a company; 30 percent of women of color felt they had been passed up for a promotion; and a large percentage of Asian and Caucasian men and women felt they were treated unfairly by leadership and management…………

Source: The Business Case for Positive Company Culture

The Benefits of Encouraging Creativity and Innovation in the Workplace

creativity

Creativity is essential for any organization if you want to keep your business moving forward.

There are numerous organizations that have designed a cool, funky, creative environment for their employees to help them relax and spark creative thinking to get their projects moving forward.

Some organizations go as far as having regular brainstorming sessions when working on a project to allow employees to contribute and build on a project. This creates immense engagement as their team members have a say and they are involved in the creative process.

Just by supporting open-mindedness, setting up an inspirational environment and offering the right rewards, you can get the creative juices of your team members flowing like never before.

Thinking outside of the box can work wonders

Why is it so important to broaden mental horizons? Thinking outside of the box generates excitement, passion and creativity. Additionally, teamwork is oftentimes essential when coming up with outstanding ideas and solutions, as two heads are better that one. We perform better when we collaborate and when we look at the number one human need that activates the heart, it is connection.

When you look at it from a decision-making perspective, imagine how many ideas and decisions you can collect from putting together a creative environment where people actually are encouraged to think on their own two feet. Treat your team members like the creative human beings they are, listen to their point of view and support them in developing their imaginations. Feed creativity by asking questions and build your ideas with the help of insight from others.

To create big ideas, you have to create the space and encourage that sort of behavior and culture. If you want your teams to think creatively, you need to motivate them with some form of reward.

Dopamine, curiosity and creativity

When exposed to a reward stimulus, your brain responds by increasing a release of the neurotransmitter dopamine that is well known for its role in movement, motivation and pleasure.

Bring it on! Your teams will magically come up with creative ways of improving the workplace, fostering imagination and solving problems. Increasing one’s imagination creates possibilities and can enable a person to pursue and accomplish many great goals.

Creativity also increases curiosity that drives the desire to learn. It opens up the mind to unexplored paths. Can you imagine a workplace now without encouraged creativity?


Related: 4 Creative Ways to Motivate Your Employees

Start solving your problems by encouraging creativity

If creativity is fueled by passion, then you need to focus on honing individual talents in order to express creativity and have your employees reach their fullest potential. A lack of such action is how employees become disengaged from any organization. They don’t feel valued because the organization is not using their talents and strengths; they become bored and always feel tired.

If you want happy, productive and prized members in your team, you need to start igniting their creativity to get them motivated.

Here are some examples to get started:

  1. Creative environment: first, create an environment that encourages creativity. You could decorate one area of your office with some nice, bright colors and designate that area to your employees, giving your team some sense of ownership
  2. Work hard, play harder: allow your team to play. You can have colored markers, flip charts, Lego, play dough, paint, music and anything that sparks the creative process during brainstorm sessions
  3. Brainstorming: set a fortnightly meeting where you can brainstorm and work on a problem or project. This gives your team the right intention before entering your meeting
  4. Goal board: create a board where you have goals or strategies that your company is striving for and each week you can focus on one goal or problem to solve or work on
  5. Homework and teamwork: you may give your team some pre-work where you have one agenda for the meeting and they all have to come into this meeting with one suggestion or solution to your goal or problem
  6. Reward creativity: of course, this followed with a reward for the best suggestion or solution that your team is all agreed upon. This is just as important as the implementation of the suggestion or idea
  7. Establish engaging rewards: incentive could be movie tickets, a bottle of wine, a Thai massage, a voucher or money. You could even go a step further and have a board to acknowledge and encourage creative thinking

What can management gain from creativity in the workplace?

Developing a creative culture takes time and it begins with management, being more open-minded and less judgmental to the suggestions of their team. Patience is a virtue; you need to allow time for your team members to develop their creativity in the organization and to put their ideas together to find optimum solutions.

Most leaders are expected to think creatively and come up with innovative solutions to organizational problems. However, by cultivating and utilizing the creative abilities of your team, it is likely to produce an even more prosperous selection of creative ideas and solutions to organizational problems.

Do you know why? We all think differently. A diverse group collectively possesses knowledge and a variety of perspectives; this goes back to why two heads are better than one.

The benefits of creativity in the workplace are countless; here are just a few examples of the amazing results you will experience:

  • Increased engagement
  • Increased interaction
  • Increased staff morale
  • Increased passion
  • Increased motivation
  • Increased problem solving
  • Increased productivity
  • Increased team bonding and collaboration

Catherine Plano

Executive Coach at Catherine Plano
International executive coach Catherine Plano has fully dedicated her entire life to helping others transform their own lives into greatness. With more than two decades of flourishing corporate activity, countless renowned companies lead and 100,000 lives touched through spiritual and mental reinvention, she continues her mission of aiding companies and individuals in becoming aware of their limitless potential and using their extraordinary abilities to achieve their desired outcomes. She is also the author of “Getting to the Heart of the Matter: The No-Nonsense Guide to Professional& Personal Transformation.

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