Pal's Sudden Service

Pal’s sudden service

Company Details:

Pal’s sudden service drive through

• Regional presence in: Eastern tennesse and sountwestern Virginia
• Started in 1950’s – expanded slowly and carefully
• Added around 20 stores in last 25 years
• Total outlets - 28 stores
• Cars exiting – one every 18 seconds
• Waiting times – from entering the queue to receiving their order: < 3 minutes
• No seating, walking or drive, in premises or off
• Each unit is 1100 sq ft.
• Key people:

• CEO – Thom Crosby
• Founder and chairma – Pal Barger
• CFO – Rob Thomson
• Head of Procurement – Dean Gionta
• David Mc Klaskey – President of Pal’s Business Excellence Institute
• 900 employees

• LDP – leadership development programme

• 4-6 people each year
• 10 people in the LDP at the moment
• 3-5 years in LDP to become OO

• 7 key business drivers – quality, hospitality, speed, accuracy, cleanliness, value and people

• Typical order size Order for 2 people, 2 sandwiches, 2 sides, 2 drinks – 43 seconds

Financial performance:

1. Second in revenue
2. Highest growth, ROA and revenue per sq. feet
3. Revenue per sq ft – 1975$ vs 833$
4. 416 continuous months of sales and count growth
5. 4 to 7 basis point above the direct competitors growth

Expansion Model:

• Owner/ operator based instead of franchisee based
• Each owner-operator (OO) has the flexibility to control operations, wage, staffing, inventory, design and improve process – menu and price remain constant
• For selecting OO, 12 to 20 interviews by the Crosby
• OO – fixed salary for first 4 years… gradually decreasing fixed part and increasing variable on unit performance, by 4 th year 100% based on performance, sales

Industry:

• Industry revenue – 570 BN $ globally and 200 Bn $ in the US
• Over 200,000 QSR (quick service restaurants) in America
• 50 Mn Americans ate at least once per day
• Growth forecast – 6% globally per year from 2015-19 and 2.5% per year in the US
• Fragmented industry
• $3-$6 per person; fast casual – 8$ - 15$

Menu

Segments:

• Hamburgers        30%
• Pizza        15%
• Sandwiches        12%
• Chicken                8%

For QSR:

• Selected Menu
• In case of menu changes addition, stringent process of selection –

• Principle adherence
• prototyping

• Fast casual is a segment - the fastest growing at 11% , estimated to generate 20Bn $ in the US

• The food truck:

• Over 4000 licensed food trucks in the US
• $ 1.2 Bn
• 12.4% Avg Annual revenue growth 2010-2015
• Popular in city centres and college campuses

Zero Defect:

• Can be achieved by recruiting and training
• 1 per 3600 orders vs industry 1 per 15 order
• Hiring

• written

• Attitude and ethical value
• Psychometric questions
• 100 marks – red, yellow, green

• 1 out of 10 to 12 selection
• 33.8 % attrition against industry 66%
• 2 hrs training on each process
• 135 hours average
• Span upto 6 months

• Training

• Orientation – 2 to 4 hours
• 4 step training process for each of the 15 core processes in the operations – tell, show, practice, evaluate
• Do it themselves
• Flash cards

• tests

• certified – 100%

Next Expansion:

2 reasons:

• Good pool management talent
• Lot of cash to invest

How to expand but keeping culture in tact

 –  25 to 50 models in next 5-10 years

Next Steps for Expansions:

• Continue with the operator – controller model to ensure quality
• Identify the locations for new unit
• Select/Hire for those locations and put them in the LDP program, so that we can develop them to become owner-operator
• Investment on Training – More certified trainers to spend time on training and making operator-controller ready for new sites
• Continue with the stringent menu approval process

Learning for Dr. Reddy’s and

• We can pick up from Zero defect culture which Pal’s is following. Our training needs to be slowly enabled to train everyone to deliver with minimum defects, however,

• Hiring – hiring for key positions needs to be very stringent and more time to be given for attitude and culture fit. Time need not be the only factor for some key positions
• Once identified, invest heavily on training of the employees in the plant – especially who are involved in the lab operations

Questions

• With our size is it possible to invest time and effort in hiring in a similar fashion? Can we do it selectively for some position?
• With our size is it possible to train every one with that precision?
• With the truck and fast casuals coming in, should Pal be looking to get into those modes? But that will affect the USP of the brand – timely delivery, standardization?
• In case of expansion in geography, will they be forced to look at modifying the menu?