Bill Gregson, CEO of Cara Operations. Photo: Thomas Dagg
Turnarounds are a bit of a specialty for Bill Gregson. In 2009, he became CEO of the Brick at a time when the company was reeling from the recession. With support from Fairfax Financial, Gregson repaired the balance sheet and sold the revitalized chain to rival Leon’s in 2012.
Cara Operations was in a similar spot when he joined a year later. A privatization by the founding Phelan family left Cara saddled with debt and unable to invest adequately in its restaurant portfolio.
Cara is on better financial ground today, thanks to a 2015 IPO, also supported by Fairfax. Now Gregson has to ensure the company’s 11 brands stay relevant to Canadian diners.
In March, Cara purchased St-Hubert, the Quebec-based rotisserie chicken chain. For founder Jean-Pierre Léger, that company is his baby. So what makes Cara the right fit for St-Hubert?
Yeah, it’s his whole life. Jean-Pierre loves it and loves the people there, and he’s proud of what he has built. What I liked is that he said that he wanted to leave a legacy of growth and was looking for a company that would enable St-Hubert to have the greatest growth. So a private equity firm probably wasn’t that partner. But he also looked at the fact that there are a lot of similarities between Swiss Chalet and St-Hubert. There are differences, too—the greatest being St-Hubert is in Quebec and not many other places. And Swiss Chalet isn’t in Quebec at all. So we’re creating this Big Chicken solution for all of Canada.
St-Hubert sells branded food products in grocery stores, which must have been attractive from your perspective. What are the opportunities for Cara?
Jean-Pierre pioneered selling restaurant brands at the retail level. St-Hubert does it better than anybody in Canada. They have two factories in Quebec, and those factories aren’t anywhere close to capacity. They’re 50% to 60% full. The further you get from Quebec’s borders, the less the St-Hubert brand means to consumers, so they really only have an Ontario and a Quebec food retail business. With Cara, we can have a national food retail business with all our brands.
Swiss Chalet already has some products in grocery stores. Why has St-Hubert managed to do a better job?
They focused on it. We do very, very little in grocery. St-Hubert has dedicated teams and does most of its own manufacturing. It’s now a business that’s north of $ 100 million. We have zero know-how on that. Rather than us taking 10 years to get there on our own, we get to leapfrog ahead.
So we’ll see a lot more Swiss Chalet–branded products in grocery stores?
Yeah. Swiss Chalet, Montana’s, New York Fries, Harvey’s, Milestones, East Side Mario’s—a lot of our brands have good consumer recognition, so that’s the opportunity.
You have a reputation as a turnaround executive. When you arrived at Cara in 2013 from the Brick, what needed turning around?
The company wasn’t as profitable as it should have been, and the balance sheet was in pretty bad shape. But Cara has some iconic brands and a lot of people here who know how to run restaurants. We had to take what I’ve learned from turning around companies and growing them, and what the people here know about getting 100 million meals into Canadians’ bellies every year, and mesh those skill sets. One thing we did was just look at what we and the franchisees pay for all supplies, and go out and requote it and begin to lower costs. And we looked at getting more people into our restaurants. That’s why we did a partnership with the Scene card, so people can redeem points at our restaurants. We’re still looking for more partnerships. You can’t turn things around just through cutting costs. You have to make the top line grow.
You’ll grow partly through acquisitions, too. What kind of company makes a good fit for Cara?
We have to like the people and they have to like us. So far, in every acquisition we’ve done, whether it’s New York Fries or St-Hubert, we’ve kept the talent. We have separate operations teams, marketing teams and chefs for each of our brands. If we have four of our restaurants in a row on one street, four different operators go in there and there are four different executive chefs who have thought about the menus. We don’t try to save money that way. There will be some supervision on our part of some financial stuff and real estate, but not oversight of how you run your business. If you don’t like that, then it’s not going to work.
But if you can understand that we’re going to provide a menu of advantages—cost advantages, sales opportunities and so on—then it’s up to you to pick what you want to take advantage of. We also provide a bunch of other brands that restaurant operators can talk to. They can see what anyone else is doing. Restaurateurs love getting the behind-the-scenes look because it’s a great way to learn.