Stephen J. Sather: Ops on top
Stephen J. Sather
CEO, president and director of El Pollo Loco Holdings, parent of El Pollo Loco, a QSR chicken chain with over 460 units—two-thirds of them franchised—in
- SVP of operations, El Pollo Loco
- SVP of retail operations, Great Circle Family Foods, a large California franchisee of Krispy Kreme
- COO, Rubio’s Restaurants
- Various other senior posts, Rally’s, La Salsa, Taco Bell
- B.A., business administration, Miami University, Oxford, Ohio
Steve Sather doesn’t have much appreciation for the art of memo writing. In a 40-year restaurant career that will end this year when he retires as CEO of El Pollo Loco, it’s always been the roll-up-your-sleeves aspect of the business—the operations side—that gets the salsa in his veins flowing. And that’s just as true now that he’s heading a $380-million-a-year public corporation as it was when he was standing behind a fast-food counter.
“Operators make very good CEOs because of that operational orientation,” says Sather, who rose to the post from VP of ops, after holding operations roles at Rubio’s, La Salsa and a Krispy Kreme franchise. “They know how to act quickly. They know how to solve problems. The good thing about operations is that you can see the results of an action very quickly and adjust.”
At El Pollo Loco’s Southern California headquarters, the staff has adjusted to moving at what it calls “the speed of Sather,” says VP of Marketing Mark Hardison.
“Steve is decisive and fast-paced,” he explains. “You want to be in good communication, constant communication. He’ll help you try to figure out what to change, to dial up what you need.”
Just don’t put the info into corporate-ese. “Walk down the hall, come into the office, talk to me,” says Sather. “Don’t write me a memo.”
Sather says his skills were given some valuable rounding when he worked at Taco Bell during one of its fast-growth periods. He headed the chain’s extensive nontraditional business in the 1990s, when then-CEO John Martin gave considerable autonomy to subordinates with multiunit responsibilities. Martin boasted at the time that he oversaw a team of CEOs.
“At the area level and above, you got to learn everything—finance, marketing, development,” Sather recalls. He notes that his colleagues in that virtual MBA program included Steve Carley, who just retired as CEO of Red Robin, and Jim Mizes, CEO of Blaze Pizza. “It was a very performance-oriented organization—very much focused on results, which was right up my alley,” says Sather.
Tools for a turnaround
One signature of his leadership style, he says, is an intense focus on metrics. The team at El Pollo Loco relies heavily on dashboards for an instant gauge of how the business is performing, and digesting the metrics is how Sather starts his day.
“I’m very detail-focused on the middle of the P&L,” he explains. “Almost maniacally focused.”
In the same vein, the turnaround he engineered at El Pollo Loco started with generating the right metrics. An early step was doing in-depth research on the brand, including a segmentation study.
At the time, the chain was wheezing. Under a succession of owners with other restaurant brands in their portfolios, it had not been handled like a prize prospect. Stores hadn’t been renovated, the menu was stuck in the past, and franchisees were struggling as a result.
In addition, the company was burdened with a $300 million debt that cost $40 million to service.
The team refinanced the debt twice and lowered the load again when the company went public. One of Sather’s lasting contributions, he acknowledges, was hammering down that IOU to $100 million, with a debt service of $4 million.
Meanwhile, the focus on four-wall fundamentals intensified. Franchisees operate 66% of the chain. Sather gave the hands-on operators a seat on all of the franchisor’s steering committees, aiming to connect what was happening in the field to decisions made in the home office. “They were very happy to see an operator in charge,” he recalls. “I had them come in and teach corporate how to run great restaurants.”
Assuming the position
Sather actually drafted the turnaround plan while the CEO’s job was vacant. He’d been asked by the board to serve as the interim chief, and he responded by drafting a blueprint for a comeback even while the research was still underway. “I changed so many things so quickly that they had to make me CEO,” he jokes.
A priority, he says, was getting the right team together.
The chain’s signature grilled chicken was well-known and favorably perceived, but the menu was lacking popular Mexican staples like burritos. He tapped Heather Gardea, a veteran menu maker, to upgrade the breadth and quality of what was offered.
Ed Valle moved over from Panera as CMO, bringing with him insights into marketing beverages, a perceived opportunity for El Pollo Loco. Larry Roberts came aboard as CFO, managing such key programs as the debt refinancing. More recently, John Dawson was hired as chief development officer, after serving as CEO of The Coffee Bean and Tea Leaf and working at Dunkin’ Donuts and McDonald’s.
Sather is careful to provide mini bios on every senior executive and a recount of their contributions, stressing that the turnaround and El Pollo Loco’s sustained success were the work of a team. He also notes the board is looking in-house as well as externally for his successor.
Together, management has raised El Pollo Loco’s average unit volumes to $1.9 million annually, from $1.5 million, and restaurant margins have improved to a mean of 22%, from 18%.
Sather acknowledges that his approach to wielding talent wasn’t taken from an MBA textbook. “Back in my early corporate days, you’d do an assessment of someone by saying, ‘Tell me your strengths, tell me your weaknesses,’” he explains. Then you’d work on those weaknesses, he adds.
“I recognize their strengths, and make sure they don’t have killer weaknesses, but I keep them out of those areas where they’re weak and put them where they’re strong.”
That also extended to the field. Sather has made a cause of finding the right individuals to run El Pollo Loco restaurants, franchised or company-owned.
“I brought them here to be great operators,” he says. “Not to write memos.”