Bill Phelps has a theory about luck.
Researchers say luck is not that big a factor in a person’s success, said Phelps, sitting in the corporate headquarters of Dave’s Hot Chicken in Pasadena, California. Each office, comically, has some form of the brand’s rubber-chicken-head logo, known as Dave, painted on the walls, reflecting that team member’s passions. In Phelps’ office, rubber-chicken Dave is a golfer.
It’s not luck, Phelps said, explaining his theory, but the return on luck that leads to success. “It’s, if you get lucky, do you take advantage of that in a bigger way?”
In some ways, that could explain how Phelps has become the brand whisperer for so many restaurant chains. He knows how to get a good return on luck.
Phelps co-founded, built, and sold Wetzel’s Pretzels. As an investor, he went on to build and sell Blaze Pizza. Then, he did it again with Dave’s Hot Chicken.
Dave’s, of course, had a particularly happy ending (or new beginning). Phelps and its co-founders famously sold a majority stake to Roark Capital in a deal valued at $1 billion, just eight years after the concept began as a scrappy popup in a Los Angeles parking lot. Phelps remains executive chair and a stakeholder.
Now Phelps is starting the cycle of invest/franchise/grow for a new young brand: the three-unit Mike’s Red Tacos.
And soon there will be more. Another new brand is on deck, though Phelps isn’t ready to reveal the next deal just yet. A third might also be possible, he said.
You could say Phelps got a bit lucky finding (and selling) hit brands as he did over the past three decades. But Phelps, by all accounts, clearly has a knack for identifying a good idea for a restaurant concept and making it work as a business.
“Bill has a sixth sense, you could say, for where trends are going and what will work and won’t work,” said Andrew Feghali, Phelps’ partner in investment firm Four Wall Partners, who was also the first franchisee of Dave’s.
Phelps also now has a well-honed playbook, and a trusted team that knows how to replicate what works (and what doesn’t), especially with very early-stage concepts. And he has a network of franchise operators willing to take risks on very young brands.
“Private equity is good at taking big businesses and growing them dramatically. But they’re not good at scaling small businesses,” said Phelps. “But entrepreneurs need hands-on help. That’s where we come in.”
'Go ahead, make his day.'
The Phelps playbook, however, is about a lot more than good business practice. Each brand has brought its own fundamental lessons about return on investment capital. But Phelps appears to be weaving in a bigger-picture philosophy about the way growing a business can change lives.
Those who have worked with him describe Phelps as loyal, and generous to his core.
For example, he is widely known as a $100 tipper.
Dave’s CEO Jim Bitticks, for example, tells the story of standing behind Phelps in line at a valet stand. When Phelps’ car arrived, he peeled off a $100 bill as the tip. Bitticks immediately feared the $10 bill he had intended to give would be met with disappointment. He said to Phelps, joking, “You at least could have let me go first.”
Phelps laughed and handed Bitticks another $100 bill to give to the valet when his car arrived. “Go ahead, make his day,” he said.
There are many stories like this. The time Phelps paid for a restaurant worker’s car to be fixed, for example, or paid off someone’s college loans. It’s always done discretely, said Feghali. “He doesn’t want it to be a thing.”
That generosity came to play in a big way as Phelps negotiated the sale of Dave’s to Roark. With the deal, team members down to store-level managers saw “transaction bonuses” ranging from the equivalent of a year’s salary to up to 20 years. On the corporate team, 19 people became millionaires.
For many, this was life-changing money that allowed them to buy a house, say, or decide to have a baby, said Bitticks.
In fact, several years ago, Phelps had come to Bitticks saying he wanted to establish a mission at Dave’s of “transforming people’s lives.” Bitticks said he initially tried to talk him out of it, saying it might be a bit too ambitious.
Now, Bitticks said, “Bill transformed my life.
“I made so much money. It’s the wildest thing. I feel like I transmuted into a different universe,” Bitticks said. “It was like the Beverly Hillbillies. It was like, how did this even happen? And he did that for a ton of us.”
Phelps admits the deal made him somewhat unpopular with his investors. But he plans to do it again, should there be another exit event.
“We take care of the people that grow the business,” said Phelps. “I am unapologetic to any of my investors that, if I make you a massive return — which we did — that the people that built the business will get absolutely massive returns for themselves.”
But Phelps said his mission to transform lives isn’t just about money. It’s about helping people reach potential. And that culture is also part of the Phelps playbook.
“It’s not just the money they’ve made through the transaction bonuses and options. It’s the culture we’ve created, where people can be a part of something. And we push people to perform at a level they never knew they were capable of,” he said.
“I have watched it so many times,” said Phelps. “I’ve watched people who were, say, OK at their job. But we have a challenging culture, and the people get better and better and better. It’s crazy to watch. But it’s because of the culture we’ve created. And it’s intentional.”
From dog treats to pretzels
Phelps grew up in the Boston area. He described his family as “very middle class.” His father worked for a leather company, where the senior Phelps noticed that dogs loved combing the tanning plant for scraps of the hides to chew on. So Phelps’ father decided to turn them into chew treats for dogs, launching the company Superior Pet Products.
Phelps, meanwhile, went to work for Nestle after graduating from college, learning marketing there. He helped his father grow the pet product business and later convinced him to sell it to Nestle in 1990.
“My father didn’t want to sell the business,” Phelps said. “He told me I pushed him too hard. But I had dinner with him a few weeks ago, and I said, ‘What was the best business decision you ever made?’ He goes, ‘To sell the business.’”
Nestle brought Phelps and family to Southern California to work in the Fresh division. There, he met Rick and Elise Wetzel, a couple with entrepreneurial leanings.
Elise had spotted a pretzel trend growing in malls, and she mentioned it to Phelps and her husband.
On a business trip, Phelps and Rick went to look at one. That night, sitting in a bar, they literally sketched out a business plan for their own pretzel concept on the back of a napkin.
“That was March of 1994. And, no, I don’t have the napkin,” said Phelps.
That’s how Wetzel’s Pretzels was born, opening first in the South Bay Galleria in Southern California.
Phelps, center, and Rick Wetzel in 1994, selling their first pretzel. | Photo courtesy of Rick Wetzel.
Rick described himself as the startup guy. “Bill’s a better operator,” he said. “He’s really strong at turning the crank and making it successful.”
But, admits Phelps, mistakes were made in the early days.
“We had no idea what we were doing,” said Phelps. “We were good marketing guys, but we had no idea how to run a restaurant, no idea how to work with young kids, none of that. It was a freaking disaster.”
One mistake: The co-founders were handing out franchises to anyone who could fog a mirror, he said.
Some, however, were actually really good, savvy operators, said Phelps. From those franchisees, the founders were able to learn and get better. In time, the stronger franchisees acquired the weaker ones, and the business began to grow.
Wetzel’s Pretzel’s ended last year with nearly 460 units, according to Technomic’s Top 500 restaurant chains. Phelps and Rick sold their stake in stages, first in 2007 to private-equity firm Levine Leichtman, then in 2016 to Center Oak Partners. In 2022, current owner MTY Food Group acquired Wetzel’s for $207 million, and the co-founders were fully out.
Building on what they learned
Rick and Elise Wetzel had stepped away from food for a few years to grow another startup. But by 2011, they were back at it with Blaze Pizza.
It was a brand they developed at a time when made-to-order fast-casual pizza was among the hottest segments. Phelps was in as an investor, and so was John Davis, a movie producer whose father had owned 20th Century Fox studios and was once one of the richest men in Los Angeles.
Davis had also invested in Wetzel’s Pretzels and did well on that deal. For Blaze, Davis brought in a group of A-list powerhouse friends, including NBA superstar LeBron James.
That — and the fact that Phelps and the Wetzels knew what they were doing this time — lit a fire under Blaze’s growth. The chain grew to more than 350 units before Phelps and Rick sold most of their stake in 2017 to private-equity firm Brentwood Associates, and then the remaining shares in 2020.
Phelps was smart — or lucky — to get out when he did.
At the time, fast-casual pizza was going strong, but the niche took a real hit after the pandemic, as customers came to rely on delivery. Fast-casual pizza, fundamentally, didn’t deliver well. Blaze is one of few left standing, with concepts like PizzaRev, Pieology, and MOD Pizza either gone, bankrupt, or decimated.
“It was a category that didn’t work,” said Phelps, in retrospect. “The issue was also that you couldn’t charge enough to pay for the labor that was involved in the business. The model of the business did not take off.”
Bill Phelps. | Photo by Lisa Jennings.
The Dave’s era
It was Phelps’ son who first spotted Dave’s Hot Chicken in 2017.
It was a crazy-sounding popup in a Los Angeles parking lot. Fried chicken sandwiches with varying spice levels. “My son goes, ‘Dad, you should check this out. This is really good.’ I didn’t at the time,” said Phelps. But John Davis did. “And he called me up and said, ‘I got our next deal.’”
Phelps said Dave’s had all the elements he looks for: it was a great product with a great story and passionate founders. The first brick-and-mortar opened in 2018, and the now-444-unit Dave’s quickly became one of the fastest growing franchise brands in the country.
Not only was LeBron James also in as an investor with Dave’s, the basketball great also brought his friend, the Canadian rapper/singer/songwriter Drake, who brought a “cool factor” to the brand that fit perfectly with what the founders had created, Phelps said.
That celebrity factor would also become a permanent part of the Phelps playbook.
But, at this point, Phelps said he had learned that the playbook was only part of the battle.
“A playbook is like, 25% of it,” he said. “The 75% is the people you put in place to execute the playbook.”
For Phelps, that meant keeping founders involved.
Dave’s co-founder Arman Oganesyan, who Phelps describes as a marketing genius, said it would have been easy for Phelps (and later Roark) to politely show the founders the door.
Phelps, however, was "chill," Oganesyan said. He didn’t come in with an “I’m-going-to-take-over” attitude.
“Bill’s favorite thing to say is, ‘What do the founders think?’” he said. “A lot of people would have come in and told the founders: ‘We got this.’”
With Dave’s, Phelps also had a solid lineup of experienced franchise operators, many who had come from the Blaze and Wetzel’s franchise families.
Phelps said he has a deep respect for the franchise operators on the ground.
“These are smart business people, who are smarter than me. They probably make more money than me, in many cases,” Phelps said. “So the degree to which you tap into their knowledge of the business and their views, it makes your brand stronger and stronger over time.”
One thing Phelps said he learned, however, was to hold everyone to very high standards, and then to have the “guts” to enforce those standards.
“At Blaze, the culture was, we wanted to be the friendly franchisor, and not to be too demanding of the franchisees,” he said. “That was frustrating for the operations team. But my philosophy is, you have to support your operations team.”
Another key Phelps' philosophy: He wants those on his executive team to be franchisees themselves.
This was something that came about from the Wetzel’s days, almost by accident, he said.
A regional manager at Wetzel’s asked to open a store, said Phelps. He did well, and started “minting money.” That made others on the team want their own stores. First Phelps’ secretary. Then the VP of finance. Then Jennifer Schuler, who was the pretzel chain’s president at the time, and later became CEO.
The experience was different from running corporate restaurants. They had skin in the game. Suddenly, Phelps said, “We understood [the franchisees'] business at a different level.”
Some might see the practice as a conflict of interest. But Phelps sees it as more “an alignment of interests.”
Bitticks, who is also a multi-unit Dave’s franchisee, agreed.
He said Phelps helped him open his first franchise location several years ago. (It was a loan, though with favorable terms. Phelps said Bitticks paid him back in less than a year.)
Bitticks said becoming a franchisee made him feel more accountable. “I’m like a player coach,” he said. “I’m advocating for change, not just as a corporate guy, but as a franchisee myself.”
Now, Phelps hopes to take that executive-ownership model even further.
Feghali said Phelps recently set a new goal as Mike’s Red Tacos and the next brands get off the ground: To help turn 100 restaurant-level managers into franchisees.
“He’s very serious,” said Feghali. “He wants them to become business owners. With all these new concepts, he’ll find a way to find these managers, sponsor them, and give them equity as an owner.”
The Mike’s era
Mike’s Red Tacos, meanwhile, already has 260 restaurants in development. The first corporate location is scheduled to open in September in Pasadena.
The three Mike’s open now are owned by founder Mike Touma, who holds the rights to San Diego as a franchisee, though he’s also on the board of the franchisor of Mike’s.
One change: Davis, who rode the investments in Wetzel’s, Blaze, and Dave’s, is not an investor in Mike’s.
But a big celebrity is. Phelps isn’t ready to reveal who it is. (Several in Phelps orbit mentioned how much he loves meeting celebrities.)
And many within the existing web of Wetzel’s/Blaze/Dave’s franchisees are ready to grow Mike’s.
Even Rick Wetzel, who is retired from restaurants, is still backing Phelps' brands as an investor. "It's a tough industry," he said of restaurants. "But I would never bet against Bill."
Feghali was recently named CEO of the birria taco brand.
He was the franchisee of 17 Little Caesars when he first met Phelps. They were introduced at a Wetzel’s event at Dodger Stadium. (A friend of Feghali’s was a Wetzel’s franchisee and invited him along.)
Phelps (left) was introduced to Andrew Feghali (center) by Jennifer Schuler (right), a former Wetzel's CEO. | Photo courtesy of Andrew Feghali.
By the end of the night, Phelps told Feghali he would be a perfect Dave’s franchisee, though, at the time, Phelps’ team hadn’t even finished writing the disclosure documents.
“Bill really likes people who are entrepreneurial, scrappy,” he said. “I think he saw that in me.”
Now Feghali’s franchise company includes 27 Dave’s units, in addition to Little Caesars and Jersey Mike’s.
The reason why seasoned franchise operators want to stay in Phelps’ ecosystem, even with the risk of investing in brands so young and unproven, is because he makes it fun to build something new, said Feghali.
“He tells them, ‘You’re going to help us finish building the plane while we’re flying it,’” said Feghali. “You’d think that would be a knock against us. But actually, people love that.”
Of course, the prospect of a Dave’s-like, billion-dollar happy ending exit also keeps people interested.
But Feghali said Phelps discourages entrepreneurs from thinking about the exit. That's another bullet point in the Phelps playbook.
“Bill always says, ‘Build it like you’re never going to sell it, but so everyone wants to buy it.’”