Culver: Controlled-growth Strategy Key to Chain's Success
8/17/2004

By Brian E. Clark
WisBusiness.com

PRAIRIE DU SAC -- For a man whose company is adding 40 restaurants a year, Craig Culver has a decidely controlled-growth attitude.

"If you let growth get out of hand, you could very well end up going the opposite direction," said the silver-haired restaurateur who heads the Culver's Frozen Custard and ButterBurger restaurant chain. 

Don DeBolt, president of the International Franchise Association, said Culver's is successful because it offers tasty, fresh food -- and because of its focused expansion plans.

"They sell be-nice-to-yourself products and do it in a very good way," he said. "They also have a measured, geographically centered growth plan that makes a lot of sense. And they've given a lot back to their communities.  

"Forty new restaurants a year is a solid rate," he said. "But it doesn't outpace their ability to support and train their new franchisees. It means they will be here tomorrow."

A "geographically centered" plan -- in plain English -- means slowly adding adjoining states to its Midwest base.

Culver's had no presence in Ohio last year, but should have six stores opened there by early next year. Colorado and Wyoming will also soon have several of the blue-roofed restaurants.

During an interview, Culver, 54, gestured with his hands to show a tall stack of franchise applications and said he is sometimes mightily tempted to open stores in Florida and Arizona.

But he won't do it, he said, because that would mean leap-frogging or jumping over unserved states.

"Jumping makes it harder to market and supply the restaurants," he said. "We learned that by jumping into Texas seven years ago."

In the early years, Culver said he felt lucky when someone wanted to buy one of the company's franchises.

"The phone was not exactly ringing off the hook," said Culver. He and his wife, Lea, started the family-owned business 20 years ago in Sauk City. She now runs the company's charitable foundation.

They nearly lost their shirts the first year. The second year, they broke even. Earnings this year are projected to reach $425 million.

And the first outside franchise? It failed when the owner said he didn't want anything to do with the Culvers after the first year.

"That hurt," he said, declining to name the deserter or his town. "It still does, frankly."

Culver's now has 256 restaurants, 105 in Wisconsin. Only a half-dozen of the restaurants are company owned. It is celebrating the completion of its second decade in business by giving away a Harley Davidson motorcycle and several hundred Trek bicycles next month.

Both manufacturers, he noted proudly, are -- like Culver's -- based in the Badger State.

Even though the Prairie du Sac-based chain has been successful beyond the family's wildest dreams, Culver said thinking about the mistakes he's made keeps him humble.

"Everyone messes up at one time or another," he said. "But the key thing is that we've learned from or mistakes."

Initially, he said his company was too quick to grab a check.

"A young company, somewhat struggling, always has to fill the coffers," he said. "We had to pay the bills. We were a little too anxious to collect that $20,000 fee rather than evaluate what was good for us in the long haul."

He said Culver's made some bad "people choices" in the beginning.

"We were selling franchises instead of awarding them," he said. "And we paid the price in a couple of cases."

Culver said he and his family chose to go the franchise route so they could be sure that each restaurant owner would be involved with the day-to-day operation.

"That makes all the difference in the world," he said.

To purchase a Culverís franchise, the would-be owner-operators have to pay $55,000 for the basic 15-year term.

They must have minimum of $250,000 to $400,000 in liquid assets. They also must pay 4 percent of the gross sales to the parent company, another 2 percent to a marketing fund and fork over another 1 percent for promotional and advertising campaigns.

But all that matters not a whit if the Culver's don't sense a certain devotion to the business or if the franchisee doesn't share the company's hands-on philosophy. If the franchisee makes that cut, he or she is then required to take a 16-week course at the corporate headquarters on Water Street in downtown Prairie du Sac.

There are other training programs for managers, equipment training and still additional training at the individual restaurants.

"Ultimately, I believe if you pick the right person, profitability will follow," he said. "Because this is a people business. It's how you deal with your customers and your employees. It all shows up in the bottom line."

Because Culver is at heart an entrepreneur, he said he is constantly bouncing new ideas off his staff.

Three years ago, the company opened a Blue Spoon Creamery in Prairie du Sac. The store has a European, upscale coffee house feel to it, with terraced eating areas in back that offer a view of the Wisconsin River.

It's significantly smaller than a Culver's restaurant and is designed to squeeze into narrow storefronts typical to downtown areas.

Its menu includes baked goods, coffees, salads, sandwiches and deserts. Culver's frozen custard is served, but that will soon be replaced by gelati (an Italian sherbet) to avoid conflicting with the chain's restaurants, he said.

Though the coffee house has done well, he said he wants to see if it has "legs" before he tries to franchise the concept. He figures he'll open another Blue Spoon -- perhaps in Madison -- some time in 2005.

Nowhere in the company future, he stated, are there any plans to go public.

That would mean a loss of control. And with three daughters, he'd like to keep the business in the family.




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