Life-Changing Books Podcast Episode 27. Robert Rosenberg: 35-Year CEO of Dunkin' Donuts

Hello, Book Thinkers family, and welcome to episode number 27 of our brand new podcast, Book Thinkers: Life-Changing Books. During each episode, I interview one of the world's top authors, and as a listener, you can expect to discover new books, new mentors, and new resources that you can use to achieve more and to live better. In this episode, I have the pleasure to interview the author Robert Rosenberg. Robert is an American businessman, a professor, and an author. He was the CEO of Dunkin' Donuts for 35 years, and he also served on the board of directors of Sonic Corp and Domino's Pizza. He was born and raised in the same area as me, Boston, Massachusetts, and he has a degree from Harvard University. Our conversation today is all about Robert's brand new book, Around the Corner to Around the World, and the subtitle is pretty creative, A Dozen Lessons I Learned Running Dunkin' Donuts. We talked all about the early days of Dunkin' and some of his favorite leadership lessons and much more. So without further ado, please enjoy this amazing conversation with Robert Rosenberg. Bob, thank you so much for coming to the Book Thinkers Life-Changing Books Podcast today. I'm very excited for our conversation for a lot of different reasons that we're about to get into. But for those in the audience that don't know who you are and they're not familiar with Dunkin' Donuts, can you tell everybody a little bit about yourself?

My name is Bob Rosenberg. I was the CEO of Dunkin' Donuts from 1963, at age 25, about a few weeks after graduating business school, to 1998 when I retired. I had a second career, basically serving on boards of directors of either franchising companies or restaurant companies, and teaching as an adjunct professor at Babson, where I was also trustee of the college for 10 or 12 years. And then now in my third career, basically traveling with grandchildren and writing a book and informing people about the book and thinking about my fourth career. So that's a little bit of where I've been and where I'm at right now.

Yeah, well, I love when icons of industry or business such as yourself decide to open up the curtains And that 4th career that you're talking about is really important to people like me. I mean, I'm a young entrepreneur and so many of us in the audience are. And so it's really meaningful that you decide to kind of bestow your wisdom on everybody.

Yeah, my pleasure. And in fact, the 4th career just occurred, or at least the idea for it occurred relatively recently and was spawned by a book.

Well, I'd love to hear that story.

You want to hear the story? Here it comes. Basically, a friend of mine who lives here sometimes in Cambridge, who teaches at Harvard Business School, who's also a wonderful writer by the name of, uh, Rosabeth Moss Kanter, wrote a book called Think Outside the Building. And it really is a story that she was telling about a course that she was teaching at the graduate school at Harvard in the business school. for people looking at their second careers in terms of how they could add value, taking their contacts, their capabilities, some of the finances they've accomplished to put to the common good for the most part, but building a second act. And I went into the book thinking, well, it's a friend, I'll read it, but I've already done that. Basically, I'm looking forward to the next stage of my life in terms of kicking back and relaxing. And I begin to read the book. And she's making a call for people who have particular competence to continue on and to add to society. And it occurred to me that something I had started in 1968— I was 30 years old at the time. I was in the chairs to become, in addition to running the family business, I was in the chairs to become chairman of the International Franchise Association. Which was the trade association for the entire franchise system of distribution. And an idea occurred to me then. '68 was not unlike today with the kind of issues that we have in terms of racial justice, and cities were burning, and people were rioting and protesting to inequality. And I had an idea at that time to basically put together a group of maybe 5, 6, 7 complementary franchise businesses that could be owned, minority-owned, going back into areas that once were vibrant retail areas that had been destroyed or laid fallow, to go back and with some incentive by the community to go back into the community. So, you could open up a Dunkin' Donuts shop along with a McDonald's. Today, a LaPelle's dry cleaning store, 7-Eleven, all of these businesses are franchise businesses that could be owned by minority owners employing people from the community and servicing the community so people didn't have to leave in order to get goods and services. I went so far as to go to Washington and get support from the then Small Business Administrator for the federal government, a guy by the name of Howard Samuels, who loved the idea. I brought it back to Boston and talked to some of the community leaders in Boston, particularly Black leaders at the time, and unfortunately The distrust and the environment was such that I really got no support and a lot of pushback. And I didn't have the skills at the time. I was a youngster. I didn't have the skills or the knowledge of how to really make it a reality. And I put the idea aside. And it seemed to me now, sitting in my apartment, as Rosebeth was talking to me, that I shifted my position from, well, I've already done this, I've already I'm looking forward to my second career. This doesn't apply to me, to saying, my goodness, this does apply to me. I may have some more juice left in the tank. And I think this is an idea I could dust off and be just as applicable and as important today as it was back some, whatever that is, 40, 50 years ago. And so, that would be the next thing after the book gets published, I think, something I'd devote some time and attention to.

I love that. Yeah, I love that. It's all about impact and it's all about leaving sort of a positive dent in history, right? And now we've got Around the Corner to Around the World. The subtitle is A Dozen Lessons I Learned Running Dunkin' Donuts. So you were the Dunkin' Donuts CEO for 35 years. For everybody that's listening, this family business started in Massachusetts and that's where I grew up and my family would always get a dozen donuts. And that would be sort of our Sunday morning snack. So it would be after soccer practice or a T-ball game or whatever was going on during the certain part of the year. It would always be a staple of my family growing up, and it was an opportunity for us to talk and laugh and try new donuts, and there was always funky things going on. So it played a really big role in my early life. And now here we are. I have the opportunity to speak to you and read this book and learn a little bit more about what was happening in those early days. So I'm very grateful for this experience.

Well, thank you, Nick. I love that story you just told, and I can't tell you how many times that I've heard that story repeated by so many families, particularly of youngsters going with their parents to the local Dunkin' Donuts shop and picking out their favorite donut. And that's a memory they sort of carry through a lifetime.

It is.

And it's something that I take great pleasure in having been associated with for all those years, and, and it really does bring an element of joy to people's lives. And That's a worthwhile purpose. Some people would say, my goodness, it's just donuts and coffee. But it's a little bit more than that. It really does play a part in people's lives. And for that, I'm forever grateful.

I'm a testament to the fact that it's a little bit more than just donuts and coffee, you know? And I think in the beginning of the book, you say 5 million people start their mornings every single day with a cup of Dunkin's coffee. Is that true?

Yes, it's true.

Yeah. It's a lot of people that you're putting a smile on their face when they get to sort of sip that first cup of coffee, huh?

That started— America runs on Dunkin' is probably a 10 or 15-year-old advertising campaign, but it absolutely is true. America does run on Dunkin'.

And I'll tell everybody that's not from the Massachusetts area, Massachusetts certainly runs on Dunkin'. I can promise that. There's a couple in my hometown, at least. And so the book is broken into 6 distinct eras. Why did you choose to write it that way?

Basically, business, the consumer, and the competition are constantly changing. And the average lifespan of a CEO generally is about 5 years. And you basically have to sort of play the hand that's dealt you, given the conditions that exist. And as it turned out, roughly, some of them are a little bit longer, some of them a little bit shorter, but the conditions— morphed approximately every 5 years, or at least into 6 distinct eras, which required for different response from the management team. The first era went extraordinarily well. Second era was a disaster. All the mistakes I could make, I made. Luckily, saw the error of my ways in terms of the things I was doing improperly as a leader. And then the next 4 eras that followed after that, we never looked back and we went from strength to strength. But that's basically how I think a lot of businesses are organized. And in fact, the world is changing so quickly today, I would think that maybe 5-year eras may be even too long a period of time in terms of if I was managing a business today. The competition, the consumers, I said, are moving and morphing so quickly, it does require a different set of responses. I remember being at a party on Martha's Vineyard with a stringer who had followed like 6 presidents. And I asked him the question. I said, well, who is the most successful president in your opinion? He said, I'd be foolish to answer your question, but I will answer it this way. Each of them was dealt a separate hand, a different set of circumstances and conditions. And they have to be measured against the conditions and situations they found themselves confronted with. I think that's true for people in business as well.

And I love how you do break down into those eras, but you use the same 4 lenses to reflect and analyze your decision-making in each one of those eras. So that framework can be applied and it will stand the test of time forever. Could you talk about those 4 lenses a little bit?

Basically, The world, you know, just comes at you so fast. Things come over the transom every single day. And slowly but surely, a lot of it came from my graduate school experience, at least the first couple. The 4 lenses are the CEO, the chief executive officer, has to be responsible for strategy, which is what your purpose is, what you want to be as an enterprise. Your objectives or goals, both the same in my language, which is what you want to have, the quantitative benchmarks you'll measure success by. The strategic initiatives, the sort of the 4 or 5 strategic levers that someone pulls to bridge scarce resources. So whether you're a country like the United States or a business or even a family, there are not infinite amounts of energy and resources available. And I found in my experience that you can't really address any more than maybe 4 to 6 really major strategic initiatives at any one time and do them successfully. And the last thing of planning really was tactics. And then, so that's sort of shepherding strategy is one sort of bucket of what responsibilities are. The second is to recruit, retain, and motivate a staff, an organization, that are capable of implementing that kind of strategy. And, and as I said, the first stage I really came away from business school understanding, and the second phase also helped me. I recruited my classmates, and some of them recruited other classmates of succeeding years to join the company. So that was a big strength in organization. And the third thing I found was critically important for a CEO to do, a leader, was basically to communicate. You're basically a communicator-in-chief, and it's the job to ensure that all constituencies are aligned against the strategy. And that never— there's never enough time to really repeat over and over again to get alignment. People in their daily lives are so busy, the teammates are so busy running their own lives, it's hard often for them to focus on it. So, you have to go back over again, travel with them, go into the field, visit with franchise owners to make sure that the message is getting through. And the last activity was managing crisis. The world is stochastic. Things happen. They're unexplainable, and they can threaten the very existence of the business. And in that case, the CEO has to take responsibility for managing through. And the 2 things I found extraordinarily useful there were that you select a very small team of people basically, who have capabilities to deal with the specific issues that's threatening the business, and then leave the rest of the organization to run the business on a day-to-day basis. People still have to get their coffee and donuts and baked goods on time, the way they've been promised, in order to keep trust with the consumer. So, the business has to run irrespective of the crisis, but you also need a team of people who are competent, who can analyze what, what, what the issue is, what the best way to attack it is. And the second part of what I would say is a lesson I learned about crisis management is to communicate to all constituencies. The crisis affects everybody. It affects their livelihood, affects their families. You have to communicate authentically, realistically. Authenticity sort of is the coin of the realm in matters like this. People, especially in times of crisis, read your body language, they read your facial expressions. Everything about you, and it's important that you, you communicate transparently and with care, understanding the issues and concerns of all your teammates to bring them along with you during the process of the crisis. So those are the 4 big buckets, and I, I tell the story of each of the 6 eras through those 4 lenses: strategy, organization, communication, and crisis.

Yeah, I think it's a brilliant and very well-organized framework to write the book because as a reader, you really do begin to understand that, as you just said, the average tenure of a CEO is about 5 years. And so every 5 years you're dealing with a different set of challenges, but because of that, you have a different set of recommendations or takeaways that you can contribute and give to the reader to use in their life, depending on sort of what's popping up and what situations or crises that they're dealing with. And you say that in the beginning of the book that you're My target reader is really a Dunkin's customer, a small business owner, a franchise owner, or a business leader. And I think that a big population or a big portion of my listeners do fall within one of those buckets. So, what I'd like to do, as we talked about before, is really dive into era number 1, give everybody a big taste as to what they could come to understand, what some of the stories look like, what are some of the situations that you dealt with, and what are some of your biggest takeaways from that first era? So I'd like to start with the open kettle and the naming of Dunkin' Donuts and how that came to be. Could you tell that story for everybody?

It's a great story. I love telling the story because it really is about the role of chance in life and in business. And this is a story not only of chance, but second chances. So basically, and let me set this stage, back after the Second World War, my dad, who had 8th grade educated guy, left school early, really got competent at driving ice cream trucks and building routes. And after the Second World War, he basically started an industrial feeding business, Meals on Wheels. And that business grew, and he took in his brother-in-law, his partner, who was a CPA, who was a little bit better educated than him, sort of to complement each other. And, and That business, though, started after a lot of growth and quite successful. It ran into some trouble. I see it as when vending machines came on the scene, they were better able to service employees and small factories and small office sites more efficiently than to have to stand out in the rain getting a cup of coffee off the side of a truck with bakery goods and sandwiches and beverages and all. And that business started to falter. And they had a commissary, this Meals on Wheels business called Industrial Luncheon Service. And the baker and the bakery that was making up the baked goods that went on the trucks said— told them this story about the fact of the Puritan Doughnut Shop on Morrissey Boulevard, a stone's throw away from our commissary on Hancock Street in Quincy, Massachusetts. Said, you know, Puritan Doughnut Shop's making more money out of one solitary doughnut shop than they are out of the 20 trucks that sell all their doughnuts all over the place wholesale. So, my father and my uncle said, maybe that's the right thing to do. Maybe we should open up a doughnut shop and not worry so much about trucks and all the distribution and commissaries and all this overhead. So, in 1948, they took a lease for $75 a month from an old awning shop, a little stucco building on the Southern Artery in Quincy, Massachusetts, which is Route 3A that leads between Boston and, and, and the Cape. And, um, they opened up in 1948, and ho-hum, business was no different than the other 1,500 doughnut shops that had opened. They called it Open Kettle. No one knew what it meant. And, and, and they opened up, and it was a big ho-hum. It did 1,500 a week, which was about the same as most of the doughnut shops that were open in there. They had great product. They made 28 varieties of doughnuts. They served good coffee. But no one really knew what was inside. And to make matters worse, The guy across the street owned a big strip of land. His name was Maury Pearl. He had made his mark as a band leader, and he diversified as well too, because he, he had made the song The Sheik of Araby, which I guess was a big hit in the '20s, 1920s and '30s. And he decided that he was going to open up, in addition to his Maury Pearl's, another donut shop. And my father and my uncle decided, my goodness, We can't let this happen. Let's figure out who he's going to hire to build this store, this competitive store across the street. And there was a guy in Quincy, an architect by the name of Bernard Healy. So, before Murray could hire them, the partners hired him. Murray— Bernard comes in and says, my goodness, guys, you're not doing yourself any favor hiding yourself in this old stucco building. What we really have to do is tear it down, open up a fishbowl effect. And the name, my God, the name Open Kettle, no one knows what you're selling. And so they sat around and did a little brainstorming and someone said, well, what do you do with a chicken? Well, you pluck a chicken. What do you do with a doughnut? Well, you dunk a doughnut. And I think my dad said, my God, that's it. And that was how the name was framed. And in 1950, they had ripped the store down, built up this beautiful new sort of outrigger-style store, very California-style fishbowl where you could see into the kitchen and see the product made and a question mark counter. and a big case loaded with doughnuts, and what was a $1,500 a week open kettle reopened in 1950 as a $5,500 a week Dunkin' Donuts shop. Same management, same menu, same prices, but the role of chance, serendipity, the competitor across the street was going to open up, and it gave these guys a second chance to launch a business, which if you look at a lot of entrepreneurs, they— I have found over and over again that's been the case, that generally speaking, It generally takes a couple of tries before you get it right. And this story sort of underscores all that. And that was the beginning to launch an empire. But it started as a result of chance and serendipity.

It was. Yeah, I would say that the rest is history. But right after that, all of a sudden, the Donut Wars broke out. And so, I think that's an equally compelling story and probably such a great sort of subtitle within that section of the book. I'm like, The Donut Wars, I need to keep reading. I'm a little tired, but I need to keep going. Like, what is this all about? And so I had a lot of fun with that subtitle. You did a nice job there. What was the framework for the Donut Wars and sort of what lesson did you learn from that?

My dad and my uncle didn't get along. And they had this industrial feeding business with these 150 trucks that went around to sites, construction sites and small office sites. And they, by 1955, they had now opened 5 donut shops. They couldn't get along at all. And as a result of that, there was a buy and sell agreement where one could buy the other out. And my dad ultimately, a lot with my urging, I was still a kid about to go off to college, bought my uncle out for the then book value of the business. And what did my uncle do? My uncle took the money and he started his own competitive donut chain called Mister Donut. So, for those people who in and around Boston, I think they'll remember that brand well, because for the next 5 years, myself, and then ultimately my cousin by marriage, who took over the CEOship of Mister Donut, who was also my counselor at camp, so it was really a family issue. This is sort of behind the scenes, the emotional energy that creates an awful lot of things that grow or don't grow. occurred, and we fought it out over the next 5 years. And I think, in fact, that's how I think I became CEO at age 25. My dad had long told friends, my aunt and uncle and my father and mother hung out in the same social circles. My father was saying at first how much he admired my uncle and then found him to be a bean counter and a millstone around his neck. And slowly but surely, my uncle, not burdened with an industrial feeding business and other businesses started to grow. And when I came back from military service and college, basically Mr. Donut was almost as large as Dunkin'. And in 1963, you know, my father didn't— was fit to be tied, tried to sell the business, couldn't sell it for $1.5 million. So, he'd be a millionaire after taxes, had turned to an executive vice president to run the business. And he seemed powerless and unable to turn the tide. And they had opened a whole bunch of different little businesses. So, the company I was asked to helm was not called Dunkin' Donuts, but Universal Food Systems. And basically, I think my father turned to me in exasperation. Unable to sell it, the predecessor, the executive vice president, was unable to beat the competition back. I think that's why he turned to a fresh out of business school young man, his son, to try to turn the tide. And luckily, I had learned enough lessons in business school where I thought I really had an idea as to how to fix the problem. And so that was what the next 5 years were about. And it was a real battle between Mr. and Duncan as to who would have supremacy of this new kind of way of doing business and distribution.

So when you stepped into that role, not only did you have to balance sort of the war between the two businesses, but you also had your father, sort of like the ego about how well the business was doing. You had to deal with what he was thinking, and now the business is growing, he still wanted you to sell it, but then there was sort of battling with his brother-in-law. And so, how did that compete for your attention? Did you play into that at all? Like, were those conversations with him difficult to have, or were you really just focused on the business and you were able to sort of— shelve his thoughts?

My dad and I have a whole different kind of life experiences. He was a product of the Depression. He had seen his father go bankrupt running a market, the Norfolk Street Market, during the '30s. And, and he was shaped by a different set of events. So I'm very sympathetic to those things. I didn't experience those. I had a whole different kind of life. And, and I loved what I was doing. And had to keep promising him that he would be able to equitize his investment and all the years of hard work and his genius that created this business. He'd be able to equitize it. But that was a balancing act. Basically, I had to fight with my left hand, Mr. Donut, and fight on the right hand. It was hard to build a business and fight back the competition in a fierce battle while we were trying to sell the business at the same time. So, I had to sort of appeal to my family and my dad to give me a chance, and that we'll grow fast, which we did, luckily. I joined the company in 1963. We had $100,000 in pretax profit. By 1968, it had grown to $700,000. We were the 3rd company to go public. But I had to go public quickly in order to keep the business from being sold. And, and so it was, it was a balancing act. I could understand his concern, his anxiety, but by the same token, you know, it really was a wonderful business opportunity. And I loved what I was doing, and I kept urging him not to sell it. So I found myself before the guy that had bought Sara Lee and Consolidated Foods up in the Waldorf Towers in New York. And now the price had gone from $1.5 million he couldn't get in 1963, To $7.5 million, and I had to turn it down. And so, yeah, there were moments of tension and anxiety, but we worked our way through it.

Yeah, something that was sort of a small footnote in the book, but that I'd love to ask you about is, you know, when presented with the role of taking over your father's business, Universal Food Systems, at the time, you stated in the book that compensation was not at the top of your priority list when you were looking at the opportunity. And so because so many people in the audience are either coming out of school right now or transitioning jobs because of the pandemic, what advice do you have for people around compensation and where it should rank on their priority list?

I think low. I think the most important thing is to love the business and love your job. And I think armed with that kind of energy, the other things will follow. And I find that, you know, purpose is more important than yourself. is if you pay attention, if your business, if you really got a unique offering that suits a purpose in the marketplace, you're satisfying customers better than anybody else, you have something unique, something worthwhile, that everything else will take care of itself. And I still believe that, you know, 50 years later. And I found that to be absolutely true. The other part will follow.

And one of the beautiful things about sort of the internet economy is that it does give a lot of very diverse interests the opportunity to become your full-time job. So, everybody has this opportunity now to use the internet as a tool to focus on what they really do enjoy. And so, that's a good way of putting it. You might need to sacrifice compensation upfront. It might be a little bit of a longer roadmap, but there's more of a fulfilling lifestyle at the end of that road.

Get it right and the other will take care of itself, in my judgment. That's been my experience.

I love it. One of the decisions that struck me as very important during that mid-'60s time was your decision to stop opening food/donut combination stores and really just focus in on the donuts and the coffee. And so right now in business, there's a very— I think there's a strong motion towards more with less, but it seems like that was part of your thought process back in the '60s. And so what drove you to make that decision of consolidating the business to one core focus?

When I got there in '63, they were about to open their 100th store. So, basically, the last 26 stores were opened as food donut shops. They had lost confidence in the base business. When I went away to college and the Army, basically, there were 5 very successful donut shops, and there was this industrial feeding business. When I came back, there were 8 little businesses. And that's why the name had changed from Industrial Luncheon Service to Universal Food Systems. And it was a hodgepodge. The last 26 stores they had opened up. Varied in size from 18 seats to 90 seats. They served scrambled eggs, bacon, and everything in the morning. They had hot dogs and hamburgers at lunch. There was no unique competitive advantage. It was just like a diner. And while I was in business school, I had the opportunity my second year to write papers about what I saw, which was what I knew, which was the company. So, I had the opportunity in this retailing class And in business strategy was one course which I learned the language of strategy. And in the other course, I had the opportunity to match up what I saw going on. And I thought basically the management was, you know, spending far too much time experimenting with new businesses and not exploiting the diamond in the rough that they had within their business, which was this emerging donut and coffee shop chain that basically could be something that was unique and really very much scalable. And that was the strategy that we brought. I've had this inkling, got there with the team, we stopped growing all the other businesses, closed a few down, and focused all our energy, standardized it to a 20-seat donut shop, and committed ourselves to have the world's best coffee and the best possible donut products we could make. And we thought if we did that job effectively, if we could do it better than anybody else in the world, that we had a vehicle for growth. And that we could really provide a real benefit to society, you know, to help people start their day. You know, I think people have biorhythms. They, they, they have to start their day with a little bit of a jolt. They needed to take, take a little break at morning coffee break, a little snack at lunch, another, another midday coffee break. I think there's a reason why tea time was tea time in England. And I, I saw that throughout the day, and I thought that we could fill that need. with little pick-me-ups throughout the day, but a really superior product made better than anyone else could make it. We were the first company really to make coffee at the core of our business. And, and we were fastidious about the product that we bought and the fields that we bought it out of, how we roasted it, how we shipped it to the stores every week, how we ground it in front of customers, made sure that it was fresh every 18 minutes. We throw away a 60-ounce pot of coffee if it stayed too long. We served it with only pure 18.5% cream. We had 27 pages of specifications on how to prepare our coffee alone. And so we were really committed to this notion of maintaining a superior competitive advantage through the products that we sold. So we narrowed it down. Now, over time, we have expanded it, but not off that base, and not based on the same exact standards. Whatever we sell would really be uniquely best in class if we could make it that way.

Quality matters. That was one of your biggest takeaways that you wanted to reiterate at the end of that first era for the reader. And we've had a couple other podcast guests, including Greg McKeown, who wrote the book Essentialism, and we have one coming up with one of the authors of The One Thing. And those books really do focus on quality and they focus on singular focus, make sure that you focus on The 20% that leads to 80%, to use that ratio. And yeah, I love how in the book—

I believe in that ratio a lot. I find that true in life a lot.

Yeah. I mean, it represents itself in so many different diverse ways, right?

Absolutely.

Yeah. And you actually, you know, in that first era, you do go into the process that Dunkin' would use to serve the coffee as well as make the donuts. And I thought that was pretty fascinating because as a consumer, you don't think about how difficult it is to serve good coffee. It's a very difficult process to master, but clearly you've done it. And you open up the book with a little jab at Starbucks talking about how at a blind taste test your traditional roast wins. You know, it wins 50% of the time, maybe?

That's exactly right.

I love that. I— you always love as a reader to read things like that because it gives you the ability to go rearticulate it to somebody else. It's a very— it's a cool fact. It's one that's talked about probably all the time, You've probably heard discussions about that subject a lot.

A lot. Yeah.

And then, so you stepped in and within 5 years, I'm going to read a couple of things here. Reorganization of management, decentralization to accelerate scalability, profit per store goes way up, products get simpler, and you consolidate down to your core focus. Store count goes from 100 to 267. And your father is still interested in selling the business. You guys are still meeting up and he's still saying, hey, you want to make sure this doesn't happen where you fail and you missed out on your opportunity to sell. So you called that intellectually challenging in the book. What was that experience like? Like you had experienced so much success and then boom, he still wants you to sell the business.

He would always tell the story. I met a guy on a golf course. who once claimed he was worth $10 million, then his business went to hell, and he ended up with nothing. Shame on him. And I acknowledged that concern and that fear. And basically, it was difficult in terms of attempting to keep him engaged to the extent that I promised that we would go public. I said, once you sell a business, it's gone forever. And I had to figure out when, because he would then say, well, if not now, when? And then I had to come up with a rationale. And this is one of the more intellectually challenging things that— a lot of things I've learned over the years, I attribute to other people, things I've read, learned, gone to seminars, learned from colleagues. But this one, I would say, I came out of my own noggin. And basically, the argument I used is that once it's gone, it's gone. You cannot get it back. You're generally precluded, if you sell a business, from competing directly in that category. It takes decades, if ever, for you to recreate that kind of growth again. And I said, the time that you should sell is not when someone makes an offer over the transom and it looks attractive. looks compelling, but the time you should consider selling a business is when you can no longer achieve, consistently achieve your objectives. You know, in our case, we were growing at 50% compounded in earnings, which is unsustainable, which also set the stage for the problems that I created in the second stage of the business. But at least at this stage, we were growing at 50%. And I said, so long as we can continue to achieve our objectives, we should not sell the business. Now, once you cannot achieve those objectives, either because you don't have the energy, because you don't have the knowledge, your health is failing, you don't have the ideas as to how to best do that, then that's the time to sell the business. And then he would sell, say, and I rejoined, well, then it's too late, it's already starting on the downside. I said, but I said, you still would have more upside than downside, and it's better than if you miss So basically, by following that strategy, I watched the business go from he couldn't get $1.5 million, maybe $1 million after taxes in '63, to a public offering in 1968 that came out at $20 million, soon to be $120 million value, to the time that we got bought out in 1998 at $325 million, to the time that Bain and their other partners bought it at $1.5 billion. The private equity companies bought it for $2.6 billion or $2.4 billion to today, where the market cap of the company in the stock market is something on the order of $6 or $7 billion. So, the fact of the matter is, is that the model I had created, if you can achieve your objectives— and we did have to adjust our objectives down from 50% growth, which was unsustainable. Wouldn't have been long, we'd been larger than the gross national product of the United States. Didn't realize that as a 25-year-old kid, but I realized when we reduced it down to 10% to 15% growth in earnings per share, which was really a much more sustainable objective, and that was satisfactory to everybody, we can continue to do that. And now we're looking back, the business has been in existence, it's about to celebrate its 70th anniversary. So, it went from not able to get $1.5 million to $6 to $7 billion today. And we basically consistently achieved those objectives. So, the model that I had created back in the mid-'60s, around '67 or so, when I had to really lodge this discussion with my dad, has held true. And this is the end result of it. And it sort of borne itself out. And had we sold, we would have given up all of that opportunity and all the joy of being able to build a wonderful enterprise with lasting values.

It's a brilliant story. And it's very interesting to hear you describe it in the book and to put those situations out there and be so vulnerable. about it because sometimes people want to look back and say, you know, hey, with hindsight, it's very clear, but, you know, and here's exactly how I dealt with the situation. But you're very open about those situations and how difficult they were.

Those are the big— the learning points generally come from mistakes, in my judgment. If you can survive them, and that's hard to do because it can be painful, but if you can survive them, those are the times when your opportunities are the greatest to learn and change. As I say, the second era was a disaster. Wrong objectives, changed the mission, and I almost ran the business off a cliff with everybody following me right over, which was an awesome responsibility and a terrible situation. But it was like a kid putting his hand on a stove. I said, boy, I'm not going to do that again. We began to build the processes and the procedures so that couldn't happen again, and it never did. But we learned a lot. I learned a lot more from the errors I made and the setbacks I suffered than I did from the successes. In fact, I would argue, That the biggest impediment to future success is past success.

Hmm.

The one turn point came from a book. I basically, in 1972, after I had changed the mission and the objectives and things were not going well, profits stagnated. We actually suffered a loss in '73. Franchisees began to lose confidence in the management of the company and we had a class action lawsuit. My first reaction was to get mad at the franchisees. I was sitting in my wingchair reading a newly published book by an author by the name of David Halberstam called The Best and the Brightest. And Halberstam was recounting the Johnson and Kennedy administrations' management of the Vietnamese War. And he said, although the leaders in our country were among the country's most educated and best and brightest we had to offer, They were relying on information, third-hand, fourth-hand, body counts, other things to define success. They weren't going into the hamlets and to the front lines where the war was actually being waged to find out from community leaders really what was going on. And the Viet Cong were winning the hearts and minds of the population. We were actually losing the war. As I sat there, I said, oh my God, Halberstam could be talking about us. And we were guilty of the same thing. Halberstam said that the real issue as to what was at fault was something he called hubris, which is the Greek word for arrogance. And I said, my God, I'm blaming my followership, the franchisees. I'm mad at the people who are suing us because they're unhappy. And I said, you know, we then convened as a management team. I shared my experience and the lessons in the book. And we changed things dramatically. We basically decided that we would never blame followership, ever. It was leadership's responsibility, 100-0, in order to solve the problems. That's what we were there for. We then decided we'd all go out and visit 100 locations and get to the front lines and talk to franchisees, travel with district managers, and we did that. And then we created an advisory council to ensure that we had an informal method of communication so great ideas could bubble up, new products, new ways of doing business. We apologized for our errors of our past, wrong strategy, wrong set of objectives, what we went off, and we invited franchise owners to come in and help us solve the problem, which they were more than willing to do and did so brilliantly. And then we never looked back, but it came from that book. It changed my behavior. It was transformational.

Wow. I love that testament for reading. You know that. I believe that inflection point right there, you reading that book and having that discussion with the board, is, is the reason the brand is so big today. And I know you do too. Failure is the best teacher. We love to talk about that on this podcast. And we love to talk about the actual application of books. Books can change your behavior if you learn and apply and learn and apply and you recycle that process through and through until a good outcome pops up. You know, that's why we're reading these books. I mean, they really can change your life.

I'm sorry. My brother Donald would always remind me, he said, when the student is ready, a teacher will appear. And I found that to be absolutely true.

Wow. That's powerful. That right there is going to be a clip that I definitely put up on Instagram for everybody to see, to garner some interest here, because that, that story is so powerful. Um, and I just love how it's related to some books. What are some other books that have had a big, big impact on your life? Are there any that come to mind?

I just read one now. I'm reading, I have 3 books. This one is How Will You Measure Your Life by Clay Christensen. Another one is Building Trust by Robert Solomon and Fernando Flores. In the book, you'll see that I was highly influenced and educated by Fernando Flores, who was formerly a finance minister from Chile, who talks a lot about the importance of language in life, how we create ourselves in language, how most people aren't rigorous in language, and how language, if it's not used properly, can create a lot of agony and pain. And I believe greatly in that. I believe that trust is at the heart of all successful relationships and basically absent in almost all failed ones. I'm also reading, not far along, The Precipice, by Toby Ord, which is a brand new book. And then the last one is David Rubenstein's How to Lead. So those are, those are what I'm reading now. And my own book, in the addendum, I give you a baker's dozen of books that have influenced me. Let me go and give you some sense of that. One is Chris Zook with James Allen, Profit from the Core, which talks a lot about how many managements are too quick to change the mission, which Boy, fit me. Guilty as charged. And talks about how you really, you know, have to really polish up the diamond in the rough that's in your midst. And that's what we did. And I find John Heider, The Tao of Leadership, Max DePree, Leadership Is an Art, Ram Charan and Dennis Carey and Boards That Lead, Matt Budd, who's a doctor here in Boston, You Are What You Say. Chapter 4, David Halberstam, The Best and the Brightest, Rosemary Moss Kanter, The Change Masters, Jim Collins, Good to Great. I have a baker's dozen, as I said, of books that have influenced me. But I found books, seminars, colleagues' advice, a great board to guide me to make sure that I didn't have mission creep and make the same mistake again, were invaluable in terms of helping me. But books play a huge role.

Yeah, a lot of your recommendations have to do with leadership. And at the end of the first era section of the book, you do talk about the importance of leadership and how it's part art and part science. So what do you mean by that?

Well, there are things that you're born with, that you come with. It may be curiosity, it could be some degree of empathy. Things that, that I really can't draw a definitive line, but, but things that you might naturally come with. And then there are parts that are science, the things that I deal with in the book itself. How do you plan? How do you recruit and retain an organization? Those, those tend to be more the science part, a little bit more teachable. But I also think that people can grow and learn in terms of their own emotional intelligence. as a result of those things that may be more instinctual, the curiosity, the inspiration, the creativity that goes along with it. I don't think there's a particular personality style that's more adapted at leadership. I find as many, as many introverts as extroverts in terms of leaders. I think that it's not only a set of things of what you do, but a lot also about personal qualities and characteristics, what you value as a human being. You know, integrity and trust are hugely important activities. Passion for the business, hugely important. So, it's a combination of things that really make for good leaders. So, part of values and those also can be learned over a lifetime through, sometimes through trial and error. Mistakes can be just as effective in terms of reshaping a human's life as could be the activities that you actually master. that I list in the book, the different activities that you function as. So it's a combination of all of those characteristics and qualities and things that come along that I think make for a good leader.

Well, one of the lessons that you mentioned a little bit earlier in this conversation is the idea that you need to take extreme ownership of the situation and all responsibility falls on you as the leader. And Jocko Willink has a great book called Extreme Ownership where he talks about leading up the chain sometimes, even as an employee, which many of us in the audience might be, you need to take responsibility for all aspects of the business and try to bear that responsibility and provide solutions and learn from those failures.

Agree 100%. And when things go wrong, you do take the pain. And when things go right, be very quick to share the rewards and share the glory with those people who helped create it. That's part of your job. And that can be true And a department head and an accounts receivable clerk, a CEO, I think it applies to— and families. It applies in all walks of life, I think. True. And I found that that is the best way to be of value, which is truly the most important thing in life, is to try to be of value to others. And that's one way to do that.

Be quick to learn and also be quick to share the reward. That's, that's another great piece of advice. Well, for people who want to learn a little bit more about you or the book, where should they go? What should they do?

There's a site called Around the Corner to Around the World, and in it there, there will be easy ways to be able to access the ability to buy the book and even some early preorder incentives to get early lessons and early parts of the book for those people who are so interested.

Awesome. And Bob, it's so funny, every once in a while I have a guest, and I really don't say this all the time, where time flies. You know, time flies when you're having fun. And I could ask you a million more questions about this book, but I know we've got to wrap up soon based on the fact that it's already 53 minutes into our 1-hour block. And, uh, is— are there any other pieces of advice that you'd like to give a young listener? A lot of, uh, The audience is young, big goals, big ambitions, looking for direction. Is there something you wish you learned a little bit earlier in your life?

I think as I help my children along, I would say the 2 basic lessons I try to impart are basically the golden rule: do unto others as you would have them do unto you. And the second is all things in moderation, seek the golden mean in life. And I find that those are useful lessons. If I were to give advice to people. If you're interested in entrepreneurship or business, my advice would be spend 3 to 5 years accumulating your 10,000 hours of understanding that the 80/20 rule applies. There are some serial entrepreneurs, but I would say 80% of successful ones have apprenticed in their industry. They know the metrics, they know the openings, they know the language, they know where the gaps are, and they know how to build a sustainable competitive advantage. So I would suggest that. I would say that if I was building a career, I think that make yourself useful, be of value to people, and really try to help. For anybody designing a life, I think that the things that I learned about planning— what's your purpose in life? What would you like to be in 3 to 5 years or longer? What do you want to have? How are you going to measure your life? As Clay Christensen said, how would you measure life? And then the 4 or 5 strategic advantages. So, as I reached each turning point in my life, as I say, I'm on my third, about to go on my fourth, I use the same planning process I used in business to write down in my own, what is my own purpose, my own mission statement? What are the 4 or 5 levers I'm going to pull with my scarce resources in order to achieve that objective? And what is it that I truly really want to have at the end? And as it turns out, most of it is always about being of value to people. And the final analysis, I think that's the way to live a life and quite truthfully always have a goal and always keep going. I think probably the fountain of youth is to try to stay of value to society as best you can. That's a long-winded way of answering your question, but that's, that's what I would leave the audience with.

Well, I would love to hear you continue talking about it. So maybe we'll have another conversation sometime soon. I know we don't live very far from each other.

I would welcome it. All right.

Well, thank you, Bob. I really appreciate your time today.

Thanks, Nick.

That is a wrap. Thank you so much for taking the time to listen to this week's episode of Book Thinkers: Life-Changing Books. To discover more books, more mentors, and more resources that you can use to achieve more and live better, make sure you check out our website at www.bookthinkers.com. There you'll find links to our mobile application, more podcast episodes, our shop so you can get some Book Thinkers swag, and our socials. With that, I'm signing off and I'll see you for next week's episode of Book Thinkers Life-Changing Books. Bye.