Marlu’s CEO seeks American dream
“My advice is to do what’s in your heart,” Tony Lutfi’s mentor once told him. Lutfi operates Marlu Investment Group.
Sent to America at age 16 to avoid fighting his own countrymen, Tony Lutfi landed a job at a Jack in the Box. “I loved the speed and the movement,” the son of Palestinian refugees recalls. Today his Sacramento-based company, Marlu Investment Group, has 21 Jack in the Box locations, five Sizzlers, five Little Caesars, 53 Arby’s, 47 Church’s and 29 Sears locations—and he just closed a deal for five T.G.I. Friday’s. It’s all because he listened to a mentor, and then worked ferociously hard.
After 13 years of hard work, Tony Lutfi finally became a franchisee in 1996, when he bought two Arby’s locations in Sacramento from his former employer. Those locations, plus several other restaurants he managed for different owners, provided the early makings of Lutfi’s own business.
And then Lutfi got a phone call. It was from Sybra, a big Arby’s operator that had just bought all the other Arby’s locations in Northern California. And it wanted Lutfi’s two Arby’s units.
But it also wanted Lutfi, who had built a reputation as a good operator. Sybra wanted Lutfi to be a company vice president, overseeing all of the Arby’s on the West Coast, more than 200 in all. It was a five-year deal, with guaranteed bonuses, a big salary and stock options.
It was an unbelievable offer, one that would help this former immigrant who had grown up poor in Amman, Jordan, the son of Palestinian refugees, realize the American dream. And so most people told Lutfi to take the job.
But as he sat at the San Diego airport, right after a meeting with Sybra CEO Jim Arabia, Lutfi called Bill Brusslan, his mentor, with whom he had worked for much of the previous decade. Lutfi called Brusslan whenever he had a big decision. And this was a big decision.
“The only way you can build wealth is through investment, not by working for a salary,” Lutfi recalled Brusslan saying. “My advice is to do what’s in your heart. I think you would always be a good entrepreneur. You owe it to yourself to give it a try.”
That did it. Lutfi decided not to take the job. “It was the hardest decision I’ve ever had to make,” he said.
The position would have offered almost everything Lutfi wanted, but not the one thing he really longed for—the ability to be an entrepreneur. And Lutfi didn’t cross an ocean as a teenager, didn’t work until he literally dropped on the floor during his college years, didn’t spend the previous decade working feverishly to own his own locations, to accomplish almost everything he wanted.
Metri Lutfi had been a barber for the British Army in Jerusalem in 1948 when the Palestine war broke out. And so the Lutfi family, including 3-year-old Amin and the newborn Gabriel, crossed the bridge into Jordan.
When Tony Lutfi’s company buys a franchise, management waits 90 days before making any strategic decisions. They interview staff, take notes and then list 30 changes to make.
The family settled in Amman. Tony Lutfi was born in Jordan in 1960; his sister was born soon after. Metri Lutfi became a laborer, laying tile for a living and rushing from job to job. He never had a guaranteed position, and the family was poor.
By the early 1970s, Amin was drafted into the Jordanian Army, to fight in a civil war against Palestinians. So, just before Tony’s 16th birthday, the family sent him to America to live with an aunt, so he could avoid the same fate. They didn’t want young Tony to fight against his own countrymen.
Both Tony and his mother received green cards, and they went to Lodi, California, to live with Tony’s aunt. Three month’s later, Tony’s mother returned to Jordan to be with the rest of the family.
“It was overwhelming,” Lutfi said, noting that he was in a new culture, going to public schools with mixed genders after growing up attending an all-boys’ school. “I was socially inept. It was uncomfortable.”
But a cousin, who had arrived in the U.S. years earlier, helped Tony adjust. And just before Tony’s 17th birthday, the two moved into their own place in Stockton. Lutfi graduated from high school, and decided to attend a community college, with plans to be a doctor. But those plans would change.
Collapsing on the floor
To pay for that education, Lutfi needed to work. He got a call one day from his cousin Sylvia, who worked evening shifts at the local Jack in the Box. The restaurant needed workers for the overnight shift, and his aunt told him: “If you need a job, come down and apply. They need someone desperately.”
He applied, and was hired immediately. He started before he even filled out any forms. “I remember making my first steak sandwiches without any meat on them,” Lutfi said. “They threw me right in.”
But Lutfi loved it. “It was so busy,” he said. “I loved the speed and the movement. Everybody’s talking, asking for something.”
Lutfi worked the overnight shift five nights a week while he went to college during the day. On the other two days, he worked overnights at a pair of local 7-Elevens. “I’d get off at 6 a.m., run to my apartment, take a shower, change, and run to Delta College,” Lutfi said.
Sleep was at a premium. One particularly difficult week in 1978 he was up for 72 hours straight. “I finally collapsed,” Lutfi said. “I dropped on the floor. My cousin came in a day later and I was still sleeping.”
But that period would soon end. The store manager at the Jack in the Box had a heart attack. He survived, but in that era a heart attack kept you from work for months. By that time Lutfi had been the night shift manager, earning $2.25 an hour. He was asked to become the store manager temporarily.
The next day, Lutfi stood before the staff, some of whom he didn’t even know. Nervous and shy, he asked them all for help.
The new job paid $800 a month, more money than he’d ever made. He dropped out of school for the semester to concentrate on managing.
The store wound up recording 11 record weeks under his guidance, something Lutfi takes no credit for. “I had nothing to do with it other than keeping the store running,” he said. “I just didn’t screw it up.”
But that doesn’t mean he didn’t feel proud. “I felt like I was already successful,” he said. “I was making more money than my father did as a laborer.”
And, he said, the success motivated him to do more. In 1981, his family arrived from Jordan. They all cobbled their money together to buy a small grocery store in Stockton, and Lutfi went to work there, and learned to butcher meat. By 1983, he decided to go to work for a local Rax Roast Beef, with a single goal: to own his own location.
Lutfi worked with Rax until 1988. He wanted to buy his own locations, and when the franchisee of the restaurants he worked for ran into financial trouble, Lutfi reached a deal to buy four stores.
Lutfi hired managers and replaced the deposit slips. One day in May, just as Lutfi was about to sign leases for three of the four properties, he got a call from the owner. A better offer came for the stores.
That offer was from a Japanese company, KFF Management, that was taking over Arby’s operations in Southern California. It wanted to convert those Rax units. KFF’s president at the time was Bill Brusslan—who agreed to let Lutfi stay on to assist with the conversions, and ultimately kept Lutfi as an operator.
Brusslan became Lutfi’s mentor. Lutfi was promoted and became the director for Arby’s stores in Northern California, 33 locations in all. “I give him all the credit in the world,” Lutfi said about Brusslan. “He really took time to treat me almost like a son. He gave me the best advice he could.”
And so, when Lutfi bought those two locations in 1996, and subsequently received an offer from Sybra, he called Brusslan, who urged him to keep following his dream.
The early years
In 1999, not long after he bought those units, Lutfi called Susan Scott. Lutfi had met Scott in the 1980s, when he worked at Rax. And now, Lutfi wanted her to come work for him.
Scott was hesitant. She didn’t have a job, but she didn’t need one, or want one. Still, Lutfi asked. And perhaps if it had been anyone else, the answer would have been no. But Scott remembered a time three years earlier when she did need a job, and Lutfi gave her one.
“He put me in a store and paid me to be a manager, even though he didn’t need one,” she said.
So, the day after Lutfi asked, Scott showed up for work. “I didn’t need the money, and I didn’t need the job, but Tony is my friend,” said Scott, who today is the company’s chief financial manager.
Two years later, Lutfi’s company got into the Church’s business with the purchase of four stores in the Las Vegas market. The first years were a “total disaster.” The acquisition came right before September 11, and the restaurants were soon “in a lot of trouble,” said Nader Lutfi, Tony Lutfi’s nephew and a company vice president who has been working with Tony since those early years. The stores suffered from employee theft and bad service, among other problems. “It took us a long time to get those stores turned around,” Lutfi said.
Ultimately, things did get on track. The units were doing nearly $1 million in unit volumes, and provided valuable lessons for the burgeoning franchisee.
It would also prove to be a catalyst, one that would launch Lutfi’s company into the restaurant franchising stratosphere. “It sparked all the other acquisitions,” Nader Lutfi said.
Today, Nader Lutfi’s office at Marlu’s Sacramento headquarters still has a few unpacked boxes, and its walls are bare. The space had been used as a staging area while the company moved into the space, and Nader is just moving in. “I’m tired of moving,” he acknowledged.
How tired? This was the company’s sixth office in just 12 years, a result of its rapid growth. Marlu would move into a new space, make an acquisition or two, and have to expand. This time, Nader believes the space should last for a decade. Lutfi bought the building, and there is additional space for the company to move into as it grows.
That growth would start with the improvement of the Las Vegas Church’s locations. Once they improved, Lutfi borrowed the money to buy 10 more in Tucson, Arizona, in 2006. It would be the beginning of a massive buying spree. They’d buy Church’s restaurants in Phoenix and in Texas in subsequent years. Deals have been coming almost annually ever since.
The company acquired Jack in the Box locations in California in 2010. It built five Little Caesars in the same area. In 2011 the company bought 15 Sears Hometown stores, getting into the real estate business. And then it bought five Sizzlers, and in 2012 it added 42 Arby’s, following that deal with a 10-unit acquisition.
The recession has been good for Lutfi, who targets older brands that have weathered ups and downs over the years, and are preferably in one of those downward periods. The theory is to get the stores at a low cost. They go in and fix the stores’ operations, and then profit from those improvements and the brand’s resurgence. “You make your money when you buy a business, not when you sell,” Lutfi said.
The Arby’s deal was a perfect example. Lutfi calls those stores “a gift from heaven.” He bought them in 2012 from the company, when it was coming off its split from Wendy’s and had been struggling with sales weakness and costly leases on many locations. Lutfi improved operations at the 42 units he initially purchased. That coincided with the brand’s sales improvement, brought about by a wave of innovative products. In one year, Lutfi said, the brand’s cash flow improved by 400 basis points, or 4 percent. “It was the perfect storm,” said Lutfi.
The 30-60-90 plan
As Lutfi’s company bought more franchises in more locations, it developed a system, and a game plan, for improving their operations and performance. It’s a system heavily dependent on existing employees, rather than wholesale management changes and top-down orders.
The company waits 90 days before making any strategic decisions. Instead, they take notes. They interview people. They talk to staff. “We try to understand why they make the decisions the way they do, and try to learn from it,” Lutfi said. The company will make needed changes, but nothing strategic.
By the end of that 90 days, they compile a list of 30 changes to make at the restaurants. Many of those recommendations come from staff themselves. And then the staff has 60 days to accomplish those goals.
“We’re engaging teams to make sure they appreciate the experience and engagement,” Lutfi said. “We’re selling them on the idea. They told us what’s wrong, and how to fix it. Now it’s just a matter of committing. But if it’s your idea, and you impose it on them, odds are they fight it.”
Said Nader: “We teach restaurant managers to be business managers.” In other words, Lutfi said, “run it like you own it.”
To Lutfi, the employees are the key ingredient. Engage the employees, and they’ll remain loyal and they’ll give you the ideas to fix the store. The company boasts lower turnover throughout its restaurants, which they believe is a testament to this idea.
During a visit to one of his Sizzlers, Lutfi spotted a server as he walked in the door, and gave her a hug. The server, Irene, had been working at the restaurant for more than 20 years. “Look at people like Irene,” he said. “At one time they felt like they were not important. But you make them feel important, because they are important. We talk with Irene every time we make a decision for Sizzler. Irene has been here 20 years. Her customers love her. I think she has a good pulse reading of the customers’ reaction to everything we do. So we ask her. And I trust her.”
Lutfi’s own personality also may play a role in the company’s low turnover. Lutfi is the kind of person to help his own employees in times of need, even when they don’t know it. He’s been known to pay for car repairs, and once paid for the funeral of a manager’s mother. “He’s just a nice person,” Scott said. “He’s good to people. And he’s fair.”
The family business
Today, Marlu Investment Group has 21 Jack in the Box locations, five Sizzlers, five Little Caesars, 53 Arby’s, 47 Church’s and 29 Sears locations. And Lutfi, by the way, still works hard, starting when he wakes up at 5:30 every morning, and continuing even after he leaves the office at 6:30 or 7 that night.
He works six days a week, but not Sundays, which belong to Anna, his wife, whom he met in 1978 at, not surprisingly, the Jack in the Box where they both worked. They married in 1984, and have three boys, and now a new set of twin grandchildren, Beckham and Mya.
The Lutfis deliberately kept no expectations on whether their sons would enter the family business. But all three worked at Arby’s until they left for college, starting in their middle-school years when they cleaned dumpsters and restrooms. “They had to understand the value of work,” Lutfi said.
“I hated it when I was that age,” said Metri, Lutfi’s oldest son and himself a new father. “But it taught me the value of a dollar, and what hard work can get you.”
Lutfi taught his boys other lessons—like accounting, for instance. “When everybody else was being read bedtime stories, my dad was showing me accounting spreadsheets,” Metri said, with a laugh.
It’s clear, the boys admire their father. “He deserves everything he’s got,” said Stephen, the middle son. “It wasn’t given to him. I’ve seen the sleepless nights and the endless hours.”
Today, both Metri and Stephen are involved in the business. Metri runs the Jack in the Box locations. Stephen oversees the Arby’s restaurants. Youngest son Ramsey is still in college, earning a marketing degree, but it’s believed that he, too, will join the company. Lutfi’s older brothers are also with the company. With Nader, that makes this a true family business.
But the sons don’t just give all of the credit for the success of that family business to their father. After all, he had a wife who was fully on board, going to the games that he had to miss and explaining everything that their father was trying to accomplish. “She’s just as important to this whole thing, because of everything she was willing to do,” Metri said.
These days, the business they built is one of the largest franchisees of any kind in the country. And it’s only getting bigger. During our interview, Lutfi was closing a deal to buy five T.G.I. Friday’s, along with development rights. He said he could see the company owning as many as 10 brands. And with the additional space in the new headquarters, it can be done without another move.
It seems Lutfi made the right decision when he turned down that job offer.