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Empire Builder

How Greg Flynn turned the ‘buying Opportunity of all time’ into the nation’s first billion-dollar restaurant franchisee


Greg Flynn & Lorin Cortina

“We believed that was an opportunity to double down,” says CFO Lorin Cortina, right, about Applebee’s refranchising initiative. He’s with Greg Flynn, CEO.

Greg Flynn sits at the top of a company that operates 503 restaurants in 23 states from California to Maine, yet for the past few months his attention has been focused on just one. Then again, it’s not just any restaurant. It’s a flagship Applebee’s, a 12,000-square-foot, 350-seat, bright-red casual-dining cathedral being built on a prominent corner at the touristy Fisherman’s Wharf just a couple of miles from Flynn’s San Francisco office. 

Flynn, the CEO of Applebee’s and Taco Bell franchisee Flynn Restaurant Group, has been at the restaurant frequently since construction began months ago. He notices the new stairway railing being installed looks just like the last one. And he cheers the latest milestone in the restaurant’s construction: the arrival of some half-moon-shaped booth seats, which he tests, by sitting on them, to the delight of a group of company managers overseeing the project. 

“This is my baby,” he said of the restaurant, which is his only location in San Francisco. “I’ve wanted to build a restaurant here for 14 years—basically, since I’ve been in the restaurant business.” 

But here’s the thing: Flynn has almost no idea how this restaurant will perform once it’s open. It’s in a popular, high-traffic area, and has views of the harbor and of Alcatraz Island, but it’s on the third floor, above the second-floor Ripley’s Believe It Or Not museum and tourist shops on the first. It will depend heavily on the Applebee’s name to get people to walk upstairs. That’s why that name is in big, bright letters on the top of a building decorated with murals and neon. 

“This could be a phenomenal success, or it could crash and burn,” he said. “But one advantage of having 500 restaurants is you can afford to roll the dice once.”

This kind of uncertainty seems rare for Flynn, who in 14 years has grown his company into the nation’s largest restaurant franchisee, according to the Franchise Times Restaurant 200—and the first to ever record more than $1 billion in sales. It’s grown that big because Flynn is a remarkably astute investor and business historian who usually knows exactly how those dice will land when he rolls them.   


Flynn’s headquarters is on the 18th floor of a neoclassical building constructed in 1923 to house Chevron. During our recent visit, he exchanged barbs with his company’s chief financial officer, Lorin Cortina. And on his office door is a black-and-white sign that proclaims “Greg Flynn, Chair Executive” around a picture of a chair. It’s an inside joke, referencing a poorly translated news article out of Poland that gave him the title. 

Greg Flynn

“No one wants to work for a dump,” says Greg Flynn, CEO of the $1.2-billion Flynn Restaurant Group in San Francisco.

The 49-year-old is charismatic and full of energy. He rarely puts things off until later, and he admits he can’t go to sleep until his to-do list is finished. “There’s a saying he has, ‘own it,’” said Brad Pettinger, chief operating officer at Apple American Group, a Flynn subsidiary, who has worked with Flynn for 15 years. “That’s his personality. You see it in his house, too. If there’s a picture crooked, he’ll straighten it. There’s an energy about him. That’s what people like about him.” 

Flynn was raised north of San Francisco. His educational background is broad in scope, number of degrees and relative geography. He majored in history at Brown University, though he spent his junior year at Trinity College in Dublin, Ireland—Flynn has dual U.S.-Irish citizenship. 

At Brown he won the prestigious Rotary Foundation scholarship to do graduate studies at the University of Queensland in Australia, where he studied late 19th century U.S. economics history. He has a graduate degree in history from Yale, where he eschewed the doctoral program to get a business degree at Stanford at the same time that his soon-to-be wife went to law school. 

Yet it was during a seven-month break between his graduation from Brown in 1986 and his time in Australia that he got his real education, at least in the real-estate business. 

Flynn was living in San Francisco when he decided he should get a job during the break. He was considering a career in real estate, and got a list of real-estate firms in the area. He walked down Montgomery Street in San Francisco and walked into the one closest to him: Eastdil Realty. 

“I never even heard of it,” Flynn explained. “I pushed the elevator button. Another guy was waiting. He had won a Rhodes scholarship and went to Oxford and worked at the firm. We hit it off. By the time we got to his floor, he said, ‘Let me introduce you to everyone.’ So I met everyone at the firm, ending the guy who was in charge, Roy March. Roy offered me a job on the spot.” It was late on a Friday afternoon, and Flynn started the following Monday. 

It turned out to be huge. Eastdil was a pioneer in the real-estate investment business. “It accelerated my education in real estate like no other job I could have done,” he said. “And it was just pure luck.” 

In between his various educational endeavors, Flynn spent two years in New York and two years in London, both with First Boston’s real estate group, and nine months with his future wife backpacking across Africa and Asia, beginning in Cape Town. 

At Stanford, he took a directed study course. His assignment: Write an offering memo for a small real-estate equity fund. He raised the money within two weeks of graduation, and in 1994 that fund became Flynn Properties. He would raise 14 real estate investment funds total, and bought and sold dozens of properties. 

During our drive to Fisherman’s Wharf, Flynn pointed out a building on a corner in the financial district, the old Standard Oil building. He bought it in 1997 for $12.5 million on a bet that the primary occupant, the Pacific Exchange, would renew its lease, while others thought it wouldn’t. Flynn was right. He sold the building the next year for $23 million. “He is just wickedly smart at identifying opportunities,” Cortina said. It’s a skill that would serve him well in the restaurant business.


Flynn’s uncle was a McDonald’s franchisee who owned four locations north of San Francisco in the 1970s. Flynn’s father, a lawyer, saw that success and decided to replicate it. He couldn’t get into McDonald’s, so he opened a pair of Burger Kings in the 1980s. And so Flynn learned about the potential involved in operating a franchise. 

“It basically paid for the rest of his life,” Flynn said. “It performed very well for him.”

Flynn oversaw those restaurants starting in 1994, when his father re-married and traveled around the world with his new wife. Flynn got deeper into the restaurant business in the mid-1990s when he agreed to be a limited partner in a new San Francisco restaurant called World Wraps that introduced burrito-like sandwiches. After the first location opened to phenomenal success, Flynn got excited and asked to build some himself. 

He ultimately built 14 locations in the Seattle area. “It was a good little business,” Flynn said. He lured Pettinger, who used to run the Seattle market for a Canadian steak chain called Keg Restaurants, to run the restaurants for him.

A key moment came in 1998. Flynn’s father had come across some real estate in Greece and asked Greg to send some money. Flynn looked into borrowing some against the Burger Kings, and discovered the world of securitized lending. 

Securitized loans were popular in franchising in the 1990s. Lenders would make loans to franchisees, package them and resell them as securities—so the lenders didn’t own the risk. They would loan up to 100 percent of the cost of the business, so long as the franchise was among a handful of well-regarded legacy brands. Flynn did this type of loan against his father’s restaurants and sent his father the money. 

“This was a giveaway,” Flynn said. So he looked at the restaurant industry, and saw two segments that would qualify for these types of loans: quick-service restaurants and casual dining. He decided casual dining was the better bet—a decision he doesn’t regret, despite the sector’s weak performance in recent years. “Looking in the rear-view mirror, it was the best decision at the time,” Flynn says. “And Applebee’s was the best bet.” 

Flynn bought the eight units in the Seattle market from Don Strang a large Applebee’s franchisee at the time. Flynn borrowed the funds for the business, and suddenly he was a casual-dining franchisee. 

The most important part of the deal might have been Dan Krebsbach, an Applebee’s lifer who built the Minnesota market for Strang before moving on to the Seattle area to open locations there. Krebsbach found out about the sale after it was completed. He had been at a managers meeting in Ohio, when Strang pulled him aside and said the stores had a new owner. “I was a little nervous on the flight back,” Krebsbach said.


Yet Krebsbach had some ideas for how the market could be run more effectively—and differently from Strang’s locations in Minnesota or Ohio. Krebsbach wanted to pay managers more, and wanted to fast-track talented managers. He wanted to do some radio advertising. And he wanted to fix things in the restaurant right away. 

Flynn and Pettinger gave Krebsbach the go-ahead to do these things. It worked. “When Greg got involved, sales really took off,” Krebsbach says. The company had two more solid years of comp sales growth and it built two more locations. Over the years, those restaurants have gone from averaging $45,000 a week in sales to $60,000 a week. 

And that became the germination of a strategy. Flynn, the one who had spent years studying business and economic history, applied that knowledge to the franchise sector. He understood that most large franchisees operate with a top-down business model in which the decisions come from a single source, often without respect to geography. He also understood that franchising works best because local owners have pride and a strong, vested interest in the performance of their restaurants.

“I’ve studied the evolution of American business very carefully,” Flynn said. “Executing consistently well, day to day in casual dining is very difficult. Most of these casual-dining operators that are spread over diverse geographies don’t do it very well, because they’re operating under a command-and-control format, which is ineffective.” 

Flynn thought a national portfolio of restaurants could operate effectively and profitably with a flat organizational structure run by local market presidents whose pay depends on the performance of their restaurants.  And so Flynn called Don Strang again.

Strang agreed to sell his remaining Applebee’s holdings, 62 locations, in 2001. To finance the deal, Flynn brought in a private equity group, Goldman Sachs. Goldman agreed to invest $40 million.

Applebee’s wasn’t so eager. The company hadn’t had a private equity group involved in one of its franchisees’ business before, and executives had their doubts. “Lloyd Hill took it very seriously,” Flynn said of the chain’s chairman at the time. “I remember him pacing around the room saying, ‘What does this mean?’” 

The solution: a limit. Flynn wouldn’t be able to own more than 11 percent of Applebee’s units. The sale went through, and Apple American Group was born. 


The company would buy more locations in subsequent years and it would build other units. And then in 2007, IHOP, led by a former Applebee’s executive in Julia Stewart, engineered the takeover of Applebee’s and vowed to refranchise the entire system. For Stewart, the timing was terrible: Markets crashed in 2008, leading to the worst recession in 80 years and a brutal restaurant environment. Lending froze, and potential buyers retrenched. In short: There were few buyers for those Applebee’s.

One of the buyers was Flynn, whose Apple American Group by 2008 had 189 units and nearly $440 million in annual sales. It had the cash and the financing to make deals. 

“It was the buying opportunity of all time,” he said. The combination of a flood of inventory, thanks to the refranchising, with a dearth of buyers meant Apple American could expand quickly and cheaply. And Applebee’s, eager to sell those company restaurants, agreed to eliminate that 11 percent limit. 

“We believed that was an opportunity to double down,” Cortina said. “Prices became so attractive. We were purchasing restaurants on 35 percent of the replacement costs.”

Between 2008 and 2012, Apple American more than doubled its unit count in Applebee’s, from 189 to 438. That included a purchase last year of the second largest Applebee’s operator, AmRest. The Polish company owned 99 units in the Southeast, wanted to get out, and called Flynn. 

With that deal, Apple American owned 25 percent of the Applebee’s system. And although there are no limits to how much of the system it could own, it’s still tough to maintain a growth rate. So the company began to look at other concepts. It chose Taco Bell, because of its sales performance and the lack of national competition in the QSR Mexican category. Late last year it bought the 76-unit Southern Bells operation out of Los Angeles, its first venture outside of Applebee’s. 

Flynn renamed that company Bell American Group. It and Apple American are subsidiaries of Flynn Restaurant Group. Flynn kept Southern Bells’ management, led by President Charlie Brown who will lead Flynn’s Taco Bell efforts. Flynn said the company will keep the Taco Bell business completely separate for a year while it learns the business before merging some operations with the rest of the company to take advantage of economies of scale. Ultimately, the plan is to buy a lot more Taco Bells.

Brown, who had owned the business with a partner for 13 years, said the choice to sell to Flynn over seven other groups came down to culture. The two companies’ cultures meshed well together, he said. “There’s no doubt that Greg and his group stood out,” Brown said. “It was clear with Greg when we first met how much pride he has in his own business. But he also felt he could learn from our business. That felt really good.”

Those last two deals also did something else: They vaulted Flynn Restaurant Group’s sales into 10-figure territory—the first restaurant franchisee whose holdings had more than $1 billion in annual sales, $1.2 billion, to be exact.

And by the way, though Flynn has built most of that through acquisitions, he says he has the most fun building new units. Apple American built 70 locations over the years, the most of any operator in the system. 


Flynn Restaurant Group now has oper-ations from Los Angeles to Maine. To operate restaurants in such a geographically diverse area, Flynn has a federal-state structure. There are certain “federal” guidelines that all restaurants in the company must follow, and the individual “state” markets have some leeway to run things as they see fit.

“You let the local people really have a say,” Pettinger said. “Another time, these folks would have been franchisees, if they had the financing and the right timing.” 

The market presidents are competitive, Pettinger said, “but in a friendly way.” Flynn flies the presidents to San Francisco for lengthy, quarterly meetings and for an annual retreat to share ideas and build camaraderie. Also attending those meetings is a senior representative from Applebee’s corporate, something few franchisees will allow. The representative’s presence doesn’t change the tenor of the meetings. “We don’t hold back at all,” Flynn said. 

The market president system has evolved so that the markets act like small laboratories, and if an idea works at one market, other markets may start doing the same thing. “In our structure, best practices flow to the top,” Krebsbach said. “Instead of someone at the top telling you what to do, you have eight ideas. Maybe five ideas would not be successful, but three would be highly successful. Then those five leaders would say, ‘My idea isn’t working well, so I’m going to copy the other three.’ The good ideas flow to the top.”

The “federal” functions include support, from a 90-person support center in Independence, Ohio, with all the basic corporate functions such as human resources, real estate, training and accounting. Then there is “federal law,” or the standards and outcomes that all locations must follow. 

Those standards include food safety, and the physical condition of the restaurants. The company has “zero tolerance” for deferred maintenance and sanitation issues, Flynn says. “What the guest sees has to be as near to perfect as reasonably can be,” he says. Some of those things, like gum on the sidewalk, take no time, but a tear in a booth seat can take time so the new seat can be ordered. 

“Many operators will tolerate tears,” Flynn says. “They wait until there are 10 tears so they can order in bulk. We’re the opposite. Where you get in trouble with us is if you don’t call for that one tear. Many problems are less expensive in the long run if you fix them earlier. But the biggest benefit is on staff. 

“No one wants to work for a dump. At a dump, you get people who will work for a dump because they have no better option.”

This federal-state strategy seems to work. Apple American has been Applebee’s operator of the year for two of the past three years, and on the day of our interview the company had just found out it finished fourth out of 42 operators on the franchisor’s quarterly scorecard that measures operations, food safety and guest satisfaction. “I’m totally convinced that it has served us very well,” Flynn says of his business strategy.


The strategy can also be seen in his Fisherman’s Wharf restaurant. As much attention as Flynn gave the location, he still left the job of running the operation up to Monty Davis, the market president for Northern California. “He went on vacation to Africa the week it was going to open,” Davis said about Flynn. “He trusts us to run it and open it.

 “It’s tearing him apart to be away, though,” he added. 

The restaurant opened on a Monday, the last week of June, to a steady stream of customers, in spite of the rain, the competition and that third-floor location. Not bad for a roll of the dice. 


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