The youngest generation of Michigan’s Schostak family steps up
From left, Bill Angott, Mark Schostak, Jake Schostak and Ken Stanecki helm TEAM Schostak.
Photos by David Franklin and Nicholas Upton
The Schostaks have it all figured out: the restaurant operator is a testament to culture, hard work and smart planning. No. 60 on the Restaurant 200 is thriving with 65 Applebee’s, eight MOD Pizzas and five Del Taco restaurants. It also owns non-franchised Olga’s Kitchen, a regional restaurant and Detroit-area institution. This year TEAM Schostak, as the group is called, reported sales of $176.8 million. (See the full list on page 54.)
The family itself is a local institution. The Schostak Brothers & Company is a well-known real estate firm based in Livonia, Michigan, with holdings across 24 states. It was in that family incubator that the franchise operation began under the name TEAM Schostak Family Restaurants in 1981.
Since then, the franchise operation has become an industry heavyweight. It checks all the boxes of successful franchise organizations: experienced management, access to capital, close community ties and a strong, systemized culture. It does a few unique things too, like self development to ensure great locations for all its brands and big savings when co-locating multiple concepts.
As the fourth generation of the Schostak family starts to take control, the company is growing revenue and it continues to develop the market for MOD Pizza and Del Taco.
Like many great stories, the tale behind the Michigan operator can be told in three acts complete with heartache, big mistakes, redemption and many lessons for the company cast.
Mike Chereton (left) and VP of Operations Jim Hannan. Chereton started at Burger King more than 30 years ago; now he serves as director of operations for the Del Taco restaurants.
Act 1: Accidental Franchisees
When the family business is real estate, it’s just a matter of time before it controls the dirt under a restaurant. Schostak Brothers & Company had a few back in 1981, but it was a Burger King property that kicked things off for the franchise diversification.
Mark Schostak, the executive chairman at TEAM Schostak, said his father was looking to diversify the family business beyond real estate. With interest rates at 19 percent and the first inklings of a dismal recession just hitting the economy, it wasn’t a great time to buy a restaurant.
Burger King came to the Schostaks and said they were having a tough time finding someone to take over the franchise.
They said, “You already own the land, so you can get the break-even. Why don’t you become a franchisee,” recalled Mark Schostak, who joined the family business in 1985. “A little light bulb went off with my father because he was looking for another leg for the family business. He saw this as an opportunity to diversify away from real estate to an operations-based business.”
So they ran with the Burger King brand, building out a handful of locations in the small satellites around the urban core of Detroit. Immediately, the fledgling operators learned the value of customer service.
“We had some very significant takeaways in working in these small towns. You learned it was really important to delight the guests. In a small town if you don’t delight the guest, they start talking and since everybody knows about everything your restaurant can develop a very bad reputation,” said Schostak. “The inverse of that is you really delight the guest and get a great reputation. That became one of our core values.”
Working in towns with populations between 5,000 and 10,000 taught the team to stick to their entrepreneurial roots.
“We had to learn to control our costs because you didn’t do a lot of volume,” said Schostak. “I think that experience with the entrepreneurial P&L focus is with us today now that we operate over 100 businesses. We never forgot our roots about controlling costs.”
Another core value came into view in those early days as well: a community-focused company. In small towns where everyone knew everything, sponsoring the pee-wee football team or the girls volleyball team was major marketing.
“In these small towns, high school athletics had all sorts of budget issues because they just didn’t have the tax base,” said Schostak, who found a valuable niche by partnering with many local teams. “The community ate there because they supported the community.”
|From left, Barb Pasciak, Mark Schostak, Jake Schostak, Bill Angott and Ken Stanecki in the company boardroom.|
Act 2: Growing Pains
In 1992, the franchise operation grew beyond its modest beginnings. The team operated 12 restaurants—eight it built and another four from Burger King’s refranchising program under then-parent company Pillsbury.
Like it did in the early days, the family sought to diversify and expand. So the Schostaks signed a development agreement with one of the hottest new concepts around, Boston Chicken. The Schostaks aggressively built 12 locations just in time for the brand to transform radically.
A new team of seasoned executives took over Boston Chicken, which became Boston Market. Everything from the menu to the marketing changed dramatically, and the hot rotisserie chicken concept became incredibly complex almost overnight.
“We learned a very important lesson that ended up being a very expensive lesson,” said Schostak. “We learned that when you're involved in a concept, it's really important that the business model is really established, specifically that the concept has been finalized and tested and there’s an economic model that you can make money on.”
Soon before Boston Market went bankrupt and the remains were sold to McDonald’s, the Schostaks were able to get out, selling all 12 locations back to Boston Market corporate, “which allowed us to not lose as much money as we could have,” said Schostak.
Putting that harsh lesson to work immediately, the team looked back to Burger King. The legacy brand was refranchising and operators who had been in the system since the 1960s and 1970s wanted to cash out. With 16 stores from refranchising and several acquisitions, the team went from 12 Burger Kings to 70 between 1992 and 2002.
During that breakneck expansion some key people joined the company. Bill Angott joined in 1996 and Barb Pasciak joined in 2000. Angott now serves as CEO and Pasciak is the director of public relations and marketing. “I talk a lot about the importance of having professional management,” said Schostak. “This company would not be successful today if Bill Angott were not here.”
But despite the key figures, it was too much too fast.
“We got ahead of our capacity to execute, we grew too fast,” said Schostak. “We didn't have a system to attract, train and develop internal people. When that happens, you get a lot of turnover. And when turnover skyrockets the restaurants aren’t operated as well, then you have guest defection and you start losing sales, losing profits and then you don’t have capital to put back into the restaurants.”
Low unemployment and brand troubles didn’t help, either. During this period, there was a new CEO at Burger King almost every year. That meant the same headaches the team saw at Boston Market, but all the worse as it was the only brand in the company. “It was a tough period but a period where we learned a lot,” said Schostak.
|The dining room of the newest MOD Pizza location is covered with images from the community—a connection the company holds near and dear.|
Act 3: Educating and Executing
“We basically pushed the pause button and said we need to regroup organizationally,” said Schostak. “We outlined what we strive for, to lead the way”—which became the company’s slogan—“and be the best restaurant operators in our trade areas.”
That meant reinvesting in the restaurants, remodeling or moving half of the restaurants and slowly getting into the Del Taco brand. But the central part of going from a shaky operation to a strong one was transmitting the culture from the top level to the front line.
That meant creating what they have dubbed the TEAM Schostak Family Restaurants Roadmap and get the entire organization to embrace the vision, mission and core values therein. That became the ultimate goal for Angott and the rest of the management team.
“It’s easy to go from being a poor company to a good company, but it's not easy to go from a good company to a great company—very few do it. We studied the ones that did and asked what are some simple things that we can do every day to be a great company,” said Bill Angott. “We live them, and we act on them every day.”
The roadmap is straightforward, but its simplicity belies the work and deep thought that went into it. It outlines how to communicate up and down the chain of command and how to retain great talent with work-life balance, development and awarding achievements. It crystallized how to interact with guests and the broader community and it outlined how to have tough conversations and make them constructive.
“Some people didn’t know what it meant to be candid,” said Angott. “We don't believe that people get out of bed prepared to do bad work. When you get out of bed, you want to do a good job, so it’s on us to let them know when they fall short and if we don’t we’re doing them a disservice. The second part to that is great expectation of candor.
Communication has to flow upward. They do the job day in and day out; if they don’t let us know what is working and what’s not working, we can't make the right decisions.”
The roadmap outlined everything the company wanted to do. It was so important to Mark Schostak that he keeps a folded-up version in his pocket at all times. But to communicate it through the organization and get everyone to embrace it, it took more than a piece of paper.
“I’m a big believer in execution. That is my ticket to success in this organization, so I’m going to give everyone a chance to learn how to execute at a high level,” said Angott.
So in 2008, he gave the entire organization the chance to do just that through a pair of educational programs dubbed TSFR University and LEAD. The university was open to all new managers and the LEAD program was reserved for employees that demonstrate leadership potential.
Programming came from business, culture and leadership books as well as 20 years of experience operating restaurants. Ongoing reminders like Angott’s “Monday Musings” and employee-driven “Roadmap Wednesdays” further reinforce the systematized culture.
To anyone that has worked in a large organization, that roadmap, the seminars and the culture talk can reek of a management team with nothing better to do. But CFO Ken Stanecki, who joined the management team in 2015, got to see the business with a fresh set of eyes. “It’s legit. The roadmap is an active part of discussions in the company and helps guide decisions and strategy,” said Stanecki. “You rarely see something like that.”
As the message echoed throughout the company, turnover dropped and operations improved. Some got really involved, pinning inspirational sayings to their bathroom mirrors.
The engaged staff and top-to-bottom communication helped push operations to new heights. TEAM Schostak was named franchisee of the year in the Del Taco system in 2009 and 2010. Revenue that dipped in 2006 flattened and began growing, even in the midst of the Great Recession.
Angott was named the CEO to charge ahead with the newly culturally empowered company. And Schostak stepped back to focus on capital needs and high-level strategy. With the engine rebuilt and primed for the next journey, the company was prepared to face some radical changes.
The Next Performance
After four years under the guiding principles of the roadmap, the education and the new vision, the team was looking to stretch a little bit. So in 2012, it purchased 65 Applebee’s. Schostak says the acquisition “really tested our organization.” And in 2015, it sold the entre Burger King operation. New consolidators like GPS Hospitality were growing fast, and the 60-unit, single-operator bloc of local restaurants was a dream for a strategic buyer like GPS’ CEO Tom Garrett.
“Tom proved that he had the ability to close really quickly. This was really emotional for our people so I didn’t want to drag it on,” said Schostak.
In this period, the company also jumped into fast-casual pizza with a 25-store development agreement with MOD Pizza. The move served as the perfect opportunity to bring in the next generation of Schostaks. “We realized the transition from siblings to cousins and from third to fourth generation was a very big transition to make. It gets a lot more complicated,” said Schostak.
The next generation included nine first cousins within the Schostak family. To guard against all the drama and the dangers of nepotism, the elder Schostaks figured out a way they should enter the business and how to operate in the business. But first they had to show they were interested in the restaurant business by working in the industry—but outside the company—for three to five years.
“It was something my brothers and I did not do. My dad came from a post-WWII entrepreneur mindset—when there was work to be done he’d call his sons. He couldn’t fathom that he had four grown boys that would work for someone else because he needed things to be done,” said Schostak. “But the idea was for them to be successful in their own right.”
Jake Schostak was the second of that next generation to come through the system. He had an early affinity for the restaurants, even bringing in his uncle Mark for career day at school “because to me he was the Burger King,” said Jake Schostak.
But before he took over as brand leader of the MOD Pizza locations, he learned a few things in the fast-casual crucible. After a stint at Lettuce Entertain You in Chicago, he headed to the East Coast for some cutting-edge insight.
“I wanted to come back to help the family business but didn't want to come back until I could help elevate the family business,” said Schostak.
“It was really when I went to ShopHouse under Chipotle’s system and processes that I learned how to run a restaurant.” He then met the founders of the fast-casual salad darling Sweetgreen, a company that demonstrated again that the culture back home wasn’t just lip service.
“They really had a strong culture. That's where I learned that culture eats strategy for breakfast,” said Schostak.
After four years away, he was ready to come back. “I knew there was an opportunity at MOD, and I was getting a little homesick so I called Mark and said I'm interested and he said, ‘We've got this.’ And two years later, we've got our eighth store,” said Schostak.
As the fresh face of the brand who Mark Schostak says “has the right name,” Jake is the critical familial link to the next generation of TEAM Schostak leaders. He's also intent on establishing the Schostak way.
At a new MOD location, Jake asked a manager how he’s “leading the way today,” using the family motto, and offering plenty of high fives in return. He’s also a regular on the local news, discussing the fundraisers regularly hosted at MOD and the ever-growing restaurant footprint.
Despite the more than 30-year age gap and generational wardrobe differences, he’s a lot like Mark if he traded a sport coat for some trendy business sweatpants. As the elder generation and the younger eagerly discuss everything from locations to signage, it’s clear TEAM Schostak plans to keep forging forward.
The Schostak Rules
Delight the guests.
In small towns, especially, everyone knows everything so they’ll either complain about or praise your business. The latter, obviously, is better.
Focus on profitability.
“We had to learn to control our costs because you didn’t do a lot of volume,” in the early days, Mark Schostak says, and that lesson sticks with them even with more than 100 companies.
Only buy into a tested business model.
The Schostaks learned that lesson the hard way when a run with Boston Chicken changed dramatically and became much more expensive after they bought in.
Develop a system for hiring.
“We got ahead of our capacity to execute, we grew too fast,” said Schostak about a period of rapid expansion from 1992 to 2002. “We didn't have a system to attract, train and develop internal people.” That leads to turmoil, weakened operations and customer defections.
Give straight feedback.
“Some people didn’t know what it meant to be candid,” said Bill Angott, CEO. “We don't believe that people get out of bed prepared to do bad work. When you get out of bed, you want to do a good job, so it’s on us to let them know when they fall short and if we don’t we’re doing them a disservice.”
Make the younger generations go away.
The transition from children of the founders to cousins and nieces or nephews is complicated, Mark Schostak says, and one rule they have is to insist anyone who wants to join the business first get restaurant experience somewhere else.
1981-1992: The Early Years
■ 1981 - Bought into the Burger King system.
“It all started in 1981 with a restaurant in Alpena, Michigan.” – Mark Schostak
■ 1985 - Mark Schostak officially joins the family business
“That became my somewhat exclusive involvement in the family business and I helped grow it.” – Mark Schostak
1992-2002: Lessons Learned
■ 1992 - Bought into the Boston Chicken concept, which became Boston Market
■ 1996 - Bill Angott joins
■ 2000 - Barb Pasciak joins
■ Went from 12 Burger Kings to 70 via refranchising
“Like we bought some of the corporate stores in the 80s, we put our hand up and said we would like to buy some more.” – Mark Schostak
2002-2012: Building and Executing
■ 2005 - Added Del Taco
“We did a lot of work to bring Del Taco to the area.” – Bill Angott
■ 2008 - Started TSFR University and LEAD Programs
“I had been in business for 25 years, and I really felt that we had learned lot about the restaurant business and I had this vision that we could take all our leanings and put them into a two-day seminar for newly promoted managers.” – Mark Schostak
■ 2009 - Bill Angott named CEO
“My job is primarily to continue to implement and grow as an organization.” – Bill Angott
2012 - Present: Growth and Diversification
■ 2012 - Bought 65 Applebee’s 2012
“The Applebee’s acquisition allowed us to see significant growth and realize our dreams.” – Mark Schostak
■ 2014 - Added MOD
“We saw that MOD was really millennial focused and something for the next generation." – Mark Schostak
■ 2013 - Detroit files for bankruptcy protection
■ 2015 - Closed BK deal with GPS Hospitality (No. 28 on the Restaurant 200).
“It was a difficult decision, an emotional experience because we grew up with these people. So we had to find a really good buyer, who would take care of the restaurants and take care of the people.” – Mark Schostak
■ 2015 - Ken Stanecki joins
“One of the things that I have changed with my though process is to bring the IT under one system. Right now rolling out a whole new payroll system. Now if we bring in another brand we' can plug them in.’” – Ken Stanecki
■ 2015 - Bought Olga’s Kitchen
“Everybody has their local brand, whether its Skyline Chili in Cincinnati or Eat ‘n Park in Pittsburgh area or to a larger extend In-And-Out Burger: a local iconic brand, that’s what Olga’s Kitchen is.” – Bill Angott