Buffalo Wings owner says ‘oui oui’ to American-style business
Love at first sight’ struck this Frenchman when he came to America and bought Buffalo Wings & Rings. He turned over the CEO job to a pro in 2009, and now is gunning to be the No. 2 player in the wings business.
FT: What brought you to America?
Philip Schram: I was born in Paris, and as far as I go back in the past my dream was to be an entrepreneur. My grandfather had a company in Italy, but it got destroyed in World War II. In France it’s very difficult to be an entrepreneur. Most of the people work for the government. I did not know anybody around me who was an entrepreneur. I started to work for a large corporation in France and got a lot of training.
Americans tie themselves to too much debt,” says Philip Schram, Buffalo Wings & Rings.
FT: But ‘entrepreneur’ is a French word. Why is being one there difficult?
Schram: I’ll give you an example. Today if I want to buy a domain name here, it takes 15 minutes on Godaddy and you can pay with the credit card. In Europe it took me nine months. And, for example, you cannot hire and fire, and that’s a big difficulty. If you are successful it’s not that good—you have to hide it, in France. Whereas here, success is—it’s not showing off, but it’s part of the culture.
FT: So you made your way to the U.S.
Schram: I spent 10 years looking for a company. Then I got the opportunity to come to the U.S. in 1999. We were invited to Cincinnati where we still live. It was a joint venture between Ford Motor Co. and my employer, who was a German automaker. It took me about four years to get a green card, especially with 9/11 it became difficult.
By 2004 I got my green card and I started to look for a business. I was searching with one of my co-workers, and we came across Buffalo Wings & Rings. We met with the founder who had the company for 20 years, and we bought the company in about three weeks.
FT: Why so fast?
Schram: I had the passion and I wanted to get going. We thought the opportunity was fantastic. The company had ups and downs. It was available. It was bankrupt. To be fair with you I saw the potential because the company at its peak had about 25 locations and in 2005 it was down to six. The thing that has always interested me in the United States is the businesses are a lot bigger than in Europe. You find your base model and then you scale up.
FT: The company was in rough shape at the time. What did you do to fix it?
Schram: We had a clear turnaround plan. We met with the franchisees, and they said we heard a lot of policies in the past. We’ll give you 90 days to prove you are good to your word.
What did we do? It was fairly simple. On a high level we demonstrated to the then franchisees that we were serious and we were doers. And the second thing is we put in place three or four programs. But I think it’s mostly the first one. A lot of franchisees want the franchisor to look forward and be people of their word.
FT: You’ve said you like to keep your operation debt-free. Why?
Schram: I think being born outside of the U.S. I am able to see everything good which is in the U.S., but at the same time some of the weaknesses. And here, both in business and personal debt, Americans tie themselves to too much leverage. At age 28, I took my last personal loan, so I paid completely my condo with cash, and I’ve always had positive cash flow and paid cash. So when I was looking to buy a business, I had enough money to buy a business.
FT: How much?
Schram: We don’t disclose that. The only loan we took was to buy the real estate. Otherwise we’ve always grown out of cash flow. We pay what we can afford. When the economy collapsed in 2008, we were close to being debt free, so we did not have any pressure either to sell a franchise or make bad decisions.
FT: How did you get your debt-free attitude?
Schram: In France, half of the people are fairly steady with their money, and half are not. I’m not unique by any stretch of the imagination. I left home with $50, so it’s not that I had family money. I started with zero. I invested in the stock market, and the ‘80s and ‘90s have been extremely strong in that.
FT: But you’ll grow at a much slower rate this way.
Schram: The growth rate might not be as big in number of units, but if you look at your profit, it may be bigger. It’s how you look at things as a family. My wife and myself both work, and we have always saved one of the two salaries, and we’ve done that almost from the beginning. We’ve saved all the interest payments from the household. I think it’s the same at the business.
If you think in terms of EBIDTA or bottom line, it’s a very interesting approach, because the net income of the operation when you don’t have any more to pay the bank, that’s the net income of the business. And sometimes people pay 10 to 15 percent to the bank.
When we acquired the company I was able to write a check without asking a bank and having to put together a complex business plan. The second thing is we always had a modest balance sheet, and when we are discussing with franchisees, they know we are debt-free and we are not at the mercy of an investment firm or a bank. That matters to them.
FT: In 2009, you as one of three owners gave up the CEO spot, and hired Roger David from the outside. Why?
Schram: I’ve always been impressed by the way they grew eBay, for example, so the founder after a few years brought in someone to run the company. I am very entrepreneur minded, and I always use my own money, but I’m not the best one to run a large organization. After four or five years we saw the company needed professional management, and that’s when we became serious about it.
We are here to inspire people, both among our employees and our franchisees, so when we are not good at something we need to quickly get out of it and put in people who can do it. Sometimes the ego might get in the way.
FT: Is it difficult for you to not be the CEO any more, when you were?
Schram: I am going to be frank—at times, yes. But I see myself with a clear dimension. If you are asking me why I am doing what I am doing? One, I have a huge passion for entrepreneurship. I believe a lot in creating jobs in the U.S. The best way to help the nation, it’s not necessarily through charity, it’s really to create stable and good jobs.
FT: But why not start another company, or buy something else?
Schram: I’m not saying I’m not looking, but Buffalo Wings & Rings is still a small company in the scheme of things. So the strategy now is to continue to invest so it becomes a great, great brand in the future. My goal is to become the leader, and the undisputed challenger in the industry. The leader is the No. 1, and the challenger is No. 2.
FT: The leader far and away is Buffalo Wild Wings, but the race for No. 2 is wide open.
Schram: Exactly. And right now we think we are viewed as the No. 2 in the sports restaurant category, but I want that to be so glowing, so there’s no question. I am turning 50, and that’s my goal.
FT: You have dual citizenship, in the U.S. and France. Do you regret not being there, and creating jobs there?
Schram: Not at all. My wife and I, it was love at first sight when we came. We were happy to become U.S. citizens. We see ourselves as American as people who have been here for generations. Being from the outside I see the opportunities of this country.