You're listening to Bloomberg Business Week with Carol Masser on Bloomberg Radio. Yes, indeed, Bloomberg Business Week on this Friday, Carol Masser along with Paul Sweeney today. And if you begin with the introduction of this book that is just out, it says every morning, five million people around the world start their day with a cup of Duncan Donuts coffee. We know it, I know it well. Uh, it is
a family business. Was a family business started by our next guest's dad, and it's one that he took over in his twenties and was a CEO at Duncan Donuts for thirty five years. Robert Rosenberg is the former CEO of Duncan. He's got a new book at Around the Corner to Around the World, A Dozen Lessons I Learned running Duncan Donuts. He's also served on the boards of Sonic as well as Domino Sonic. We actually talked to the former CEO, Clifford Hudson earlier this week, and Robert
joins us on the phone from Martha's Vineyard. Robert, welcome to Bloomberg Radio. My pleasure than well, it's nice to have you. You're with us you have had quite a tenure. I'm just curious when you took over at the age of twenty five did you was there ever any doubt that this is what you were going to do, and what was it like to step into that position at what most would consider a pretty young age. It was a breath taking But I did expect. I did expect
to join the family business. I sort of grew up over the store, so figurative late so I did all kinds of jobs, went to hotel school, and went into the army, went back to graduate school. But I mean I did a number jobs, so I knew the business. But I mean I never expected at twenty five to be to be in a posential to have to assume
responsibility for the overall business. So Robert, when you do assume the top job at the age of instanted to know, well, how did you think about surrounding yourself in terms of a team. Presumably you'd look for some folks you've not only trusted, but that maybe had some skill sets you didn't have. How did you build that first team when you were there? Some of them I inherited and they were terrific, But I had an opportunity while I was in graduate school to take a look at the company.
I had studied strategy and I took retailing under a wonderful teacher by name of Walter Salmon. So I had an opportunity that the company I took up wasn't called Dunkadon, was called Universal Food System, was eight little businesses, sort of a Hodge budge. And I had a hunches as a kid, as a student that companies can not only die as young companies from starvation, not enough capital and not enough people, but they can also die of indigestion.
All right, Now, our company wasn't dying of indigestion, but it was certainly suffering from it. So the first thing we did as a team was to change the strategy. And I also recruited some of my classmates from business school right out of Goldman after the Hey they went
in after we graduated. One of my closest friends went to Goldman and took me a year or so to get him out, but I ultimately got him out, and then he brought another friend from the corporate finance department, and so we started to recruit some really extraordinarily talented people. Allowed us to punch way beyond our weight in terms of a tiny little company. Imagine how hard it was to give people to give up jobs at Goldmen to come to work for a small donut company and Queensy,
Massachusetts wasn't easy. Yeah, I bet it must have been interesting. You know, when you took over the company, you know how big was it, What was the financial state of it? You know what kind of growth were you seeing? At that point company earned a hundred thousand dollars. It was in eight different businesses that were nearing a hundred stores. My father bought my uncle out, and my uncle started
a competitive business. Imagine the dinner conversations about that called Mr Doughnut and and they were overtaking us, so that one of them, my dad tried to sell the business. I traveled with him my second year of business school and York to a private equity buyer. He was looking to get a million dollars after tacks, as always his dream. He was a great educated, weelf made man, wonderful guy, um and and so um. That was sort of the the lemmas that we were facing at the time when
I took over. All right, so we talked to us about that strategy. In the early years to growth. Was it focusing on what you did best, which I'm presuming is the donut business. Talked us about your strategy that eventually got you to where the company was as a more mature company. We basically took the seven or eight little businesses and we either closed them down and we sold them off, and we took the one diamond in the rough, which really um was Duncan, but it was
more like diners. They sold all kinds of food, scrambled eggs in the warning, and they were varied in size from eighteen seats to ninety seats. There wasn't anything common about it. So we basically decided on a couple of things. We were going to focus on one business, focus on donuts and coffee, changed the menu. We were going to focus in certain markets and build bland and it was a stra the g that worked extraordinarily well. We went from a hundred thousand pretax profits in five years we
were at eight hundred thousand pretax profits. We were the third company of public after McDonald's Kentucky Fried Chicken. Duncan was the third and at the end of the sixties when we went public in sixty I mean it was a little bit like high tech company. And before you know it, the company that we couldn't sell for a million and a half dollars before before tax payment was now worth I think on my thirtieth birthday something on the word of a hundred hundred fifty million dollars market.
That's amazing. You go ahead, please please go go continue. Unfortunate the next five years weren't so successful. A lot of focusing began to do the very same time thing. My dad changed the strategy, decided we were franchising company rather than a donut and coffee company, and I almost drove the company off a cliff with everybody following behind me.
Luckily saw the error of my ways and we were able to recover and and that was the beginning of really on maturation process of better policies, plans that are listening, less arrogance. Uh. It really changed us. We had transformation or moments in terms of our management, and we went off to the racism for the next twenty years. The same team worked together for the next twenty years, and we never looked back, Well, what was We've got about a minute and then we're gonna do some news and
come back. But I mean, what was the pressure or why did you feel like you had to kind of deviate from the strategy, the core strategy. I got seduced wrongly by a public market. We were selling US sixty times any can you imagine a thirty year old beyond intoxicating? And it was seductive. So I decided that we had
to keep going at fifty percent a year. Wrongly, So I was chasing the wrong goals and went weighed beyond what our confidence was and began started another food service chain called Charles good Light, fish and Chips, and on and on. It was negotiating and talking to him about opening franchise learning sentence. It was just wrong. It was
the wrong aiming point. And if you have the wrong aiming point and the wrong strategy, it's very little as you can build a successful business, and when you've got thousands of people and franchise on its in their lives,
it can be cataclys. So you know one thing I'm curious about, Robert, First of all, the for a little perspective for everybody, When you did take that CEO job back in ninety three, your salary that first year was fifteen thousand six hundred dollars, which I wanted to point out when I started in journalism some twenty five years ago, that was like my first jobs have been when I was paid. I think it was a little bit more money back then. So listen the book the way you
write it. You write about six eras, and I'm curious if you have a favorite era um during your tenure of the company, and if there was a time that maybe wasn't so much fun. Well, the time it wasn't very much fun was the second as I changed strategy wrongly, had the wrong objectives and almost ruined the company, and came to the point where the board had said we were now a public company, we've had enough of you and and we would like you to find a replacement.
I quickly thought them, I thought that was their job, but give me another quarter. I thought we had seen the error of our ways, and I in particular, I thought, really did come to understand it what we were doing wrong, what mistakes were, what our responsibilities as leadership were. And luckily they agreed and we never looked back from They
had the best era. They don't love them, but I said the eighties was a good error because it was the time that we changed the business in rather dramatic ways, some of which worked out wonderfully well, some moderately well, but particularly the two things that worked out particularly well.
One well was a trip to the Philippines where I was going to have to explain to the franchise these they couldn't take the donuts out of the store, but they could, you know, And they were taking them out and putting them into theaters and gas stations and convenience stores. And when I got there, I found out that the wives of the board members were really in business doing this, and I didn't have the heart to say no to them.
And when we started to reconceptualize the business, we began to think that maybe they had a better way to go to market when you could take the product, whether people workshop travel to play a little bit like Coca Cola and dad putting it in the bottle, away from the soda fountains, selling it everywhere, and that was kind of transformational for us. And the other thing was we changed the design of our business to to a much more self service and that allowed us to really increase
the amount of coffee and beverage business. And we did a shift from being baker excuse me, bakery led to the beverage lead and that was a wonderful era. Yeah, so, Robert, you talk about it in your book how a company's success is determined by how well it adapts to change. Here when a lot of change, uh, we're all dealing with these days, and so it must be even that
much more difficult to manage a business. What were some of the big I guess pivots you guys maybe had to deal with or some big, you know, big events that happened that said that said, boy, this is really going to impact our business. We need to really pay attention here. Well, that's a crisis. In terms of crisis, there was probably four or five what I would call existential crises. It's going to have spend really spelled the end of the business as it existed. The first was
our contract. We were operating on commissions from supplies, which was deemed illegal. Ultimately, before that ever occurred, we changed to a royalty system. That was a huge change, and when we had two hundred units an there was a class action lossus during the seventies. When I told you we took our eye off the balls. Some of our franchiseess became very disgruntled. They sued us and we would
declared the class, which would have been cataclismic. At the time, the sock was selling an all time low price and the basic judgment was about a near a million dollars. Much more of the company was worth. That would have spelled the end. And then we're in the Hostel take over at the end of the eighties, and that was
a huge ship, so existential threat to the company. Ultimately, the the fellow that was trying to take us over when lost his empire, and probably w have lost Duncan duted if I hadn't found a White Knight, as we hadn't found a white Knight to save us at one minute to midnight. So there were crises we fit certainly nothing like a pandemic, and out of it there are lessons Lawrence, how to handle a crisis. Well, you know,
it's interesting. I feel like as you you talk through these stories, it's like one Harvard Business School case study, you know after another. Um, I do wonder just real quickly, when Starbucks came out in the seventies, were you like, uh, oh, now that's it. No, Basically I saw Starbucks as somewhat different than Duncan duncalas qs our quick service restaurant from featuring convenience and value and people and to go. Starbucks was the third place, something between office and home. And
it was a much more tony offering. I can't pick the right exact word, but but it appealed in a different way. And and it wasn't so focused on speed and convenience and value, much more on ambience and specialty, sort of a panache. Now we started to bump into each other more recently, but not back in those days so much. Robert, I'm sorry, No, go ahead. I'm gonna say I've had a lot of egg and bacon on a croissant. My husband I can't go into a Duncan
without getting him some of the old fashioned doughnuts. I gotta tell you, Robert, we we have to ask before we let you go. What's your favorite donut? Mine is Barvarian cream. I love that too. I like a lot, but I like a jelly stick or a lemon stick. That's that's a cake stick, fill with out a lemon and jelly along with Duncan ice coffee. That's my goat. I love Duncan Ice Coffee is. I gotta say, that's
like one of my favorite. What a treat. Good luck with your book, and hopefully we can get you back here soon because I'd love to talk a little bit more about your Yeah, take take care and stay well. Robert Rosenberg, former CEO of Duncan there for thirty five years Duncan Donuts and his book. Check it out. It's a fun read. It's called Around the Corner to Around the World. A Dozen Lessons I learned running Duncan Donuts.