“If you’re going to win the Kentucky Derby, you have to have a great horse,” said Phil Greer, CEO of the Greer Cos. “Cheddar’s was a great horse for us. And we made money with it.”
On Jan. 4, Greer and his business partners, son Lee Greer and Steve Pottinger, sold all 44 of their Cheddar’s Casual Café franchise units to the Irving, Texas, brand’s parent company. Terms of the deal were not disclosed, but Lee Greer said they were paid a premium.
The all-cash sale also saw Greer Cos. invest a significant amount of those proceeds back into the chain’s acquisition company and gain a seat on the board.
“I’m pretty excited about being so heavily invested in corporate now,” Greer said. “Having a seat gives us a say in determining the future direction of the company.”
Phil Greer placed his first bet on Cheddar’s in 1996, opening a restaurant on Walden Drive. A self-described “real estate guy who knows the restaurant business from afar,” Greer enlisted the help of Pottinger to add another in 2000 and two more in 2003. All were so successful, Pottinger recalled, that he and Greer believed it was time to draw the whip to accelerate growth.
“I think we thought to ourselves, ‘We’ve got this figured out, so let’s go,’” Pottinger said. “We’d put some simple systems in place to improve what Cheddar’s had started with, and we took off.”
Wall Street to dish pit
Both Phil Greer and Pottinger credit Lee Greer with speeding up the company’s expansion. A Wall Street analyst living in New York, Lee Greer heeded his father’s request to return to Lexington after some of his friends died in the 2001 terrorist attack on the city’s World Trade Center towers. His combined business acumen and ability to “remember about everything he sees and hears” allowed him to understand the Cheddar’s system quickly, his father said.
“I sent him to Kingsport, [Tennessee,] for training in the kitchen, and they sent him straight to the dish pit,” Lee Greer said. “He went from Wall Street to the dish pit but took right to it.
“He and Steve both were great in operations. They became hot shots in the company.”
Standard procedure for many restaurant franchises is the use of a corporate training team to open new units. But when Cheddar’s corporate saw how well Greer’s company ran its restaurants, it gave the reins to them.
“We could walk in to a building, and over a weekend turn it into a restaurant,” Pottinger said. “We could do that because we had an amazing training team. Second to none.”
Coaching talent
The Greer Cos.’ ability to hire well and cultivate talent started with Phil Greer. As a teacher at Tates Creek High School in the 1970s and ’80s, he demonstrated a knack for guiding young people as a football and wrestling coach. Such sports were natural choices for the former University of Kentucky defensive back, but when asked to assemble and coach a girls tennis team, he was out of his element.
“Those girls made me a great coach because they worked hard,” said Greer in a 2013 interview with Nation’s Restaurant News. “When I started with them, I could hardly keep score. But I pushed them like they were football players, and they seemed to love it.”
Under his guidance, Tates Creek’s girls won state tennis championships, and Greer’s other teams contended for state titles.
“I’ve associated myself with winners, and I like to hire people who also associate themselves with winners,” he said.
Lee Greer said that the future of the company’s 6,500 employees received significant consideration in the sale of their restaurants. Having reached the end of their development agreement, Greer Cos. was unable to offer the advancement opportunities it had in the past.
“But by being bought out by the company, it now gives them incredible opportunities to grow and go elsewhere within the system nationwide,” he said. Some of its veteran employees included general managers “who’d been with us 10 to 15 years, people who are passionate about their jobs. Cheddar’s is going to want to use them to roll out new units nationally.”
Miles and money
The Cheddar’s system includes 169 units in 29 states, seven of which — Kentucky, Ohio, Indiana, Tennessee, West Virginia, Virginia and North Carolina — were Greer markets. Before the sale, Greer Cos. units made up nearly 75 percent of all Cheddar’s franchise units. After the sale, Cheddar’s company-owned unit count grew to 139.
In traveling to develop those markets, Phil Greer routinely drove 100,000 miles annually. When his partners convinced him to get a jet to access their stores quicker, he resisted initially but later relented.
“I’m not a spender,” said Greer, who hails from Jenkins, Kentucky, where his family lived in a coal mining camp. To get to Lexington to play football at UK in 1964, he even hitchhiked. “But hopping around the country on our own jet is what allowed me to build those stores so fast. I’m glad we did that.”
Their restaurants were regarded by Cheddar’s ownership as the chain’s finest, and their per-unit annual sales averages of nearly $5 million made Cheddar’s high-volume sales model highly profitable.
“Some restaurants sell expensive food and make high profits, but they don’t sell much food,” Phil Greer said. “I chose a concept that sold a lot of food affordably and for a little profit. Volume keeps your food coming in fresh every day, and at night, there’s very little left to waste.”
Despite their success, Pottinger acknowledged the hypercompetitive restaurant marketplace has made life tough even on Cheddar’s operators. The never-ending stream of new restaurant openings combined with shrinking margins, a tight labor supply and rising hourly wages have made the past few years particularly challenging, he said.
“I have to say that it’s a relief to be out of operations,” Pottinger said. As owners of all its restaurant buildings and the land below them, the company will continue generating lease revenue from Cheddar’s. “The plan for all of us is to take a little breather for a while so we can figure out what we want to do.”
The road ahead
Given that all have a two-year non-compete clauses, opening a casual restaurant concept is out of the question. In Lexington, the company holds investment stakes in Willie’s Locally Known and Vinaigrette Salad Kitchen, but Lee Greer said it’s uncertain whether they’ll expand those concepts. He also said they’ve yet to decide what to do with the vacant and lavishly appointed building that housed their lone independent concept, Coba Cocina.
“That’s emotional, because we loved that thing, and when we closed it, it hurt bad,” Lee Greer said. Restaurant and non-restaurant companies have expressed interest in the site, he said, but a deal for it is not in the works. “The good news is I’ll have time think about it soon.”
Though they’ll continue as Hilton and Marriott hotel franchisees, all three said not to count them out of the restaurant business for good.
Lee Greer said, “I keep asking myself whether I want to work that hard again, and then I remember how exciting it was to do it.” Pottinger said he’s “probably got a restaurant concept in my brain that I think I can do,” and Phil Greer said: “I’d not say I’m out forever, because I have another thing in mind. I just haven’t decided to do it.”
Yet as if reading from a script, the trio agreed that when their brief rest is over, they’ll be re-engaged in Cheddar’s future as shareholders.
“I’m loyal to the company, and now we’re the largest minority shareholder in the company,” said Phil Greer, who is 70. “We believe in Cheddar’s because it’s a winner.”