The Story of MrJims.Pizza
I have been asked many times how I came to be in the pizza business. I hope you enjoy hearing my version of what happened.
I was going to college in Detroit in the late 60's and working part time at McDonald's. I lived at home with my parents but I was paying all of my own college expenses. I found that I wasn't a very good student (not true today) and people graduating in my field with majors in physics were not making much money.
Sue and I had decided to get married. So, I decided to drop out of college and work full time at McDonald's restaurant with the hope of owning my own McDonald's someday.
I was making $3.00 per hour as an assistant manager at McDonald's when we married in '72 and had been there since '67. My father wanted me to go to work with him at General Motors at over $6.00 per hour as an industrial chemist. He wanted me to learn a trade. But I wanted to be rich so I stayed at McDonald's. I knew that locking into a trade would provide enough comfort that I wouldn't feel the need to push myself to get further so I said no thank you. So much for my career as an industrial chemist.
The McDonald's I worked for was owned by Harry Granader a long time franchisee of McDonald's and a great man and now philanthropist. I didn't do that great at McDonald's. I was a blue hat (blue paper cap with netting on the top that says TRAINEE in big letters) for 13 weeks before I got my white hat. And after 8 years I had only reached the level of first assistant manger. The General Manager for Mr. Granader's 3 stores, Charlie McCann, was my mentor at the time. Mr. Granader was mostly an absentee owner and I didn't know him well. I knew Charlie was going places and wanted to catch the wave. I had just attended Hamburger University, McDonald's training center in Illinois, where I graduated 2nd-Burger in class 183. The award is actually called Archie Runner-up. I was very excited about a life with McDonald's.
However, a guy who had only worked at McDonald's a few weeks longer than I had, was promoted past 2 levels of management above him and replaced my mentor who was ousted. He was able to do this by working directly with the owner. I was disheartened.
My first thought was to work for Charlie as he was getting his own McDonald's but even he didn't think I was qualified to run his store. He did refer me to another McDonald's franchisee in Columbus, Indiana as an assistant manager but I didn't think it was the right fit. It finally dawned on me that I wasn't the type of person to do well when others determined my future. I had to figure out a way to buy my own McDonald's. I needed $100,000 down and I made $10,000 per year at the time. I figured if I didn't eat or pay taxes I could save it in only 10 years (joke).
Enter my good friend and lifelong mentor Hungry Howie (Jim Hearn). One of my friends worked for Jim at Hungry Howie's Pizzas and Subs. Jim had just converted his 24 hr Tick Tock Hamburgers to his very first Hungry Howie's Pizzas and Subs restaurant in Taylor, Mi. near Detroit and was doing well there. He also owned a Dino's pizza franchise and, as you might imagine, they wanted him to get out of that franchise. His Dino's was for sale.
I would hang out at Howie's and talk to Jim about the pizza business. It seemed like the pizza business was a way for me to increase my income to the incredible sum of $30,000 per year. This was a way for me to earn enough money to get my McDonald's. I asked him to sell me his Dino's. He said no. I didn't have enough for the down payment he wanted. He offered to help me open my own pizza place and I could even call it Hungry Howie's if I wanted to. It had cost him only $7,000 to convert his restaurant so he thought I could get my own place open for that amount. Sue and I had $4000 in savings and I was able to get a loan for $2500 more. I also got a loan from a finance company and had a Sear's and Ward's credit card. This was before bank cards were so available.
So I found a location and signed a lease. I started buying equipment and got all of my friends to help do the remodeling of the space. There were many people who gave free help: Linda, Frank, Mark, Phil, Chris, Steve and many more. Well as it turned out rather than the $7000 I thought it would cost it ended up costing $17,000. I was days from opening and I had no money. I desperately needed another $5000. I had borrowed all I could. I had gotten equipment from 2 different dealers with a promise to pay later. My dad said he couldn't loan me the money. Jim couldn't loan me the money.
Let me introduce Dee Chambers. My wife's best friend Linda Chambers' mother Dee was a widow. She had some savings in CD's. I asked this mother of a friend who barley knew me to loan me the money. And she did. She only asked that I pay her the interest rate she was geting on her CDs. Later it occured to me what an incredible event this was. I would never recommend giving needed savings to someone to open a restaurant. 25 years later I asked how she was able to put so much trust in me and she said she never doubted it for an instant. Her daughter, Linda, still works for me as our goddess of Finance.
With the loan I was able to open up the 1st shop on 15 August 1975.
I had thought that since I ran a McDonald's doing over $20,000 per week that owning a pizza place doing only $5000 per week would be easy. However, the pizza place only did $700 in sales the first full week. I paid $300 for food $300 for labor and $300 for advertising. I had already maxed my credit and owed everyone and was going deeper into debt as I continued to lose money week after week.
Luckily, since 1971, I had been studying Scientology
. I had learned what causes people to behave in certain ways and to not be adversely affected by the negativity of others. I was a trained counselor. I had learned formulas that would help me make better decisions and develope new strategies I could implement to improve the situation. Managing by the statistices of the restuarant I was able to create some improvement of the scene.
Sue and I lived in government subsidized housing at the time which helped. She was teaching school an hour drive south of our house and the pizza shop was an hour north and west of our house. Still, on Friday's after awaking early, driving the hour to work and teaching all day she would still drive the 2 hours in order to come in to help out. Many times her paycheck went into the business. She would leave every morning at 6 and be home at 5. I would leave at 10am and get home at 1 or 2am. We didn't see much of each other for a long time.
Jim Hearn would come by on Mondays and buy some of the groceries I had just received with cash so that I could put that cash into the bank to cover the check I had just written for last week's groceries. I would tell all my creditors that I would get to them when I could and meanwhile I continued to put out as much advertising as I could. Jim was a great help for encouragement when I was struggling. He would talk about the new ideas he had to increase sales and tell me to keep at it. I saw Jim and his family often counted on his help until his recent passing in March 2013.
Jim has personally helped many thousands of people lead better lives through his consummate knowledge of the business and his uncanny knack for making sound decisions.
Over the past four decades I have sought his advice on many occasions. He and his wife Ginny give me and my family an open invitation to their home in Florida which I have taken advantage of many times. His whole family including his daughters, their spouses and grandchildren honored my daughterâ€™s wedding with their presence. They are part of my family.
Jim was a great man and a great friend. He will be missed by the thousands of people whose very livelihoodâ€™s were only possible through his work and influence.
He will be missed by the millions of customers he has indirectly served, because his guidance will no longer be available.
Godspeed Jim Hearn!
Well back to my story, after 6 months the sales where finally enough to start making money. Over the next 6 months I made more than I had in a year at McDonald's. It was looking pretty good.
I remember, before I got open, there was another very similar pizza place opening just down the street -- Lonzo's. He was able to beat me to the punch and got open a few weeks before I did. At the time I thought that was a big deal. Six months later he was out of business. What had I done that he hadn't? I just didn't give up. In Scientology I learned that there was no such thing as failure just not enough push though or not enough follow through. Lonzo just didn't push through. He let the obvious fact that he was losing money determine his future and I didn't let it determine mine.
After many more months, during a visit to see Sue's brother Mark in Texas, I got the idea to open a new store there. There were hardly any pizza places in the Dallas phone directory and the pizzas I ate were not very good.
I got together with my friend Bob Hudson who worked for me in Michigan. We formed a partnership for a new MrJims.Pizza in Texas. Bob's had gotten his dad's agreement to finance the store.
I found a location, ordered the equipment to be shipped to the store, set up my wife in an apartment in Texas, and was finalizing the lease for the store. The most important detail was the leasehold improvements estimate. These are the tenants expenses to get the place from raw space to pizza place. This is for all the plumbing, internal decor, electrical, air conditioning and all the other similar things that you need in a pizza shop. The landlord normally pays a portion of these. The landlord thought my share would be $8000 which was doable with our budget. I was back working in the Michigan store waiting for final word on the exact estimates. The landlord called me in the middle of the supper hour rush to say my share would be over $30,000 and I should just bite the bullet and get on with it. There was no way to come up with that money. The deal to open my 2nd store had just fallen through, Sue was already living at our apartment in Texas and I was staying with friends.
I took a walk to be sad for a moment.
Then I got on a plane went to Texas, found another location that would work in Garland, Texas and Bob and I did get the store open in October of 1977. It did fairly well right from the start.
After a few months I sold the store in Michigan and opened another in Garland, Texas. I would work during the day at the one store and in the night at the other. That store took a terribly long time to get going and lost money for quite a while. Bob and I opened another store in Richardson, Texas in 1979. That new store was not making money and our 1st store wasn't really making that much either so Bob sold out his share to me. He went back to Michigan for a few years. Later he came back to Texas as my employee and eventually opened his own MrJims.Pizza franchise in Desoto, Texas and now owns the Duncanville store.
The First Franchise
In 1981 one of my manager's, Scott Hallman, got a windfall from his parents and decided to become the first MrJims.Pizza franchisee. We worked out a deal where I was paid no up front money and no money for the first 6 months of his business. I remember when I was helping him pour concrete for the plumbing for free; that I was hoping he would do very well indeed. He opened in Mesquite, Texas in 1981 and did do very well. Better than I had ever done. He found a partner and opened another store on the east side of Plano, Texas.
A few months later a couple, Eve and Tom Osbakken, came in and bought a franchise in Arlington, Texas. They were first people that had no real restaurant experience to buy a franchise. Again there was no up front money and no money for the first 6 months. So I would drive the 1:15 to get to his store work with him and drive the 1:15 home. It went on for weeks while I just let my own stores slide. I remember the first day of business. I assumed it would be slow and arrived late. It was very busy and no one in the entire restaurant had ever made dough, made a pizza, taken an order or anything else. I was ordering people about without courtesy including Eve and Tom. I remember the look Tom gave me and I thank God to this day that they are not temperamental people. I thought I was going to get fired. They could have easily done so. But the Osbakkens are people of honor who remain franchisees and good friends to this day. I watched their children grow and even presided over their daughter's wedding.
While I could end the story here with a "and the rest is history"; I am compelled to tell you one more chapter.
The Great Debacle
I had a franchisee who was considering opening MrJims.Pizza outside of Texas. I hired an attorney to develop the documents to sell franchises in other states. As it turns out my documents were not in compliance with Federal franchise law. I should have had audited financial statements among other things. She felt she could have it all done by March of 87.
In May of 87 I had over 30 stores. In that month we sold 8 new franchises and I had 4 stores I owned. My we took in over $140,000 that month. I was doing great. I had been open a dozen years and new I'd made it. I wish life was really like that. Where you could reach some point of no possible decrease. As you well know life is not like that.
My attorney did not have the new documents ready as promised and in July a franchisee turned me in the Federal Trade Commission in Washington DC for the out of date documents. My attorney advised me that there was a possibility of a $10,000 per day per violation fine (which would have been millions), or that I might have to pay all the money back to all the franchisees, or that I might have to offer to let all the franchisees out of their contracts, or I might have to serve some jail time, and possibly may be barred from ever selling franchises again. She had me cease selling franchises at that moment. This cost one couple who were ready to purchase a franchise their life savings. They had to live off the money they were going to use for the store and by the time I was ready to sell them a franchise they didn't have enough to open.
In December 1987 and $70,000 later I finally got the documents and could begin to sell franchises. In November '87 I had now had 6 stores I owned and including the royalties I only took in $70,000 that month. In the short few months from May '87 to January '88 I lost $500,000. Since I only had about $60,000 to begin with it was a fairly gruesome scene.
I had not paid my taxes that I withheld from my employees and owed the IRS ($111,000). In Feb. '88 an IRS agent, Melvin, came in to my office to collect the taxes. He was asking the value of the books on the shelves and what my home was worth. The IRS can force you to sell all your assets to satisfy tax liens. I remember coming home from work that day to talk to Sue. She had quit teaching to raise our daughter and was not in any way involved in the day to day operation of the business. I told her the situation and that the IRS could take our house. Rather than tearing into me with, "how could you do this to our family you stupid pig!" She only asked if she needed to go back to work. In view of the fact that the IRS was going to put us on a budget and all extra money would go only to taxes I thought, what's the point of paying them off earlier if it takes Sue out of the home? She was raising our children. She didn't go back to work.
I hired a new attorney and he worked with the IRS collection agent. We worked out a budget and I had to pay a payment to the IRS of $1000 every week on Monday. Then after a few weeks it was decided that was not enough and the payment was boosted to $1960 every Monday. We had to deliver the check in person to the IRS office. One week we didn't get it in till Tuesday and the agent gave me what he called a "courtesy call" to advise me that if I was ever late again he'd come in and take care of business.
This put the IRS ahead of all my other creditors. So I ended up not paying my credit cards and lots of business debt. I sold or closed all the company stores and began to rebuild.
It was at this time that I did a weekend handling at Scientology
. It involved a couple hours of counseling and writing up a new plan to handle the dangerous situation I was in. After that weekend my statistics started to rise.
I let go of most of the staff and just kept at it. Over the next year I paid off the IRS and started making some headway with selling new franchises. After I stopped selling them I had almost no new people come in.
But I continued to improve the product and the system. Finding faster ways to make the pizzas more consistently and better advertising campaigns. I paid or settled all the old debts.
And the rest is history.
We now have over 50 stores and are growing. I am doing very well now and make sure all the legal rules regarding franchising are followed. And I keep my taxes paid up to date. I still haven't gotten my McDonald's yet but maybe I'll do it someday.
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