Home-Field Advantage



Corporate culture plus local market knowledge is the winning formula for Keg franchisees

Walk into any Keg Steakhouse & Bar in the evening and the glow of dimmed lights is a calming precursor to what lies ahead — warm melt-in-your-mouth bread, tasty apps and entrées like mustard dill shrimp with sirloin that ooze juice into a dollop of creamy roasted garlic mashed potatoes. The menu and decor have evolved, but there’s no denying this tried-and-true formula has been a staple of Canadian culinary culture for almost 40 years. How fitting that an equally enduring culture is found among the employees, management, top executives and franchisees who contribute to a corporate society that’s both fun (think golf tournaments, company awards and ski trips) and fruitful.

It was what Jay Crossman liked about the brand more than 30 years ago when he joined the team as a university student. “It was a great job, we had a lot of fun,” says the Ottawa-based franchisee, reminiscing about his start at the steakhouse. “The culture of the company was about doing a good job for the guest, but enjoying yourself at the same time and people will come back.” Talk to him now and his enthusiasm for the brand hasn’t changed, even if the company management has.

The Keg story begins with George Tidball, who introduced the concept to the nation in 1971. Tidball had already made a name for himself — opening the first McDonald’s franchise in Canada in Rich-mond, B.C., in 1967 — but he was eager to do something on his own. He created a successful restaurant built on “great food, superior service and a comfortable atmosphere,” but his vision didn’t end there.

“He wanted to grow the company, and he knew that if he didn’t keep and reward his best people, they were going to leave him,” explains James Henderson, executive vice-president of Business Development at The Keg. “So, he created a joint-venture program where operators had an opportunity to buy into about 25 per cent of their restaurant.” The idea was embraced as new partners invested more into the company, both financially and professionally. Unfortunately, the situation changed when U.K.-based Whitbread PLC bought The Keg in 1987, aiming to convert it to a corporately owned and operated family style concept. This new structure was met with a fair share of disappointment when most of the joint-venture partners were forced to sell their stake back to the company.

The morale booster came 10 years later when former company shareholder and director, David Aisenstat, took control. The new president and CEO — who already had years of experience helming his family’s well-respected Hy’s Steakhouse & Cocktail Bar chain — was intent on returning control to worthy staff, reinventing a company that, today, is approximately 50 per cent franchised and 50 per cent corporately run. Still, the franchise model was never intended to encroach on the steakhouse’s core structure. “The Keg’s primary focus is not as a franchise company. We are a restaurant company that franchises,” the CEO maintains. “Our goal is to blindfold someone, bring them into any Keg and have them be unable to determine whether it’s corporately run or not. Each location has a somewhat unique design and atmosphere, but the service and food are always Keg quality. That’s why our guests keep coming back.”

With that in mind, the franchising concept was reborn with the help of trusted senior employees who Aisenstat knew would flourish once they had a greater share in their own success. “These people were isolated to a certain degree and David said, ‘Look, what we’re going to do is keep all the restaurants in major cosmopolitan areas corporately owned, and those in the outlying areas we’re going to franchise back to the people who have proven themselves,” explains Henderson.

Crossman benefited from the new strategy. “I sat down with David, chatted and worked out a deal,” he recalls. “I became the franchisee of the original Ottawa location, and I’ve opened up two more restaurants since then.”
It’s a similar story across the country. “We had people who had already proven themselves,” explains Henderson, noting the ease of bringing them on board as franchisees. And the recruitment strategy hasn’t changed much since. Candidates from outside the company need to have the financial wherewithal and must fit into Keg “culture,” he says.

Understanding the Keg’s philosophy is one thing, but the investment also involves a substantial financial commitment (expect to spend $4 million for a new freestanding, 85,000-square-foot unit) that’s nurtured by a strong corporate team. Once the restaurant is built, the company’s HR department helps find employees that fit the brand’s ethos, before a training team dispatches to the new digs for two weeks to offer support during opening.

The relationship doesn’t end there. “There is no ‘us’ and ‘them,’” says Crossman, referring to a corporate- versus franchise-run mentality. “We don’t have to go through a specific channel to ask for help in terms of marketing or purchasing or any kind of opportunities or problems that come up. We can talk directly to the people involved in the different departments, just as if we’re part of a corporate store.”

It’s not just talk. Franchisees are actively involved in fundraising for The Keg Spirit Foundation, welcomed to meetings to offer input and invited to social corporate-building events and competitions. “I know enough about some of the other [competing] companies…They don’t operate that way; they don’t,” maintains Crossman. Proof of such success is attested to in The Globe and Mail’s Report on Business magazine, where The Keg has been named one of the top 50 employers in Canada for the past seven years.

Running several of its own stores is another key to The Keg’s success. Such involvement gives head-office execs the ability to drive business forward corporately and lead franchisees by example, says Henderson, while explaining how it opens doors to more expansion possibilities within different markets as well. “If you were just strictly a franchise company, and you’re looking at growing your business, I think you’d have less of a priority on who the selected candidate is when you’re looking at how many restaurants you can build,” he says. “We don’t have to be that particular, because we can build corporate restaurants in any market.”

The Keg’s not pushing a grow-at-all-costs strategy, either. “We’ve had a lot of people from overseas — Dubai, Korea and China” — express interest in the concept, Henderson admits. “But if you stretch across the ocean, all of a sudden your impact and your influence on how your restaurants are run is compromised,” he adds. “So, we’ve really looked at trying to extend into the U.S., where we already have corporate restaurants.” The Keg has 16 U.S. restaurants, with 15 of them corporately owned.

That development slowed down with the weakening economy this past year, but at home and abroad the long-term game plan hasn’t changed. “The impact of the recession on the casual-dining industry is well documented, and The Keg has not been completely unaffected,” Aisenstat admitted when the company’s Royalty Income Fund quarterly sales results were released in August. “We view the current economic climate as an opportunity to focus on what has made The Keg successful for over 37 years; we believe that by staying true to our brand, we will emerge from the recession in a stronger position relative to our competitors.”
The company has maintained steady sales by avoiding the current industry trend of cutting back portion sizes or prices. Keeping positive while maintaining quality remains paramount.

That mindset extends across the country to Ottawa where Crossman is hoping to open a fourth location. Ask him the secret to his success and he points to his peers. “Most senior franchisees I know across the company all participate in the restaurant. They are there every day. They’re minding their business, watching how their restaurants are doing, listening to the guests, making changes based on problems or criticisms; that’s a big part of it.”

But, perhaps, there’s another trick. “Because of the culture,” says Crossman, “and the fact that David treats franchisees in the same fashion he does his corporate stores, we all feel part of the same group heading in the same direction, trying to achieve the same thing.”

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