What does it take to succeed as an independent operator? Recently, Lisa Fey, group director of foodservice marketing for Coca-Cola, sat down with three entrepreneurs who are doing just that. Her conversation with quick-service veterans Thom Crosby and Matt Andrew and newcomer Rodney Mason touched on such topics as minimum wage, mandatory healthcare, menu trends, and financing.

All of you have made the decision to be your own operators. How did you come about that decision?

ANDREW: We spotted an opportunity to further develop the pizza industry and sort of create what we call the “next generation pizza joint.”

CROSBY: From our standpoint, each time that we would look at something that we could franchise, we thought, “Well that’s a pretty good idea, but we can do it better.”

What suggestions do you have for finding resources outside your skill or experience set?

ANDREW: Suppliers are critical. We take our strategic partners very seriously, whether they’re our food distributor, our marketing agency, our accounting agencies, or legal agencies, and so on. Those guys are integral to our business because we look to them not as extensions but as part of the brand.

For instance, we use a company called Roma as our distributor. We don’t have in-house purchasing experts nor could we ever afford to do that. So we rely on the executives over at that company to help us with our buying power and constantly monitor our prices.

It’s really just an exercise in working with your partners, at least the way we view it. The more successful we are as an independent, the more successful our partners will be.

CROSBY: We do training for all sorts of corporations through our Pal’s concept. A lot of the companies that participate are small, independent, start-up restaurants. They’re trying to figure out, “What am I supposed to be doing with the marketing, menu development, training?” A lot of them come after they’ve already almost wrecked the train, drove it off the track and they’re trying to figure it out.

We try to make sure they’re real clear on their goals. You first have to know where you’re going so you can pick the right partners. We also encourage them to look at the culture and the actual makeup and focus of partners they’re considering. You want to make sure you link up with the people who are legally, ethically, and morally correct, who have the same vision and passion you do.

On the training side, there are free resources. We encourage people to benchmark the best. Go to your local college or university, tell them what you’re trying to do. Usually somebody out of the business department will come right out to help you. We’ve seen lots of small independent chains have a great success that way.

Studies say 20 percent of independent operators fail within the first 12 months. What tips would you give to someone to help him break through that one-year mark?

ANDREW: Make sure you’ve got additional cash reserves for the things that you can’t foresee and you can’t project. It might take longer to get that plane off the ground. Cash is certainly king whenever starting any adventure, certainly in the restaurant business.

MASON: While you’re building your store, get your sign on your building from Day 1. If it takes you six or eight weeks for your permits, that’s free advertising that’s up there. It’s awareness.

Make sure, whether you need it or not, to get a Web site, a really simple Web site that has a blog on it with TypePad so that you can be posting comments, so that you rise on Google. If you’re on page one or two in Google—through the review sites and anything else—people are going to know of you because that’s how they’re looking for restaurants now.

Think about your menu. Actually, think about who your competitors are, how you’re priced. Make sure that you get your menu out in the market before you open. You got to get awareness. You can’t just open your doors and expect people to walk up unless you have something really special that they’re looking for.

You brought up the Internet. What role do you gentlemen see the Internet playing both from a Web-presence standpoint as well as online ordering?

CROSBY: I’ll start with the online ordering. That’s something that we’re against because you’re talking about introducing an order stream and a demand stream that the kitchen’s normally not set up for, especially during your busy times. You need somebody who’s actively monitoring that, which can become labor intensive from our point of view.

We see the Web as a great voice. We try to make our Web sites very relevant to the local markets. If you want to know what’s playing at the movie theaters, you want to know what time it’s coming out, come to our restaurant Web sites because it’s there. We have inspirational type messages. We give them a reason to come back every day because there’s relevant content to their life beyond just the idea of eating or consuming our product. But they’re always exposed to our image.

Any other thoughts on the Web?

MASON: Online orders are a vehicle, but they’re not really the reason that you’re on the Web. There are local community sites. I live in a city of 100,000 people here in Frisco, Texas. Frisco Online makes or breaks a restaurant in Frisco. If people go into a restaurant right when it opens and they don’t like it, the restaurant shuts down. A good hamburger place like Krystal came in here. They weren’t set up and ready to operate. It was all over Frisco Online. They were out of business in six months.

The Web is, at least in the markets that I’m in, huge. The power of it is probably the most important medium that there is.

ANDREW: Social networking in general is just paramount to the evolution of our brand. If you’re not controlling the message online, your positioning will be done for you. It’s been critical for us to get out front, have a presence on sites like Facebook. Otherwise, people will do it for you.

Make sure you’re a part of the process or helping to shape or mold your image online. It’s just as important to make sure you’re monitoring other independent operators.

A big part of our demographics is the younger generation and baby boomer generation. They’re going online to look for restaurant reviews on sites like Urban Spoon and Yelp. You better make sure you’re hearing what those customers are saying about your restaurant.

We do a lot of guerrilla marketing online. It’s wondrous, low-cost. We do a lot of very strategic guerrilla marketing using e-mail.

What other things do you do to ensure customer satisfaction or to get feedback from your consumers?

ANDREW: We give every customer that comes in a Maddio’s Pizza Joint a feedback card. We’re a new restaurant so getting that feedback right up front is critical to the oversight of our development.

We try to hit on several points within this little form just to make sure that the customer is able to communicate to us what they like, what they don’t like, and how we can improve. We look at those feedback forms daily. Part of my job as the leader of the brand is to look at those and make sure that our teams are assembled to fix issues that we have.

We get a lot of praise about our customer service. That’s good feedback to give to the staff to keep them motivated and engaged.

CROSBY: We design the systems and management to where the general manager is up on the front line the vast majority of the time. We’ve really streamlined the back of the house so that there’s just no need for management to be in the back of the house. They’re up front interacting one on one with the customer. We tell our managers, “Here’s the type of data we’re wanting to draw out today. Make sure to create a dialogue to find out these types of items.”

Our prototype has a large community table. We’re in a downtown location, and there’s different schools around. Students like to come in groups and sit there. Senior leaders—myself or Pal Barger or Rob Thompson—go often and eat lunch. We sit at the community table and ask them, “What do you think about this?” We’ll observe how they’re eating, how they’re utilizing the product. We’ll take notes of that, open a dialogue with them.

And then we have a third approach. We go within a three-mile radius of Sharon’s and go door to door. We do this on a six-week cycle. We have a preset of information that we’re wanting. We find we get the best responses, though, if we’re not reading from a card. So we memorize the five questions.

Once we step outside, we jot down their answer, then go next door to keep this information flow coming in about the concept. How they feel about the tray dress, the level of service from hospitality, the product quality so forth and so on.

How do you make sure that you hire the best people?

CROSBY: One of the things that we did is partner with a company that has a product called Sysdine. Potentials apply online. The program does a survey that gets at applicants’ core values and how those align with our company’s core values. It gives us a visual score card with lights on it—red is a no go; yellow caution; green go. It takes applicants step by step to make sure on the front end that what they’re looking for is aligned with what we as a concept can deliver. Then the automated system generates the list of interview questions.

That’s one of these cases we were talking about earlier: determining the right business partner. It’s a monthly subscription so it’s cheap, fast, and effective.

ANDREW: The tools today are just fantastic, and they’ve made a lot of huge improvements in helping to recruit the right guys for the team. We are in the customer-service business; we’re in the people business at the end of the day. With that being said, we really hire people based on their attitude.

Get the people who walk into an interview and are smiling and naturally outreaching and outgoing. It’s critical.

MASON: It’s also really important to think through all the conflicts that you’re going to have where you might have a disgruntled customer that comes in. In a large metropolitan area there’s always professionals who try to create a scene to get free food. And there’s other odd things that happen in the restaurant industry that people aren’t familiar with. So just being prepared for that so that people understand that, “Hey this might happen, and here’s how we’ll handle it.”

You can try to hire the best people and make the best food, but issues happen. What direction would you give other operators about how to handle those situations?

MASON: Set up your phone system so you know who’s taking the order at what times because customers might try to claim other things happened. The way to deal with it is not to be confrontational. Just say, “I understand what you’re saying, but it doesn’t match up with what we’re doing here.” Try to keep it at a level that makes sense,

Then also know when to pull your release valves. If someone’s going to stand in your store and scream or cause problems, be prepared for that. Typically you want your manager to step in quickly. They’re more adept at handling that than hourly employees.

CROSBY: We take a very regimented, but somewhat different approach. What we found that works the best for us and in the markets in which we’re growing and competing is we actively train every employee how to handle any situation. The manager’s not supposed to step in unless it just really gets out of hand. We train people in how to be the company representative and we give each employee the right to make it right for the customer. We want them to be the customer’s advocate. We focus them on the lifetime value of that customer.

We currently estimate, looking at the age and the lifespan of people wanting to eat a hamburger, that each customer is worth about $33,000 to us. So we’re making a decision to create loyalty with that customer to keep them coming back so that we get the entire lifetime revenue stream from the customers. We’ve empowered any employee that’s on the frontline. If you see them, talk to them. They can listen to and solve your problem. They make commitments for the brand. They can give money back. They can take your product back. Whatever it takes we’re going to make it right for you.

Now if they see the repeat offenders, someone trying to abuse the system, then the employee says, “Well, let’s put this into the system, notify management, and management will fire the customer.” We do have that step in place if we have to use it.

We don’t do coupons, but if they’ve got a coupon for Five Guys or anybody, we’ll say, “Fine, here’s what our menu items are. How do you want us to use that coupon?” One, we get a competitor’s coupon out of the marketplace, and we’ve got them thinking about us. We build this reputation of being easy to deal with.

ANDREW: Our strategy is real simple: We just kill them with kindness. If somebody tells us they thought something should’ve tasted different, we’re right away asking them, “Would you like to have that made over again?”

If you do find somebody who is a repeat offender like we just talked about, I think that’s absolutely appropriate to fire your customers. We’ve been fortunate we haven’t had to do that yet. More times than not we’ve been successful turning around a negative situation into a positive situation.

According to some of the latest research, customers are going to outlets where they perceive there is a deal or some type of discounting. How are you addressing demand for a deal or value?

ANDREW: When we were building the model, we realized that, especially with the economic conditions, every day value is critical. We really ingrained it into the DNA of the brand. We sell pizzas, subs, and salads for $6.50. We think we’ve got a great value proposition. When you add the drink on there, you’re still in the $8 range.

What we didn’t want to do was be like a lot of pizza chains, especially the big three delivery guys. I don’t think they’ve ever sold a pizza at their retail rate. I couldn’t even tell you what their prices are because they’re so heavily dependent upon the coupon strategy. We wanted to be everything opposite of that.

We don’t want to discount our product. It’s already value-priced so we don’t have to set a price and then sell it for 50 percent less than that to get your attention. The big chains have gotten a lot of customers hooked on coupon strategies. But when we look at the brands that we want to emulate long-term in the marketplace, a coupon hasn’t been a big part of their strategies.

MASON: We follow the same thing; we don’t coupon. Our food is priced at a value. We have a core following. About 10–15 percent of our customers are people who used to live in Chicago. They’re our hardcore ambassadors. They eat with us if not once a week, twice a week. And they tell everybody about us so we have to retain our quality and make sure that we are a good value and a good experience. We are a fast-casual so people come to the counter to order and then they go sit down. What we’re seeing is people are coming in to our place on a Friday night instead of going out to a nicer restaurant.

What impact do you see the economy having on your restaurants today?

CROSBY: What we’re seeing is a tremendous positive impact. When we set out, we put forth our financial plan. We had our annualized pro forma budget month-by-month, pretty aggressive budget in this economy. For the current month, from what we projected that we would do, we’re up 76 percent.

We don’t discount. We price it at the best possible price. We don’t say, “Oh, but we could sell it cheaper, and we will—for a while. Here’s a coupon.” People recognize the value.

We are seeing people trading down from the full-service-type restaurants. We’re just really, really thriving. Most everyone I know in this end of the business—whether independents or they’re franchising in a big national chain, is doing strong numbers right now.

How about the potential impact of a raise in minimum wage? What are the implications to you as an operator?

CROSBY: It’s really critically important to pay people a fair wage starting. The impact of minimum wage increases, because of our average pay and the success we have with hiring people, isn’t that big to us when it goes up in a given year. If it’s across the board and if it is going to drive pressure on the financial statements that people have to react to, you can pretty well expect that all your competitors are going to be in the same place. It keeps the playing field level when it’s a federally mandated minimum wage or if you’re just in one state.

We’re right on the border with Virginia. So if Virginia’s set minimum wage is different than Tennessee’s, that might cause some problems for us. But the federal minimum wage going up we see as a good thing. It’s helping the employees, and we like for the employees to have a good life. The wage going up is reasonable because it’s trailing way behind what our average wage is anyway.

ANDREW: When that’s raised then it makes it more of a competitive field. We pay all our employees above minimum wage. You have to in a market like this anyway. It has minimal to no impact on us whatsoever.

MASON: Same with us. We pay well above the minimum wage. Our customers perceive our staff as providing a great service, so they get some pretty decent tips at the end of the day, too. That works out great for our employees.

How do you feel about employee healthcare?

CROSBY: It’s something we absolutely wish we could provide for all of our employees. I associate with a co-op of restaurateurs trying to figure out how can we bundle together here and get this worked out so we can afford it. The price of the product really keeps us out of the market of being able to provide full coverage healthcare for the hourly employees, which we regret.

If healthcare was more affordable. … It’s one of the big issues, especially in the United States, we’re going to have to come to terms with. We would be all for it if we could afford to jump in. But at this time, it’s just something we cannot make work on our financial statements.

Imagine you have a few minutes to sit down with President Obama and talk with him about the issues that you face as a small business owner. What things would you ask him to address?

ANDREW: I would ask the president to really see what kind of measures they can put in place to make sure that that money hits the street in the communities, gets to the local banks and regional banks so bank lending officers and committees have the assurance that they can lend money again to local restaurateurs and local operators and feel safe.

It was encouraging to see that the SBA is going back up to 90 percent now of their qualifications from like 70 percent. The quicker they can make that happen, I think we’ll see the country get back to where it was just a handful of years ago. We all know that it’s small businesses that create the majority of the jobs in this country, so we put the pressure on the lending at the small-business level.

CROSBY: We would say let’s be smart and focus on how to get people back to work because the more people out there working, the more people eating in restaurants.

But one of the things that’s coming forward is unionization. I think that’s wrong for U.S. business. Whether you’re a big manufacturer, mainline retailer, or in the restaurant business, that harms us. It’ll make us less competitive in world markets. To get the United States really back on course, we need to become a net producer country again instead of the net consumer country that we’ve been for decades.

I don’t think that unionization is the right way to get the number of jobs that we need out there. Nor is it the right thing for small or younger businesses if they’re having to kind of look over their shoulder and worry about an issue like that.

As we were talking earlier, we would really like to see things move forward on getting affordable healthcare in this country because that’s going to make a difference and make us more competitive.

We really and truly have to come to terms with being totally self-sufficient from an energy standpoint. If that means drilling more wells or changing to some other fuel or building 700 nuclear power plants—whatever it takes, we need to have our eyes wide open and get a great plan. Let’s get moving forward from this instead of endless arguing and non-movement.

MASON: Stop taxing us. Stop adding to our liability and bottom line. The more pressure put on small business, the fewer people we can hire and the slower the economy is going to move because we support 70 percent of the economy.

Has the green movement changed how you run your restaurant?

CROSBY: Our approach is: What is good for the environment, what’s good for the world, and what is a financially sound business decision at the same time? We can’t come to terms or seem to make all local sourcing of meats or produce work; it just financially doesn’t seem to work for us. But we do source within regions. Everything is within the U.S. borders. We consider plants that meet certain standards about their carbon footprint, their waste, their recycling programs. We focus on packaging that’s recyclable. We get the maximum amount of recycled product in there.

We try to reduce our internal consumption back of the house, the paper that we print on, the impacts of the disposing of ink cartridges, how we dispose of or recycle any of the shortening that we have. It’s all there, right down to the quality of the water we’re putting back into the municipality system. When we specify grease interceptors, we get by with like a 300 to 400–gallon grease interceptor. We put in a 2,000–gallon grease interceptor and enzymes. We win awards for the quality of the discharge water that we’re putting back into the municipal systems.

We just try to approach it from what makes business sense, what makes us a good citizen, what supports all the efforts, especially efforts within our borders in the U.S.

Thom, you talked about the fact that you were “entrepreneurial” and that’s one of the reasons you chose to go as an independent operator versus a franchisee. What does it mean to be “entrepreneurial”?

CROSBY: Setting your own course and having the opportunity to then deal with all of the implications and decisions. If you’re entrepreneurial, you have a passion for wanting to create. If you want to be a successful entrepreneur, you want to create in a way that delivers predictable, sustainable results.

Is there a certain type of personality that’s best suited to run an independent restaurant?

CROSBY: First and foremost, that person is a lifelong learner. If you had a conversation with them, you could just see the wheels turning. They’re seeing the level of systems and the unique flow that’s going on around them. And if they bring to the table this characteristic of being a lifelong learner, they’re going to be successful.

They read QSR, and it’s not just, “I want to keep up with what’s going on.” They’re thinking more, “There’s good stuff here. The world’s full of great, smart people. What can I learn?” It’s the kind of individual that one single sentence or a piece of a sentence just really resonates with them and starts their minds churning about the ideas and possibilities.

The other thing is a person who has great tenacity; they don’t let things buffalo them. They will stick with it, if they have a passion. They’ll believe in what they’re doing, until they actually overcome the hurdles.

Whether you go the franchise route, the independent route in a restaurant business or any other business, or working for a nonprofit organization, there’s always hurdles. The real successful personality has to have this tenacity.

The final thing that is absolutely critical: They have to have a true ingrained passion and it just flows out of them. You can tell that they’re excited about what they’re doing, they love it. It energizes them and where they’re going.

ANDREW: It doesn’t matter whether it’s a franchise business or an independent business, you got to want to be in the people business when you’re in the restaurant business. You’ve got to want to make sure that you excel and your team excels.

It takes strong guts to be able to muscle through. The restaurant business is a very competitive business. It’s a seven-day-a-week business, very long hours. Being driven is paramount.

From my experience being on the franchiser side, the more successful franchisees are those who are good at following instructions and good at following formats and systems and staying within what we call compliance of the brand guidelines and the operational guidelines. Some people who are extremely entrepreneurial don’t make good franchisees because they’re always wanting to improve the box and change the bottle. That’s just in their DNA.

You’ve really got to analyze what your particular strengths and weaknesses are. You can probably come to a conclusion pretty quickly whether or not owning a franchise business or starting your own independent business is really the path that you should take.

I would encourage people who are looking at those options to really ask themselves some of those key questions: Do they want to go it alone in an independent business? Or do they want to join a larger system because they like the way it’s perfected and they just want to run a business?