Steve Carley
CURRENT ROLE: chief executive, Red Robin Gourmet Burgers
HEADQUARTERS: Greenwood Village, Colo.
UNIT COUNT: 451
ANNUAL SALES: $1.2 billion (2010)
HOMETOWN: Chicago
RESIDENCE: Denver
BIRTH DATE: Aug. 19, 1952
EDUCATION: B.S. in finance, University of Illinois; M.B.A. in marketing, Northwestern University
KEY ACCOMPLISHMENTS: created the Helping Hand for Hamburger Helper
PERSONAL: married, two children
HOBBIES: riding his Harley, cooking
On the wall in Steve Carley’s office is a placard that reads, “Illegitimi non carborundum est,” mock Latin for, “Don’t let the bastards wear you down.”
The saying is a potent reminder for Carley, chief executive of Red Robin Gourmet Burgers Inc., that no situation is perfect and that the onus is on him to keep moving forward by doing what he believes is right in business and in life.
Carley found himself in just such a difficult situation when he joined the 452-unit Red Robin chain in August 2010. The Greenwood Village, Colo.-based casual-dining concept had been under steady fire from activist investors critical of management’s attempts to reverse the chain’s fortunes. In April David Makula of Oak Street Capital Management LLC was named to Red Robin’s board with the understanding that he would not block the chain’s strategic efforts going forward. Oak Street and its affiliates are among Red Robin’s largest shareholders, owning about 13.8 percent of the company’s common stock.
“The key to success is doing what you’re supposed to do when you’re supposed to do it, no matter how you feel,” Carley said. “That’s a pretty good distillation of how you make things happen.”
From the ground up
Carley has employed that philosophy throughout his career. Despite experience in high-ranking marketing positions at Pillsbury and PepsiCo, Carley returned to the United States after several years selling soft drinks in the Middle East to work as a clock puncher at Taco Bell. He wanted to get into the restaurant business, and his bosses at PepsiCo — which then owned Taco Bell — thought the bottom was a good place to start.
“I had to demonstrate proficiency at that level in order to become a restaurant manager,” Carley said. “So I show up with my little three-ring binder I got from the HR guys, and the team there flips through the pages, smiles and says, ‘We’re going to teach you to run restaurants.’ … That was a real gift PepsiCo gave me.”
It was a gag gift, if you asked his mother-in-law, who initially didn’t understand the steep decline in Carley’s stature: no more supersonic, Atlantic-hopping trips aboard the Concorde, and a lengthy break from silk ties and tailored suits.
“She was distraught that her son-in-law was wearing a rayon vest and a paper hat,” Carley said.
But he quickly impressed his overseers and was elevated to manager of six stores. An equally rapid ascent to district manager was followed by a corporate marketing position at Taco Bell headquarters in Irvine, Calif.
Karen Eadon, a Taco Bell alumna, herself, knew of Carley’s reputation for being a team-building motivator. So when the opportunity to work for him arose at Costa Mesa, Calif.-based El Pollo Loco, she applied for the job.
“The chance to work with Steve was really what made me interested,” said Eadon, El Pollo Loco’s chief marketing officer until taking a leave of absence in 2010. “He brought both marketing and operations perspectives to that job, and that dual background has been so critical to him doing well in this business.”
More than a fixer-upper
Beginning in 1990, Carley left the restaurant industry for a decade when he set out to right the listing ship at Fairlanes, a chain of bowling centers. Six years later he was recruited to serve as president of Universal Studios Hollywood theme park in hopes of reviving its operations and marketing image. The call to return to the restaurant business came in 2001 when El Pollo Loco, then a 200-store chain, sought new leadership to spur growth.
Board member Glenn Kaufman headed up the search process and was impressed by Carley’s confidence.
“His leadership qualities were evident, and it was clear that he was ready to re-enter the restaurant business,” said Kaufman, now managing director of D Cubed Group, a private-equity investment firm. “I liked that he saw the opportunity to take something that once was special and make it special again.”
In addition to being “the redheaded stepchild of the Denny’s organization,” Carley said El Pollo Loco struggled with operational challenges that stifled unit growth.
“We spent a lot of time making it a freestanding company with its own identity, and then started working on the product.”
He also set about building a team that shared his vision. Former board member Dennis Lombardi said Carley’s charisma and energy attracted highly talented executives “who were loyal to Steve and dedicated to the brand. They worked as a team and were always asking the question, ‘What can we do to make this better?’ It was an amazing turnaround there.”
Lombardi, a consultant with WD Partners in Dublin, Ohio, called Carley a rare talent who blends both tactical and strategic thinking to solve problems.
“They’d have annual strategy sessions when they’d discuss key challenges for the coming year,” Lombardi said, “and he always insisted on bringing middle management and store managers into the mix.”
Carley’s repairs at El Pollo Loco — despite recessionary headwinds in its core market of Southern California — prompted Red Robin to come calling. After years of declining profits, shareholders began pressing for management changes and the possible private purchase of the publicly traded company.
Kaufman, a Red Robin board member, knew who to pursue.
“I knew this would not be an easy project, but that it was a good fit for him,” Kaufman said. “Steve is a person who understands how to work with partners in a business and who seeks significant dialogue with them.”
Carley was eager to start rebuilding the company.
“We needed to get our team members to focus on what great performance looks like, and keep them achieving it,” he said.
Carley sought revenue goals as small as 200 basis point improvements, telling his staff to achieve them “10 basis points at a time.” The menu got a facelift, a loyalty-card program was launched, and expenses were trimmed wherever it benefited the company without compromising the guest experience.
For the first quarter of 2011, Red Robin reported a 76-percent increase in profit and said turnaround efforts are taking hold. The chain reported a net income of $8.7 million, or 56 cents per share, for the quarter ended April 17, compared with a net income of $4.9 million, or 32 cents per share, for the same quarter a year ago.
Same-store sales increased 1.9 percent for company-owned restaurants, which was driven by a 0.9-percent rise in traffic and a 1-percent increase in average check. Revenues, including sales from company-owned stores, franchising royalties and fees, increased 4.1 percent to $286.8 million, compared with $275.5 million for last year’s quarter.
Carley believes the chain is on the right track.
“I’ve got to keep helping people understand what winning looks like from a financial and guest-service perspective,” he said. “If I can keep them growing and taking care of guests in a meaningful way, the financials will come together and shareholders will benefit.”
