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The Growth of Guckenheimer

The Growth of Guckenheimer

By John Lawn

(Left) Guckenheimer Enterprises' executive committee: C. Stewart Ritchie, III, CEO; William R. Pope, Sr. Vice President and CFO; George E. Maciag, President Emeritus; Jeanie S. Ritchie, Chief Administrative Officer; Frank V. Lapetina, Executive Vice President and COO.

Operations Vice Presidents Jim Puccinelli and Paul Hennessey with COO Frank Lapetina, after a meeting at a Silicon Valley account.

(l. to r.): Kathy Nicholl, ombudsman; Suzanne Morrisson, director of information technology; Bill Pope, CFO; Roy Bischoff, director of purchasing; and Jonathan Laddy, controller.

Stylized merchandising displays remain a signature characteristic at Guckenheimer accounts.

Vice President of Sales Louise Tuite: "We've always had the view that our business presentations should retain the personality that makes this company what it is."

ATTENTION TO MERCHANDISING. Servery items on display during lunch at Electronic Arts, a Guckenheimer account.

The rolling hills and bucolic, coastal California towns that extended outward from Stanford University in the 1960s have long been acclaimed as a natural incubator for the entrepreneurs and startup companies that grew into what is today known as Silicon Valley. The same time and place gave birth to Guckenheimer Enterprises, a privately-owned and independently-managed contract operator that has earned a reputation as one of the country's premier B&I specialists.

Since its founding in 1963, Guckenheimer has grown from a oneman, sandwich cart operation on the Stanford University campus to become the largest independently-operated corporate dining specialist in the country, ringing up over $225 million in sales last year.

Along the way, the company's philosophy has remained remarkably consistent. In the words of co-founder and CEO Dr. C. Stewart Ritchie, III, it has sought only to practice "the art of doing a common thing uncommonly well."

"The answer was always yes"
In 1963, Ritchie was a second-year medical student at Stanford University, low on tuition money. A natural entrepreneur, he started selling sandwiches to other students from a makeshift cart and leveraged that start into a business that paid for the remainder of his education (see sidebar, p. 32).

Today a current medical license still hangs on the wall of Ritchie's Redwood Shores, CA, office, but he's never practiced a day of medicine. Instead, he, his wife Jeanie and his management team have in the intervening years grown the original business into a contract management company that today operates food-services for business dining clients in 26 states.

With an early reputation for high-end casual food and mottos like "Whatever It Takes," and "Hire People with Heartpower," the Ritchies began to attract the attention in the culinary circles and corporate board-rooms of northern California. "No matter what the request was, the answer was always, 'Yes!,'" recalls Jeanie Ritchie.

The company expanded its operational capabilities and added one account after another, often young companies with odd-sounding names that have since become industry icons. Early clients included Sun Microsystems; Adobe Systems; Bank of America; Levi Strauss; 3Com; and the legendary Xerox PARC R&D center.

Guckenheimer established a reputation for innovating with the style and quality of the food it offered. Building on its tradition of selling gourmet, European-style breads and sandwiches, it emphasized stylized food presentations and the use of fresh ingredients.

The company also became known for a high level of creative show-manship in its sales proposals, many of them developed by LouiseTuite, an enthusiastic young business development specialist who joined the company from the client side in 1976 and who is its vice president of sales today. "We've always had the view that our presentations should retain the personality that makes this company what it is," she says.

Meanwhile, the new accounts kept adding up. "Getting the Crown-Zellerbach account in San Francisco was a major milestone," Stewart Ritchie remembers. "It was a spectacular building in the downtown financial district, open to the public, and it helped us establish a distinctive regional image."

In 1981, Guckenheimer opened its first out-of-state operation in Plano, TX, for Mervyn's department stores, a chain it already worked with in California. Soon after, it landed a contract with Nike for its world headquarters operation in Beaverton, OR. The period in which Guckenheimer would begin to achieve a national presence had begun.

A search for structure
The Ritchies realized they needed to bring more structure to the way they were running the company and began to look for outside managerial talent to help. In 1987 they found an individual who would play a seminal role in Guckenheimer's growth right under their noses, in nearby Los Altos.

George Maciag was one of several Saga executives who had left that company soon after it was acquired by the Marriott organization in 1986. Ritchie offered Maciag a chance to extend his career and to have an equity opportunity in the fast-growing organization.

It was an offer Maciag couldn't refuse. He was personable, organized, and a respected operations manager. He also brought much-needed organizational experience to Guckenheimer that helped it restructure its finance, operations and other systems to match its growing business opportunities. 1987 was also the year the Ritchies started a company ESOP (Employee Stock Ownership Program) to reward the rank and file employees who were helping to build their business (see sidebar, p. 38).

Soon after, the company hired another promising manager in Frank Lapetina, a veteran from Marriott's Management Systems division. Lapetina rose through the ranks and today serves as Guckenheimer's Chief Operating Officer. With a strengthened organization focused on what the Ritchies called "worker capitalism" the company turned its attention back to selling new business.

By 1990 Guckenheimer was operating in five states and had reached $50 million in annual revenue. By 1996 it had moved into 14 states, rang up $120 million and was continuing to follow clients to other parts of the country. It went to Colorado and Boston with Sun Microsystems, to Salt Lake City and Chicago with 3Com, and to locations in the Midwest and on the East Coast with Bank of America.

Today, nearly 35% of Guckenheimer's business is located east of the Mississippi, even though northern California continues to be the region with the greatest growth. Major East Coast clients include John Hancock in Boston, McGraw Hill in New York City andTIAA/CREF in Charlotte, NC. Operations are managed from seven regional offices in northern and southern California, the Pacific Northwest, Charlotte, Boston, Chicago, and Dallas.

It's worth noting that while most Guckenheimer accounts are in the B&I segment, there are exceptions. They include public venues like the Denver Museum of Natural History, the Frist Museum in Nashville, the San Francisco Academy of Sciences and the Tacoma Art Museum. These accounts "are not divisionalized," Ritchie says, and are managed along with the business dining accounts in their respective regions. Guckenheimer also runs a few senior dining operations.

"It's an interest and perhaps a dream for the future," he says. "We think it plays to our cultural skill set—nurturing and taking care of people—but we've put our corporate emphasis on corporate dining. Most of our medium term opportunities will come from organic growth in B&I, rather than from diversification."

The management team charged with overseeing that growth includes Stewart Ritchie, CEO, Jeanie Ritchie as chief administrative officer, Lapetina as executive vice president of operations and COO, William Pope as senior vice president of finance and CFO, Louise Tuite as vice president of sales, and Chuck Knightstep as vice president of human resources.

Last year, after a decade and a half with the company, Maciag announced his move into semi-retirement, stepping into the capacity of president-emeritus, "where I am still on the coaching staff," he says. Meanwhile, overall responsibility for Guckenheimer's operations moved to the capable hands of Lapetina.

An emphasis on regional autonomy
Lapetina is quieter than you expect at first, but you quickly discover that is because he is a good listener. You get the sense that has paid off over the years in terms of his client and staff relationships. He's spent virtually all of his adult life in contract services, first for Mannings (later acquired by Service Systems), then with Marriott. He joined Guckenheimer in 1987.

"I saw it as more of a restaurant company and that appealed to me. I liked what they were doing with food at the accounts," Lapetina says simply.

"It really helps that we focus almost exclusively on business dining. Our culture and operations are geared to corporate clients, on recognizing what they want and then focusing on delivering it."

Lapetina is the force behind Guckenheimer's recent restructuring of its field operations. "There are really two thrusts," he says. "We have strengthened our senior level management to help us accommodate our greater national presence, and we have created regional business units with directors who have the experience and skill levels to support local decision making. At the end of the day you can not be making all of the decisions in Redwood Shores."

Operations vice presidents Jim Puccinelli and Paul Hennessey split responsibility for overseeing regional operations and have a track record of collaborating that goes back to the late 1980s. To further strengthen the company's management presence in southern California, the company also recently hired Curt Bawden as area vice president.

As the company has grown over the last five years (see chart) it has puts its resources behind efforts to strengthen regional support systems in terms of its accounting, human resources and operations.

A half dozen regional chefs report to the regional directors of operations and work directly with chefs and operational people at individual Guckenheimer unit locations.

"They will typically spend a week there, looking at the recipes that are being used, encouraging chefs to be creative, offering new ideas, working on food safety and food presentation practices," says Hennessey.

Food presentation programs are also supported by a team of regional directors of merchandising and standards whose job it is to work with a cross section of unit employees so they can better support the merchandising activities of the culinary staff.

Northern California Standards Manager Trish Scallan, for example, recently organized a field trip to an open flower market with nearly a dozen managers as a takeoff point to discuss floral display techniques. Another program she manages, "Concepts on Display," brings together area managers from throughout the region to demonstrate food merchandising opportunities.

Lapetina admits the decentralization process over the last five years has not always been smooth or easy. At the same time, he believes the effort has more than paid off, as demonstrated by the company's recent success at landing signifiant new East Coast business.

The everyday gourmet
Guckenheimer's culinary sophistication has been a mainstay of its reputation from the earliest sandwich offerings sold from Stew Ritchie's carts. Menus typically exhibit a wide variety of offerings that appeal to both sophisticated palates and to those looking only for well-executed comfort food.

Most menus are planned two weeks out and follow a basic seasonal rotation, but chefs and managers collaborate to manage a custom menu mix for each account that provides both variety and necessary margin and revenue opportunities. It is often heavily influenced by input from the customers at that unit.

For example, "Bento boxes"—lunch offerings based loosely on the components of traditional Japanese carry-to-work meals — are popular at many northern California operations. The lunch menu at one account recently included Nigiri Maki (a variety of items including sushi-type rolls and mini-entrees like "Unagi" (barbecued teriyaki eel), Glazed Shitake Mushrooms, Grilled Eggplant with Fresh Basil Tomato and Melted Provolone Cheese, Seared Scallops with Ginger Garlic, Menrui (noodles) and Gohanmono (rice) served with exotic dipping sauces, as well as other offerings in a similar vein.

Electronic Arts, a high-profile northern California account, has an eclectic employee base that ranges from corporate executives to hard-core programmers and game "testers;" its lunch menus reflect an equal diversity. On one hand are offerings like Baked Carnitas with Orange Zest, Roasted Lamb with Pistachios, and Grilled Ahi Tuna. On the other are elaborately merchandised hot dogs, Organic Ground Beef Hamburgers and Meat Loaf, and a wide range of grab-and-go items merchandised from stand-alone coolers.

Although Guckenheimer has a well-earned reputation for its use of scratch cooking, "we don't see any incompatibility of that philosophy with our offering retail packaged snacks in the same locations, if that is what the employee base wants," says Hennessey.

In fact, it's not unusual to see convenience store-like snack displays integrated with the checkout and beverage cooler areas of many Guckenheimer accounts. At some locations, it also operates mini-convenience stores using the Dock 3 "virtual c-store" model.

At those, a one-employee kiosk on campus serves as a pick-up/drop-off spot for services ranging from dry cleaning, shoe repair and DVD rentals to overnight shipping and car washing services. Over 250 online merchants list merchandise in the online shopping component of the program, with orders shipped directly to the kiosk for pickup by employees.

Cafe concepts are typically customized for each account. Offered under taglines like "The Everyday Gourmet," "Sweet Pea's Salad Bar," "The Humble Potato Patch" and "Bowl Me Over," they span the world's ethnic flavor profiles and are distinguished by an emphasis on fresh preparation and food presentation. Indeed, the latter interest is a key criterion when the company interviews and hires new culinary talent.

"We find that even with very talented chefs there is often a significant learning curve in going from individual plate presentation to the job of presenting food on a grander scale in a cafe," Hennessey notes.

New culinary ideas and concepts are solicited from every level of the organization as part of Guckenheimer's "Creativity Program," a three-times-a-year award program managed by Jeanie Ritchie. Suggestions are submitted to an executive committee, and those that are implemented earn cash awards.

"A submission can be made on anything that might improve our company," she emphasizes. "To be entered, it must first have been tested in the employee's own cafe or region, and he or she must get both the unit and area manager to sign off on it."

Every Guckenheimer cafe is expected to participate in the program each year, and techniques for encouraging the process are part of the company's management training.

"It seeks to identify best practices not from the top down, but from the bottom up," says Puccinelli.

"We like to joke that we have the largest R&D program of anyone in the industry. In contrast, we look at some competitors that generate all their menus in the central office, and others that just say, 'Be creative— go out and create great food!' Our approach tries to blend creativity with structure in terms of guidelines that give creativity meaning in our programs."

Simple is better
As it has grown, Guckenheimer has centralized some functions, like purchasing and IT, to standardize services across the company. On the IT side it is moving to integrate its varous application programs and to migrate them to a web portal model that will ensure device independence and consistency in the field.

"We have a philosophy that 'simple is better,'" says Suzanne Morrison, director of information technology. "People often forget that in many cases your managers end up doing the bookeeping for your clients. We're here to support field managers and our software has been developed by sitting down with clients in their operations, making sure it is modeled to match the way it will ultimately be used."

That support-the-field philosophy is echoed by Roy Bischoff, director of corporate purchasing. While the company has moved in the direction of national supplier agreements in recent years, Guckenheimer unit managers also often work with a separate list of approved specialists to buy produce, center of the plate and dairy items. Although individual unit managers and designated chefs retain significant freedom in terms of product specs, the company requires brand compliance in key product categories.

"My thinking is that vendors need to bring a sense of urgency to our business that is consistent with the sense of urgency our managers must have to succeed in their dayto-day operations," says Bischoff. "If they do, we are a great partner and are willing to work with them to address drop sizes, scheduling issues, product velocities—whatever is important to their side of the business."

Celebrating people
The Guckenheimer mission statement is shorter than most: "Food with Inspiration—Service with Heartpower—for Businesses Everywhere."

"We look at ourselves as a family company, nurturing our people as we build the business," says Jeanie Ritchie. "We consider our employees our most important customers. When we approach prospective clients we say that at heart we are a people company, and yes, we also do excellent food."

In practice, the company spends a considerable amount of time and dollars in pursuit of that "people celebration," honoring employ-ees in a seemingly unending variety of ways: via employment anniversaries, internal awards programs, in annual and regional meetings, and with internal competitions, such as last year's "Safety Bingo" program, which emphasized sanitation practices at the front line level.

That's a message that seems to have sunk in across the company.

"There is a book—Good to Great, by Jim Collins—that many of us read at the suggestion of the Ritchies," says Bischoff. "Part of the message was that if an employee is on the right bus, but not in the right seat, you need to try to put him in the right seat without putting him off the bus. It's that kind of thinking that's at the heart of our success. We are all supporting each other here and that is key to meeting our clients' expectations."

In 2001, Guckenheimer Enterprises was recognized as "Emerging Growth Company of the Year" by the San Francisco Chapter of the Association for Corporate Growth.

"My main message is that culture trumps everything else in a service company," Ritchie observed when accepting the award.

"Our mission is to do a basic job —foodservice—well, even while it is something that many large companies believe is a necessary evil. Our goal is to astonish and delight our customers with our food, merchandising and employee behavior, and to make our restaurants and services such a positive part of dayto-day life in our host companies that the clients simply can't let us go."

Vital Stats

Name: Guckenheimer Enterprises, Inc.
Headquarters: Redwood Shores, CA
FY 2003 Sales: $240 million (est.)
No. of Contracts: 350
No. of Unit Locations: 450
No. of Employees: 4200


The Doctor with a Sandwich Practice

Stewart Ritchie as a medical student with one of his original sandwich carts.

Stewart Ritchie originally hailed from Kansas, the son of a wildcat oil driller. Flush with a B.S. from Colorado College, he'd moved to California to seek a medical degree from Stanford University. As fate would have it, the elder Ritchie's luck ran out in Stewart's sophomore year.After drilling a long series of dry holes and running out of financing, his father called him to say that needed tuition money wasn't available and that he'd have to return to Kansas to finish his education.

That alternative simply wasn't acceptable to to the young medical student, who had grown attached to both Stanford and to Jeanie, a young nursing student who would later become his wife.

"I'd already taken on student loan debt and began looking for other ways I could finance school on my own," he remembers. "There were no convenient lunch options at the medical school and I got the idea that I could sell food in the courtyard there."

A born entrepreneur, Ritchie arranged to buy fresh gourmet sandwiches for 45 cents each from his favoite deli, located at a shopping center a short distance from the campus, and began selling them for 60 cents from a borrowed hospital gurney made into a makeshift mobile cart. Soon he was selling over a hundred sandwiches a day and had added soda and hand-held desserts like cake and strudel to his menu.

By the end of the year, he'd expanded, first by buying push carts that let him meet the health department codes of the time, and then by hiring fellow students to sell sandwiches at other locations on campus.

"I was paying $5 an hour, almost three times the minimum wage, so I didn't have many absentee problems," he recalls. "I controlled the supply of sandwiches—you had to bring in the cash from today to get the sandwiches tomorrow. It was primitive, but it worked."

Sales grew, paying Ritchie's tuition and then some. By 1967 he'd begun to think about offering foodservice to the industrial plants that were beginning to crop up in the area.A big break came as a result of a letter he sent David Packard, co-founder of the technology giant that bears his name (see above). "I knew HP had a well-paid workforce that could afford my sandwiches and I had already approached the company's management unsuccessfully," Ritchie remembers. "I never met Mr. Packard directly, but as a result of the letter I was offered the chance to open a small outlet called 'Stew's Delicatessan' between two pods of the Dymec manufacturing plant ."

In 1969, Ritchie finished his surgical internship and had gotten his license to practice medicine. By that time, the company's volume had grown so significantlythat it had contracted to have its sandwiches and breads custom-produced, and Ritchie decided to stay in the business. He and Jeanie registered what by then they had begun to call Guckenheimer Enterprises as a corporation ("We wanted a name that would suggest our European-style sandwiches, and just made it up," she says.) They priced the original shares of the company at $10 and raised almost $250,000 from classmates who believed in their concept.

Jeanie stole time to work on the business from what was then her own bud-ding career teaching surgical nursing at San Francisco State College.Another Stanford student, Bob Bass (later to go on with his brother to financial renown in Fort Worth) signed on as an intern and helped out with some of the company's early administrative issues.And Stewart kept looking for new clients.

"We built the company brick by brick," he says. "We sold some sandwiches, then went down to the end of the street and tried to sell some more."

Ritchie began approaching other companies, touting the HP business as a reference. Soon there was another breakthrough—an opportunity with Lockheed, which offered to let Guckenheimer run the foodservice at its Mountain View facility if it could do so without a subsidy.

The Ritchies jumped at the challenge and Jeanie soon became the site's unit manager. "It was our first true B&I account," Stewart Ritchie recalls today. "It forced us to begin offering simple entrees in addition to sandwiches, soups and pastries, things we could make without having a real kitchen.We made what was basically a snack stand operate like a mini-cafeteria, and it worked!"


An Ombudsman of First Resort

An "ombudsman" is usually a government employee appointed to investigate claims that government agencies are failing to be responsive. But at Guckenheimer, the ombudsman's role is to be a "first resort" for employees seeking answers to questions when the "right" person to ask is not obvious. The position was suggested by CFO Bill Pope, who saw a need for employ-ees to have a one-source, "go-to" person on topics from benefit plans to administrative policies.

"My role is a recognition of how very hard it is to be a manager in this business," says Kathy Nicholl, who serves as Guckenheimer's ombudsman in addition to her accounting responsibilities. "I act as a liaison between people in the field and those in the corporate office. I am a problem solver.

"A manager in the field may be in charge of catering, cooking, cafe services, pleasing the client, handling payroll, accounting and all of the other things a unit manager has to do. He or she doesn't have an answer for every question that comes up, and needs to stay focused on the business, not on making calls to find those answers. That's where I come in. "

"A lot of calls are about benefits—perhaps vacation time accrual isn't showing up correctly, or someone has a question about a healthcare claim. Maybe a unit manager needs deposit slips, but doesn't know how to get them.Another needs new hire packets. Someone else needs help for a new book keeper.

"Basically, we don't want anyone to feel they don't have somewhere to go if they have a question, or that they might be considered unimportant because of his or her position," says Nicholl. "The bottom line is that every employee is important and everyone's time is valuable. My job is to find answers so they can quickly go back to what they do best."


Worker Capitalism

The Ritchies have longed promoted the idea of "worker capitalism," a philosophy they institutionalized in 1987 when they initiated an ESOP (Employee Stock Ownership Program) and set aside more than a quarter of the company's stock to fund it. Today they speak highly of the value it has provided to many long-tenured employees and proudly point to stock share values that have quintupled in the intervening 15 years.

In practice, every Guckenheimer employee becomes eligible for the ESOP on the July 1st following his or her first six months with the company. Vesting in benefits begins after an employee has been with the company three years and is complete after the seventh year. Totally company-funded, each participant receives an annual credit to his or her account based on Guckenheimer's stock performance for the year. Contribution amounts are determined by the individual's salary as a percentage of the company's total payroll. Benefits are distributed in the plan year following an employee's 55th birthday, and in some cases as part of early retirement.

With operating profits over the past five years growing at a 23% compounded rate, the value of the program is clear, CFO Pope observes.

"We do not limit this program only to management, as some companies do," Ritchie notes. "We want to vest every employee in the company's continuing success.There is a lot to the idea of making a company a place where people come to get a job and stay because they find a career."


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