Charles H. “Chuck” James III continues to reposition his family-owned company into the quick-service restaurant business. Exclusively a Burger King franchisee, James has opened a new store in Chicago and acquired four more in Kenosha, Wisconsin. Deerfield, Illinois-based C. H. James Restaurant Holdings L.L.C. (No. 71 on the BE INDUSTRIAL/SERVICE 100 list with $57.7 million in sales) now operates 48 Burger Kings and plans to open two additional stores this year.
The company is an affiliate of 125-year-old C. H. James & Co., which was founded in Charleston, West Virginia, as a wholesale distributor of fresh produce. As that parent company’s fourth-generation CEO, James has driven its evolution from distributing food to restaurants to manufacturing food for restaurants and, since 2004, owning restaurants. C. H. James & Co. still has
food distribution contracts for Darden Restaurants, but the vast majority of its efforts now are in the quick-service restaurant business. By adapting to the changing times, the company has been able to survive and thrive.“People talk all the time about how Wal-Mart has wiped out Main Street. What they don’t talk about is Wal-Mart also wiped out Main Street’s suppliers. My family business was predicated on supplying mom-and-pop grocery stores and restaurants. As those businesses slowly died off, we really didn’t have a market anymore. We literally had to shift our market to stay in business,” James says.
Profits in the distribution business are typically 1% or 2%, while his restaurants can achieve pretax margins above 10%, says James. His average annual sales per restaurant are about $1.4 million. He says existing fast-food restaurants generally sell for five to six times earnings-several hundreds of thousands of dollars.
C.H. James Restaurant Holdings has grown into Burger King’s largest African American franchisee, says Jonathan Fitzpatrick, senior vice president, development and franchising at Burger King Corp. James has established excellent operations, recruited and retained the right employees, delivered great customer satisfaction, and stayed focused on each store’s profit and loss. “Chuck is engaged in every aspect of the business, whether it’s the operations, the financial, the people, or great communication with the corporation. His engagement as a franchisee is the key to his success,” Fitzpatrick says.
In 2007 he was one of nine franchisees worldwide to receive Burger King’s Brand Leadership Award. But how well will C. H. James Restaurant Holdings weather today’s turbulent economy?
“My outlook on the restaurant industry overall is somewhat negative, although I am a little bit more positively inclined on the fast-food portion of the industry. I think people are going to trade down from casual dining alternatives to fast food, and fast-food companies have done an OK job of adding healthier options to the menus,” says Mark Basham, a restaurant analyst for Standard & Poor’s Equity Research.Quick-service restaurants are forecast to post 2008 sales of $157 billion out of the entire U.S. restaurant industry’s $558 billion. “This year there are a host of challenges to restaurant operators, ranging from skyrocketing food costs to higher labor costs to an escalating energy price situation,” says Hudson Riehle, senior vice president of research and information services at the National Restaurant Association. Restaurants also operate in an extremely competitive environment where customers have many choices.
As stores try to stay competitive by not raising prices, higher costs are putting pressure on the usual 5% or 6% quick-service restaurant pretax profits. One way restaurants drive sales volume, which increases profit margins, is to improve staff to serve customers better.
Employee turnover at James’ restaurants is 60% a year and not the typical quick-service 130% to 150% rate. “What we try to do is recruit really great people, show them that they have a career opportunity with our company, train them, develop them, and retain them,” says James. “If there is any one key to our organization’s success, it’s the people we have on our team who are in the stores delivering excellence every day.”